Sunday, April 26, 2009

LPO industry in India

‘In 1991, with India running out of hard currency, Manmohan Singh … decided that India had to open its economy. “Our Berlin Wall fell … and it was like unleashing a caged tiger … We went from quiet self confidence to outrageous ambition in a decade” [Tarun Das, Chief Mentor, CII]
Thomas Friedman, The World is Flat

In the era of liberalization, the Indian economy moved from being a moribund and a closed set-up to become a dynamic growing economy with an annual average of 6% growth between 1991 and 2005. This growth was led by many factors, the most important being the growth in the service sector of the country. According to AT Kearney’s annual global services index, India is the current global capital for outsourcing and offshoring with other Asian destinations dominating the top five positions.
1. India
2. China
3. Malaysia
4. Thailand
5. Brazil
6. Indonesia
7. Chile
8. Philippines
9. Bulgaria
10. Mexico

The service sector in India accounted for about 52% of GDP in 2004-05. In fact India’s service exports had more than doubled from US$ 25bn in 2003-04 to US$ 60bn in 2005-06 and now accounts for nearly 37% exports.(1) According to the IMF report in 2006, productivity growth in India has been strongest in services. Emphasis on strong growth, privatization, foreign investment, and tax reduction provided the much needed acceleration to the already emerging economy.

In this burgeoning sector, a major chunk of the service sector is constituted by Information technology (IT) and IT-enabled services. The software services in Indian economy increased by 33% which registered revenue of USD 31.4bn. The outsourcing industry has been the stalwart in achieving this growth. This rapid increase in growth is directly correlated with the technical and critical aspect of the work being outsourced. An upward trajectory has been witnessed– moving from back office operations to becoming more knowledge intensive in nature. In other words, the movement has roughly been from BPO to KPO to now LPO.

Legal process outsourcing

“Legal process outsourcing refers to the offshoring of different elements in the legal process by law-firms, corporations, and in-house legal departments (mainly in US and UK) to offshore centres (mainly in India).(2) It is a very recent phenomena which has in few years gained huge momentum. The first firm to do legal outsourcing in India was Bickel & Brewer in 1995 with its office, I&A International, in Hyderabad. It dealt with digitalization of the legal documents and creating searchable databases. Later on it hired lawyers to review documents produced in lawsuits. In 2001, GE was the first company to offshore its in-house legal work in India. Since then a lot of companies have entered the arena in one form or other.

There are four basic models of LPO firms under which the companies function in this domain. They are – captive centres (when a large corporation starts its own centre in foreign country responsible for its legal and business processing issues), captive centres formed by U.S./U.K. firms and their subsidiaries (law firms in the U.S./ U.K are working with firms to India to set up subsidiaries to provide legal and paralegal services for export purposes only. For example, Fox & Mandal and ALMT Legal, two Indian based law firms, are teaming up with Patent Metrix, an Irvine-California based law firm), joint ventures by U.S./U.K based firms and third party vendors providing services to law firms and in-house counsel.(2) Among these, research indicates that it is most difficult to maintain captive centres. Capgemini, the French IT services & Consulting company, on the basis of Forrester research found that the cost of starting and maintaining captives far exceeds the cost of hiring third party alternatives and that 60% of the captives are struggling in India.(3) Currently, third party vendors are the ones that have proved to be beneficial both for the clients and the company itself. Whichever model it may be it is an indisputable fact that this industry has huge potential. Between 1990 and 2005, the legal services industry grew at an approximate annual rate of 6.75% and is expected to grow at 6% per year for the next decade, 2006-15.(4) Also, different estimates made by different research entities present a picture that spells out business and opportunities. ValueNotes projects LPO to become a $640mn industry by 2010. While Evalueserve estimated revenue from LPO at $300mn by 2010. Forrester research projected that legal outsourcing to India will reach $4bn by 2015. Although these estimates are varied, they do give a sense of huge potential of business increase in LPO industry in India. The biggest economy currently served by this industry – the United States, has a huge legal services sector. According to US Census Bureau, the legal services industry in the US generated approximately $184 bn in revenue in 2008. Even a small fraction of legal work outsourced would translate into huge amount of business for offshore service providers. Ron Friedman on the basis of a survey, “The Change Agenda: Looking Ahead”, conducted by Rees Morrison and Aric Press came to a deduction that U.S. LPO spending in 2013 will be almost $2bn.

Growth in LPO domain

The LPO industry has in a span of few years seen major mergers and acquisitions, partnerships and alliances. The first acquisition happened when Mysore-based Software Paradigms International (SPI) India acquired the entire BPO/LPO clientele of Comat Technologies across the US and UK, which was served by Comat’s Mysore-based operations. Such deals are indicative of the pace of growth of the industry. Gavin Brier in his article “Recession” “Depression” Unemployment” “Meltdown” “Crisis” … wrote “The IT industry took 13 years to come to maturity, BPOs took half a decade and now LPOs are emerging in a big way.” Even magic circle firms like Clifford Chance are taking interest in doing business in the Indian subcontinent. Established LPOs including Pangea3, Jurimatrix and SDD Global have attracted a significant level of private equity and venture capital. Big player like CPA Global has entered into strategic alliances to further enhance their products thereby giving an edge to their services. In 2008, CPA Global entered into an alliance with major electronic discovery software provider Applied Discovery Inc., a division of Lexis Nexis. The relationship ensures that CPA’s clients around the world benefit from a total review and e-discovery solution. Such tie-ups have played an instrumental role in making LPO a fast growing business. Recently UnitedLex entered into an alliance with Huron Consulting Group as well as Ocean Tomo, thus further enhancing and enriching the quality of their services and expanding their market. In terms of mergers and acquisitions, in 2008, Integreon acquired Datum Legal. CPA Global in the same year acquired SVPG to strengthen formers’ presence in German market. In short, business deals in the LPO space has made the industry grow from few vendors to more than 100 within a remarkable short period of time.

Services provided

A plethora of services are provided by the legal offshore service providers. The key being – contract management, document review, legal research, deposition summaries, litigation documents, patent renewals, patent analytics, IP support services, data verification, IP recordals, patent research, trademark renewals, trademark watching, digital content watching, trademark search, and so on. These services can be categorized under two categories:
1. Manpower intensive functions – Such as legal transcription, document conversion, legal coding and indexing, document review etc.
2. High-value services – They include patent and general legal research services like freedom-to-operate search, patent assessment, patent portfolio management, statutory and case law research, due diligence services such as technical, legal and financial analysis of companies for mergers and acquisitions, and contract drafting and review of contracts.

Corporate legal departments are the major clientele of these afore-mentioned services. A key consideration among corporations world over is the reduction of costs though not at the expense of quality. Indian LPOs have, in such a scenario, provided cost-effective solutions while maintaining expected or higher quality levels and in some cases even exceeded the quality provided by in-house teams. A balance between cost-and-quality aside, there are other advantages that vendors located offshore are able to provide to their clients. These include the benefits emanating from having an effective 24-hour work day and more importantly, providing access to a workforce that is keen enough to service tasks thought of as ‘mundane’ by in-house staff. Adherence to operations methodologies similar to Six Sigma and compliance with global certifications such as ISO 9001:2008 (Quality Management System) ensure consistency in the quality of the work product delivered from an offshore location such as India. For mature and stable providers of offshore legal services, the recession has only added to the business with clients expanding the offshore teams who had been serving them either in a shared model or as a dedicated team. As an example, one of CPA Global’s European telecommunication company recently doubled the number of engineers performing patent research and analysis for them.

In this manner, the ‘recession’ has further enhanced its attractiveness and financial viability. The present economic conditions have also made corporations, primarily the ones having large patent portfolios, to look for ways to reduce cost (e.g. by abandoning unused segments) or generate new revenue (e.g. by out-licensing/sale of patents). Large companies such as CPA Global, which have multi-shore operations and services catering to patent monetization, have also gained from such focus on the use of patent portfolios.

Bhaskar Bagchi, country head CPA Global, in his interview with Financial Times remarked “There is now a very clear economic reason for both corporate and law firms to look for offshoring. India has proven that they can deliver the same quality, if not better, from what they got when they did the work onshore.” A clear indicator of this growing profit and business is the rate of hiring seen recently in the LPOs. Rohan Dalal, managing director of Mindcrest India, plans to hire “400 plus staff in a phase-wise manner”. CPA Global has set the target of 2,000 employees by 2010. Other companies like Pangea3, UnitedLex and others have also reported plans for increasing their teams. The emphasis is not only on recruiting but also on retaining the valuable human resource. Companies have initiated various programs to promote a culture of growth and what Bhaskar called “empowerment”.

Distinguishing aspects of LPO industry

The LPO industry thrives on innovation, constant learning and development. A lot of emphasis is laid on the fact that employees are regularly updated with information as well as required skills. This education is not only limited to technical knowledge but also involves acquiring skills to be able to operate in a global environment. Himanshu Arora, Global Head, Learning and Development at CPA Global, in an interview told about the objective of providing training to the employees. He said, “The education doesn’t pertain only to enhancing knowledge and skills but also educate employees about how to deal with different cultures which helps in building fruitful cross-cultural relationships. Best practical content is used, which is developed by the subject matter experts to make the learning process an enriching one”. Another big LPO unit, UnitedLex brings in two U.S. patent attorneys to train the lawyers and review their work.(3) Thus, the opportunity to learn in a consistent manner and with the company laying stress on this aspect gives the employee required exposure as well as a chance of growth. Being a knowledge-driven service it becomes imperative that the stress on learning continues throughout the service tenure.


LPO as an industry is quite different from other knowledge-based industries. The work done is high on intellectual level and is also expertise-centred. As it is in the growing stage, one can expect a lot of innovations happening. With the newly enacted LLP Act, it is expected that international law firms will also be making foray into the Indian legal market. Sec 59 of the LLP Act allows law firms to set up their business within Indian boundaries. Such firms will act both as consumers and producers of trained force suitable for addressing the legal support needs of global corporations. In that respect, the LPO industry and the international law firms will converge and are expected to fuel the growth of each other. It is also expected that some international law firms may also setup their own ‘captives’ that will address the offshore legal support needs of their clients.

Knowledge intensive outsourcing functions such as offshore legal offshoring aka LPO have the real potential of becoming indispensable tools in a corporate strategists’ toolkit. What is needed is a ‘leap of faith’ to move from transaction-oriented client-vendor relationships to a relation that is a true partnership. Anyone who has used an external provider for legal needs, offshore or otherwise, knows that depth and ability to fulfill complex needs comes with time. The same is true for work done by engineers and lawyers located offshore. Offshore companies that have healthy client relationships and talent retention practices that actually work would be ideally placed to grow into the role of such partners.


1. India 2007. Ministry of Information and Broadcasting Government of India.
2. Legal Process outsourcing: Can offshoring of legal services to India be both efficient and ethical? Maya Karwande. Legally yours blog.
3. “Will tough economy push companies to outsourcing” David Hechler.
4. Legal Process Outsourcing (LPO)-Hype Vs. Reality. E-ValueServe.

- Megha Pande