Thursday, December 22, 2005

LPO: Blue-eyed boy of KPO!

ASKED for a sound-check at a function in Delhi this month, Bill Gates eschewed the “1,2,3...” favoured by ordinary mortals. “One billion, 2 billion...,” he counted. They think big, these IT moguls, and especially, these days, in India.

ASKED to develop a story on something as broad as "India's IT and remote-service industries", The Economist chose to mention only about outsourcing of legal services amongst myraid of outsourced services that are loosely classified as KPO.

The story talks about the billions of IT/Technology dollars being pumped into India by biggies of the league of Microsoft and Cisco. Interestingly the growth is limited by a factor that seems counter-intuitive:

“The only thing that limits us in India,” Mr Gates told the local press, “is the speed at which we can recruit.”

This is great news, when read in conjunction with the big numbers about the talent pool in India. If so much is not enough, the Indian opportunity must be HUGE! On a lighter note, we don't expect the leaders of some fanatical political outfits to use Mr. Gates statement to persuade families to have more kids!

Very amusingly for people like me - interested in watching the "sector": Legal Process Outsourcing - the story talks about only LPO in addition to BPO and IT Services outsourcing. And that's not quite surprising, for the opportunity presented by LPO is really big and lucrative. Consider the following:

The law, in fact, illustrates how vast is the untapped potential market. About $250 billion is spent on legal services world-wide, about two-thirds of it in America, and as yet only a tiny proportion goes offshore. Forrester, a research outfit, has estimated that, by last year, 12,000 legal jobs had moved offshore, and forecast that this will increase to 35,000 by 2010. India, with its English-language skills and common-law tradition is well-placed to secure a big share of the business. It is not just a question of “paralegal” hack work such as document-preparation. Sanjay Kamlani, of Pangea3, a small Indian firm, calls it “real lawyering”—drafting contracts and patent applications, research and negotiation. His clients are both big law firms and in-house legal teams.

India's fundamental attraction has not changed since it first drew software developers: fantastic cost savings. With American lawyers costing $300 an hour or more, Indian firms can cut bills by 75%.

We've seen the above numbers earlier too, but what is worth a second mention is the size of savings that outsourcing of legal work to India can bring. Even with a naive calculation of saving 75% of an annual budget of $250 billion, we're talking of saving about $190 billion ! Of course, not all of the $250 billion is "outsourcable", but even if 1% of the savings were to come from outsourcing legal work to India, we're still talking about $2 billion. This is a big enough number to wake up General Counsels of large corporations and Partners at law firms. And the ever increasing number and size of LPO outfits is indeed a "Good morning GC, this is India calling, your draft is ready!"