Wednesday, July 04, 2007

Valuenotes' research update on Legal Services

Here's the press release from Valuenotes about their research update on Legal Offshoring. As with the report last year, the numbers are suspect. Here are a few snippets:

A recently released report by ValueNotes estimates that the current Indian revenues from legal services offshoring are slated to grow from $146 million for the calendar year 2006 to reach $640 million by end 2010. The industry employed around 7,500 people in the legal offshoring space in India as of end 2006. The number of employees is expected to reach 32,000 by end 2010.

Let's see: 7,500 people (which is a grossly suspect figure in itself) earning $146 million (suspect again) ~ $10/hour (@ 2000 productive hours per person per year). Why would anyone have such low rates and still continue to be in this relatively challenging business? I think the effective billing rates (discounting writing hours off which often happens in the name of training, client development, hiring ahead of work etc.) should be about $35-45/hour for better known players and about $20-30 for lesser known ones. Any lower doesn't seem either scalable or sustainable.

The Indian vendor space has over 100 service providers that can be categorized into three groups: Captive centers of corporates, Third party - Niche service providers (Stand-alone LPOs) and Third party - Multiservice providers. Third party vendors dominate the LPO space by employing the majority of the workforce in the sector. However, vendors with niche focus and multi-service providers differ distinctly in terms of service offerings and capability.

Hmm... 100 service providers, 7,500 people in all - Pangea3 is one of the largest players with about 220 employees, so an average of 75 people per player seems suspect. I hope the report isn't including the "onshore" employees for multishored companies, which many of the names mentioned are. Again, I hope the report isn't counting overall employee strength for Broadline BPO/KPO companies with some (often marginal) proportion of services under the "legal offshoring" gambit.

The Legal services outsourcing industry has grown at 50% CARG through 2005-06. This growth has been driven primarily by increasing demand, vendor maturity and capability of vendors to offer higher value services. Based on our exhaustive primary research and analysis of this sector, ValueNotes has identified a “List of frontrunners” which includes Evalueserve, Integreon, OfficeTiger, CPA Global, Mindcrest, Pangea3 and Quislex. We have also identified ‘‘Emerging players’’ that have potential to emerge as winners within their chosen niches. These include players like LawScribe, New Galexy, SDD Global Solutions, Tusker Group, Aptara, Lason and Quattro BPO.

But hey, some research is better than none, isn't it?