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Liam Brown on February 8th, 2010 at 10:14 am :
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I read with interest Matt Sullivan’s blog post, LPO Industry Consolidation Underway? He offers a useful summary and analysis of recent deal-making among legal process outsourcing (LPO) providers.
Sullivan rightly concludes that legal cost control still looms large for many corporate law departments. We hear this in many conversations we have with both in-house and outside counsel. We also agree that Pillsbury’s publicly announcing an alliance called PEARL (press release, PEARL overview) that includes LPOs is significant. In the UK, that law firms publicize working with an LPO is almost old news; the same cannot be said for the US.
We expect more US law firms to discuss LPO - and many other new ways of doing business - in 2010. The 2008-9 crisis has ended. The end does not mean a return to pre-bust levels of activities. Rather, it means that most firms have taken the necessary emergency measures to cut costs. In our view, that’s the easy part, as painful as those cuts were. Now comes the hard part - prospering in the new normal.
Pre-bust, firms moved in lockstep. I don’t mean just how they compensated associates; few large firms considered any strategy or action not already widespread. Now, just as compensation models are changing, so too are firm strategies and actions. We see some firms hunker down with no clear plan to change. Others, however, such as Pillsbury, are taking active steps to offer clients more value.
My colleague Ron Friedmann wrote last November (at the Integreon blog) that Law Firms Differentiate in a New Era. The Pillsbury announcement is an example of firms differentiating. Not all firms will “do LPO” or form innovative alliances with other legal market players. We think that firms that don’t change both their client value proposition and operational model in significant ways are likely to lag behind their competitors who do innovate.
Our investors, as well as the investors in our competitors, understand this. The smart investors understood this pre-crash. Post-crash, it’s obvious of course. Outside capital will continue to flow to organizations that improve legal outcomes and reduce legal costs. In the UK, with The Legal Services Act, capital will likely soon flow directly to law firms. The combination of client demands, law firms themselves recognizing the need to change, and the availability of outside capital to support better ways of doing legal work will continue to alter the legal landscape.
Filed under E-Discovery (EDD), Legal Economics, Legal Outsourcing (LPO)
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Liam Brown on November 20th, 2009 at 3:58 am :
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The Lawyer’s Lyceum Capital injects £25m into LPO start-up and LegalWeek’s Lyceum commits £25m to enter LPO market in Laureate venture articles show continuing investment momentum into LPO, as discussed in my post £400m Acquisition an Indicator of a Maturing KPO Market? This particular investor group has been looking for opportunities to invest in “new business models for delivery of legal services” for some time. I can’t find much about the startup company, Laureate, on the web, but Lyceum’s advisory panel knows a thing or two about the opportunity in the legal market: former Clifford Chance managing partner Tony Williams, visionary legal IT consultant Richard Susskind and Paul Hewitt, who helped develop legal services at the RAC and Cooperative Group. I expect to see some of this private equity money go towards acquiring law firms’ captive, non-core business services operations. It’s certainly a use of capital that Integreon has earmarked.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends
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Liam Brown on November 4th, 2009 at 8:26 pm :
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This headline in the Financial Times grabbed my attention: Lloyds in talks to buy CPA Global for £400m. That’s a lot of money by anyone’s standard and made me think how the KPO market has matured over the last decade.
Many people I talk to are surprised to learn that it’s taken Integreon almost nine years to grow from startup to become a $100m business. Back in 2001, most analysts thought “outsourcing” meant offshore IT or call center services and, in the face of scepticism from the investor community at the time, the Integreon management team scraped together the money to launch a KPO business (before the term “KPO” even existed). We were a pioneer in Document KPO for banks, consulting companies and law firms in those early years. Then we became an early leader in Research KPO for the financial sector.
Over the last few years, we’ve become the largest provider of Legal KPO services to corporations and law firms. Over the decade we have slowly expanded our range of KPO services, built or acquired and integrated operations globally, as well as developed our proprietary automation, collaboration and knowledge management technologies. Along the way we have achieved the scale to generate the internal profitability that supports our ongoing investment in services, products, locations, etc. As we come to the end of 2009, we have become the leading global KPO (perhaps), and I feel fortunate to count many of the world’s leading brands as our customers.
These last twelve months have been tough for smaller, niche KPO providers. I have great sympathy for the entrepreneurs, employees and investors of those companies that have gone out of business or are struggling to stay afloat. I hope that they survive or succeed in selling to a larger, more stable entity.
Some industry analysts have recently commented that we are likely to see the serious entry of the large ITO and BPO players into the KPO market during 2010, through acquisitions. Perhaps. I am not sure how many of those firms have the management bandwidth, strategic inclination or patience to acquire, integrate and grow the available small captive or third party KPO operations to build a KPO business of any reasonable scale, which would be required to move the needle for them. Rather, I expect that the industry consolidators will be the handful of scale KPOs that are focused on growing their consistent cashflow business toward an IPO event.
Filed under Economic Trends, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Liam Brown on May 13th, 2009 at 7:41 pm :
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Our CFO, Richard Little, high on Everest recently.. showing the lengths to which Integreon will go to satisfy our customers!
Filed under Uncategorized
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Liam Brown on May 12th, 2009 at 3:09 am :
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Outsourcing is back in the news. Come to think of it, when has it not been in the news? Two US national mainstream media had important articles last week.
Outsourcing: Thriving at Home and Abroad (Business Week, 4 May 2009) reports that outsourcing is thriving in the current economy. “Companies looking to cut expenses in the face of soft demand are keener than ever to hand off parts of their operations to lower-cost providers.” That is old news; what’s new is the locations those companies are selecting. Political considerations, internal and external customer perception, availability of talent, currency exchange rates, disaster planning, shrinking cost differentials between domestic and offshore locations, relative inflation rates, now drive companies to consider smaller domestic US cities such as Indianapolis and Boise. The drivers have consistently been, as the article touches on, increasingly sophisticated customers taking “a more nuanced approach” to their operations and sourcing strategy. Core processes are kept captive and non-core processes are outsourced (the so called “hybrid captive/outsourced approach”); some non-core processes are outsourced to multiple providers to mitigate risk (the so called “multi-sourcing approach”); and some processes are sourced offshore while others are sourced onshore (the so called “right-shoring approach”).
Obama’s Plan on Corporate Taxes Unnerves the Indian Outsourcing Industry (New York Times, 6 May 2009) reports on how the Obama Administration’s proposal to tax offshore profits is causing consternation in India. The article suggests the impact of the proposals may not be that great, though they are not yet fully understood. As we read the tax proposal, to the extent it has an impact, it would impact the profits of companies operating offshore captives so it might actually drive demand for third party providers of offshore services such as Integreon. What really caught my attention, though, was the speed at which this tax proposal appeared and at which it has the potential to change the sourcing location landscape - much faster than company operations planners can respond.
The lesson we draw from both articles supports the strategy we have long followed; namely, be flexible about location and have a choice of countries and continents. Companies should select location based on factors such as culture, time zones, cost, business continuity, exchange rates, relative inflation rates, skill availability, turnover, and taxes. Because these factors change over time, sometimes quite rapidly, companies must retain flexibility. For example, the Indian Rupee has had dramatic swings in value versus the US Dollar. And, as the Business Week article points out, the economic downturn has suddenly shrunk the cost arbitrage advantage of India over the US (though it is still large).
For these reasons, we now operate delivery centers in India, the Philippines, US, and UK, with more locations likely in the future. We are not dogmatic about the “best” location.
For onshore locations, we have long been enthusiastic about the types of cities Business Week describes. In 2007, we acquired an existing outsourcing business in Fargo, ND. The location in Fargo was a big factor in our acquisition decision - we recognized that we could hire, and more importantly, retain long-term highly skilled workers there at costs significantly lower than in major US cities.
We have also just opened a delivery center in Bristol, UK. While Bristol is a major city, costs there are up to 30% lower than in London, so it reflects the same thinking - find the right onshore locations that offer a good mix of skill, cost, and cultural compatability.
To drive home the point that location decisions depend on many factors, consider electronic discovery services. For our EDD business, we employ specialized employees, operate server farms, and need to take quick delivery of digital media. For these reasons, we operate delivery centers in “high cost” domestic cities such as New York City and Washington DC.
Global supply chain economics are complex and change rapidly. We encourage those considering outsourcing to think carefully about the right destination(s) for their work and to select a service partner that offers a range of choices, with the location flexibility to accommodate your needs as the evolve. We believe that optimized value chains will operate the right processes, in the right places, with the right people, using the right technology. Each value chain will differ - one size definitely does not fit all.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Onshore v. offshore, Outsourcing Industry News
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Liam Brown on January 31st, 2009 at 4:12 am :
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Industry sentiment is that Q4 08 was very challenging for many EDD vendors as corporations reined in litigation spending. And Q1 09 looks to be the same, if not worse. Tanking Economy Hits E-Discovery Firms (The National Law Journal, January 29, 2009) reveals that some EDD vendors are in financial distress or have simply gone out of business. One can only imagine the consequences of litigation data suddenly becoming unavailable during a lawsuit. Corporations and their legal advisors should now urgently diligence the financial health and capital structures of their EDD vendors and consider those dimensions beyond the usual price, experience, technology, information security and disaster recovery capabilities. It’s not sufficient to be told ”we have big private equity investors with deep pockets” - the wallets of those very investors who were spending their way into the ‘hockey stick’ EDD market growth, e.g. described in the 2008 Socha-Gelbmann Survey (Law Technology News, August 11, 2008) are now superglued shut, despite the pleas for cash from their portfolio companies.
We’re seeing more EDD vendors for sale right now than ever before and we are actively looking to make an acquisition. It’s a good time to be an acquiror of one of these businesses since it fits our overall business strategy, we believe we understand what we are buying (these are very complex, technical businesses), and many of these companies are struggling under a debt burden they cannot service or have investors that want to get out rather than invest more.
Before trusting data to an EDD vendor, we encourage buyers to dig deeper than ever before into the current Q profitability of the vendor, the level of debt, and the management team or investor plans to sell the business.
Filed under E-Discovery (EDD), Economic Trends
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Liam Brown on December 2nd, 2008 at 2:45 pm :
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Update at 01:15 IST, 19:45 GMT, 14:45 EST on Tuesday, 2 December 2008:
In the aftermath of last week’s attacks in Mumbai, our hearts go out to the victims and their loved ones. We are thankful that all of our associates are safe.
Unfortunately, the threat of terrorism has become an international fact of life. In New York and London, our colleagues and customers know firsthand what it means to be the targets of terrorism. Indeed, no major world city is immune. Global firms like ours understand that when international terrorism does occur, it is likely to be “local” for some part of our business or our clientele.
In this environment, contingency planning is vital. Our contingency plans have two priorities: the personal safety of our associates and the continuity of support for our customers. Strategically, we are able to divert work to other locations in our global network if necessary.
Even as we mourn for the victims, we salute the resilience and dedication our Mumbai associates have shown in carrying on with their lives and their work. Like the city they call home, they embody a deep determination to overcome, and no act of terrorism can take that away.
Update at 19:15 IST, 13:15 GMT, 08:45 EST on Friday, 28 November 2008:
Government commando actions against the terrorists are still underway. All Integreon associates and customers in Mumbai and Delhi are safe. We have operated six shifts since the attacks began; our associates are reporting to work without any fear and there has been no impact to customer deliveries. Our Emergency Response Teams continuously monitor the status and provide regular updates to associates. We have taken steps to ensure the safety of our personnel and our ability to activate business continuity plans should that become necessary.
This was posted at 10:45 IST, 05:15 GMT, 00:15 EST on Thursday, 27 November 2008:
Integreon expresses our sorrow and grief for the victims of the terrorist attack in Mumbai on Wednesday and for their families.
Thank you to the customers and friends who have checked in with us on the status of our Mumbai associates. We are fortunate to have accounted for all of them and they are all safe. We have been in constant contact with and have also safely accounted for all customers visiting Mumbai.
We have activated business continuity plans for customers who have operations with us in our other centers in Manila, Delhi, Fargo and New York. Our operations in Mumbai are located almost two hours north of the incidents and so have been not directly affected. Almost all associates have arrived at their desks and we continue to operate as normal at full capacity, which is a testament to the true spirit of Mumbai.
Filed under India Business and Economy, News from Integreon Delivery Centers
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Liam Brown on August 7th, 2008 at 10:51 pm :
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We read with interest that Quatrro, a busines process outsourcing (BPO), knowledge process outsourcing (KPO) and legal process outsourcing (LPO) company, plans to acquire three US BPOs. (Economic Times, 7 August 2008.) We wish them well, but as we previously wrote in BPO Players Moving Up the KPO Value Chain, we think that building a combined BPO/KPO/LPO is a difficult strategy to execute.
We have extensive experience working with demanding professionals such as lawyers and investment bankers. On the one hand, they are apprehensive about dealing with BPO generalists, who are not focused domain-specialists in their markets and therefore may lack the relevant people, process, judgment and technology systems. We are seeing some reversals of earlier decisions to outsource KPO work to BPO generalists where those BPO suppliers have struggled to deliver the appropriate level of professional service, failed to deliver ongoing continuous improvement, promised transformation but did not deliver, or did not create the training and career path that would keep professionals from leaving.
On the other hand, lawyers and investment bankers want to make sure their business partners are financially stable and a suitable scale to serve their business continuity plans (BCP) and breadth of service needs. In our view, the LPOs and KPOs that will thrive long term are those that specialize in these professional support sectors with scale. BPO services such as mortgage servicing and voice support are different enough businesses that they ultimately don’t fit well with KPO and LPO work.
Filed under Business Process Outsourcing (BPO), Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Liam Brown on April 29th, 2008 at 8:00 pm :
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Lloyd’s announced last week that it now offers a new “Outsource Protector” policy, which protects insureds from force majeur disruptions to an outsourcing and offshoring-agreement.
Insurance is certainly one way to deal with the risk of interruption. According to the Lloyd’s press release, the policy “will reimburse the named insured for abandonment and relocation costs as well as extra contractual costs of working during the period of indemnity as a direct result of a variety of force majeure perils defined in this policy.”
Business continuity is a big issue today. Everyone realizes that no single building, city or country is risk free. Terrorism has unfortunately heightened awareness of the this issue but many other man-made and natural incidents occur regularly, including power black-outs, severed undersea Internet cables, floods, fires, snow storms, and riots. To ensure continuity, businesses must invest in operating from alternate locations. There is an economic cost to building and operating facilities. There is also an economic cost to developing (and regularly testing) plans to transfer work to the back-up site. But the reputation risk of being unable to deliver mission critical work is much more significant.
In our view, rather than buy insurance, companies should invest in effective business continuity plans, which allows any mission-critical work to continue in the event of a disruption in any one location.
Integreon recognized this issue some time ago and responded by investing in building a global delivery platform. We have delivery centers in Mumbai, Delhi, Manila, and Fargo (N. Dakota, USA) and the ability to move work across them. And on a couple of occasions, just for short periods, we have had to do just that.
Filed under Outsourcing Tips
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Liam Brown on April 23rd, 2008 at 12:06 pm :
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[This post originally appeared at the Legal Process Outsourcing blog on April 8, 2008]
The Wall Street Journal recently ran a story with a rather downbeat headline: “Why Big Law is Bracing for a Leaner 2008.” Yes, the economic downturn is going to have a major impact on law firms, but these revenue pressures will likely lead to operational improvements in order to preserve profitability. The truth is that the legal profession has been slow to embrace the knowledge process outsourcing (KPO) trend that Wall Street began adopting nearly a decade ago. However, this financial environment provides the impetus to introduce competitive advantages and operating efficiencies that might otherwise have received a chillier reception during better economic times.
To be sure, law firms have long outsourced back-office functions such as payroll, copy center, mailroom and travel and it has become recent common practice for law firms to outsource IT functions too. But today there are also many non-core or low value-add knowledge worker functions that no longer make economic sense for law firms to handle internally. Non-core administrative functions include word processing and transcription, presentation graphics and accounting. Low value-add legal functions include e-Discovery services, litigation document review, research and intellectual property support.
I used to hear that constraints to outsourcing domestically or offshore to countries like India and Philippines included fear of losing control of the quality of the work or of security of information. But these fears are unfounded, as evidenced by the judgment-based, market-sensitive work the major Wall Street firms, major corporations and some leading law firms now outsource to third parties or their own offshore captives.
Indeed, major law firms that so far have resisted the outsourcing or offshoring trend will find it increasingly difficult to justify the cost of retaining these non-core functions in-house, particularly in the high cost cities in which they operate. Today more than ever before, their clients expect them to operate cost-effectively on their behalf.
My personal Eureka moment, which was the catalyst for Integreon entering the legal process outsourcing (LPO) market, was when I received a Big Law invoice for $250 an hour for their associates to review my e-mail during litigation. I was very happy with the value-added legal counsel that the partner at the firm provided (we prevailed), and thought “I am happy to pay the partner $500 per hour, but Integreon has knowledge workers offshore who can do this kind of review work for one tenth of the cost of the $250 per hour associate here in U.S… and I can afford lots more of them to do the work faster and with more rigorous quality checking
Leading outsourcing firms deliver services from low cost domestic cities, such as Fargo, ND, as well as from overseas countries such as Philippines and India. This allows law firms to adopt a ‘best-shore’ approach to their operations, keeping some functions in the U.S. or U.K., while moving other functions overseas. For example, work requiring extensive ongoing interaction with the firm’s lawyers might best be delivered from a low cost onshore location. Or work to be completed overnight in the U.S. by more expensive night staff might be performed much more cost effectively during the daytime in lower cost India or Philippines, leveraging the time zone difference. Or delivering services from multiple locations for business continuity reasons.
Those firms who have already invested in moving operations to lower cost locations over the last few years have a meaningful cost advantage going into 2008. I was recently sitting with the COO and CIO of one of our Big Law firm clients who both appeared quite relaxed because, as one of them put it, “we need to take $5m out of our cost structure this year and we can do that because we did the heavy-lifting of launching our offshore center already and now we just need to accelerate the rollout“.
So in my view, today’s pressure on costs will lead to lasting changes that will make the legal industry decidedly more efficient tomorrow. And the beneficiaries will be the LPOs, the partners at the law firms, and the law firms’ clients.
Filed under Legal Outsourcing (LPO)
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