Outsourcing

It was thought that the practise of law would be one of the few areas that would be safe from the outsourcing trends that have had such a profound affect on American businesses. However, that hasn't been the case. Americans facing the hardhitting economic crises, are hit even harder by the outsourcing of jobs to countries like India.

According to the New York Law Journal: “Outsourcing legal work to India is no longer a novelty. It’s a reality.”

In a recent study released by the Forrester group, a Cambridge-based research firm, they estimated the current value of legal outsourcing to be $80 million with more than three fourths of it based in India. They go on to predict that the total amount of legal outsourcing will increase to $4 billion by 2015. And they expect much of the outsourced work to go beyond the basics like IT and human resource support. http://www.legalweek.com/Articles/1029148/Management++IT+The+evolution+of+outsourcing.html

It is currently estimated that there are as many as 200 business process outsourcing companies scattered around India alone, providing a variety of business and legal services. Two companies in particular are worth noting as representative of the trend.

The first is Pangea3, one of the largest of the Indian legal process outsourcing (LPO) companies. Pangea3 has received two separate infusions of venture capital cash from the United States: $4.4 million from GlenRock Capital and $7 million from Sequoia Capital. Sequoia is a well know silicon valley firm that was an early investor in Yahoo®, PayPal™ and YouTube™ among others. Pangea3 has used the money to expand its operations, which now include five offices (three in Mumbai, one in Delhi and one in New York). On their Web site they claim they: “… deliver best-of-breed patent analytics and patent drafting, contract drafting and contract management, legal research, competitive intelligence, electronic discovery, and document review services to U.S., European and Japanese corporations and law firms at a radically low cost.”http://www.pangea3.com/index.html

The second firm is Office Tiger, which was started by two American graduates of Princeton University, in Chennai, India. Specializing in business and financial services, Office Tiger provided legal outsourcing as well. After growing to more than 5,000 employees with revenues of more than $125 million, Office Tiger was purchased in 2006 by RR Donnelley for $250 million. The division currently has more than 10,000 employees with multiple locations.http://outsourcing.rrd.com/wwwFinancial/OutSourcing/Solutions/solutions.asp

Legal Process Outsourcing is a sub set of Knowledge Process Outsourcing (KPO). KPO is posed to form the third generation of outsourcing where its USP remains the arbitrage of technical expertise and domain knowledge rather than cost reduction such as with its counterparts BPO and ITO. The global KPO market is set to be worth between US$10billion and US$17billion within two years according to research by KPMG.

The global financial sector has harnessed this business model to the maximum extent. The services in the KPO financial sector alone are expected to reach US$5 billion by 2010. KPO has already been used to handle credit scoring, loss protection calculations and fraud analytics and more.

Outsourcing made its debut in the 1980s with Information Technology Outsourcing or ITO where third party organizations managed internal IT system’s maintenance, development and application. This was followed by Business Process Outsourcing or BPO in the 1990s where elementary or standardized processes that were supplementary to an organization’s core activities were outsourced to another organization. And then entered KPO where the focus is one task and expertise that are central to an organizations core competency or competitive advantage. The outsourcing industry has thus moved by leaps and bounds. It used to be supplementary and cost cutting measure and now has become an intrinsic and indispensible model.

The concerns regarding KPO according to Bob Hayward, KPMG IT advisory director could be the risk faced by valuable intellectual capital due to lacunas in the service provider’s legal and compliance departments. Also, KPO calls for a highly specialized skill set and defined domain expertise hence, the available talent pool is smaller. KPO organizations are stepping up ramp up and retention processes to attract and keep a workforce with required qualifications and skills.
India is a dominant force in the KPO industry due to the easy availability and apparent abundance of qualified and trained staff and experienced professionals. A report by GlobalSourcing Now identifies India as the leading KPO destination. A large pool of trained staff and technical professionals are reversing the myth that India is good to provide software professionals only, says the report. Organizations from all over the world are leveraging the benefits of India’s knowledge base. The report predicts that by 2010 the KPO market in India will be worth US $12 billions and will employ more than 250,000 professionals.