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sector/lpo

LPO-Legal outsourcing
business is on the upswing

The legal process outsourcing (LPO) business is witnessing a surge, thanks to the rise in
the number of legal cases in developed countries hit by recession
/Ambrish Jha

R Top
op 10 LPOs
ecession might have come as a
blow globally, but for the LPO
industry it’s an opportunity
pp 2008
8 Rank Company 2007 Rank Company
never seen before. Bankruptcies an and 1 Clutch Group
up 1 Pangea3
litigations have increased manifold,
and so has become
ecome bailout packages 2 CPA Global 2 Integreon
from governments
rnments leading to signifi- 3 Integreon 3 QuisLex
cant rise in regulations. All these have
fueled the need d for legal
leg works, and 4 Law-Scribe 4 Law-Scribe
the direct beneficiaries
aries are the LPOs. 5 Mindcrest 5 Mindcrest
The LPO business, s, however, is not
just about employing lawyers.
awyers. It does
6 QuisLex 6 Law Wave
involve technology and marketing in 7 SDD Global 7 Atlas Legal
the base countries, namely, the the
e US, th
8 Cobra Legal Solutions 8 Ius Juris
UK, Japan, etc. With an advantage ag in
technology and knowledge of how the 9 Bodhi Global 9 Lexadigm
outsourcing industry works, BPOs and
10 iDiligence 10 NeoWorth LPO
ITOs have turned out to be the wor-
SOURCE: The Black Book of Outsourcing (http://www.theblackbookofoutsourcing.com/vendors-lpo-2008.htm)
thy forerunners to the LPOs as far as
technology is concerned. Some BPOs LPOs have emerged as a perfect professionals in India to accomplish
have actually taken to it on seeing the solution to the in-house legal depart- low-end, standard, and less sensitive
huge gains waiting to be tapped. Some ments of large multinational corpora- legal tasks outsourced to them. The
of the big names of the LPO industry tions and law firms looking to cut on benefits are mutual. While the US- or
include Pangea3, Clutch Group, Inte- their legal costs. They employ highly UK-based legal firms and multina-
greon, CPA Global, and Mindcrest. qualified, skilled, and motivated legal tional corporations manage to reduce

78 JANUARY 2009
DARE.CO.IN
sector/lpo
their legal expenditure by almost 50 to areas — litigation, compliance, bank- and senior lawyers charge close to
80 percent, Indian lawyers employed ruptcy, and foreclosure. For instance, $1,000 an hour in the US. LPOs, on
with the LPOs earn much more than bankruptcy of Lehman Brothers alone contrary, charge anything from $32
they would if they practice in Indian has led to litigation worth $1 billion. to $100 an hour. Outsourcing to India
courts on their own. Indian LPO companies have man- provides higher savings as one moves
What has helped the cause is that aged to impress outsourcing compa- up the value chain in the type of work
legal systems of both the US and India nies by embracing professional man- outsourced, Chopra reveals. For sec-
have their origin in the UK legal sys- agement skills and providing services retarial type transcription or data en-
tem. Most of the LPOs do employ or matching American standards. Sanjay try work, savings are around 30 per-
work in association with British and Kamlani, Co-CEO, Pangea3, says, “Legal cent, she says, but as you move into
American lawyers. They are the ones talents in India have learned to imple- litigation, corporate, and intellectual
who provide additional training, most ment Six Sigma tools and other meth- property support work like document
often in legal writing style, to the law- ods to ensure consistent quality deliv- and contract review, drafting, patent
yers employed by the LPOs. For senior ered in the most efficient manner.” searches, illustrations, and applica-
lawyers from the US, this association tions, the savings increase from 50 to
has come as a huge relief from the 70 percent.
en
grueling task schedule, ensuring bet- Tremendous
remend saving opportunities
ter remuneration at the same time. for
or legal firms showcase how LPOs
Most of the legal outsourcing takes these. For Pangea3 the
can cash on thes
place from the US and the UK, though last three months h have been the larg-
other European countries and Japan generators ever and the
est revenue gener
have also stated doing the same. India last six months have seen a 100 per-
has managed to emerge as the big- cent growth in business as compared
co
gest destination of legal outsourcing, to the
he same period last year, Kamlani
K
but countries like the Philippines and reveals.
s. Abhi Shah’s Clutch Group
Grooup ex-
South Africa are also trying to take a pects a year-on-year increase
ear-on-year in ase oof 100
pie out of the business, thanks to their percent in business thi this year com-
is y
comfort with the English language and pared to last year.
ar.
the similarity of their legal systems
with American and British ones. The market size of The size of tthee LLPO ssector
ec
The market size of the LPO business Various
rious estimates
e tima ates have been made
is anyone’s guess. Estimates vary from LPOs in 2006 was $146 about the he size
e si ze of the LPO sector by
$40 million to $150 million. However, experts. While
rts. Wh
W hi Shah says the market
there seems a perfect consensus about
millio 0, the
million and by 2010, size
ze
e in 2006 was $146 million, Poorvi
n 20
one aspect — bullishness of the indus- industry wou rth
would be worth Chothani
C
Choth h of LawQuest puts the figure
try. By 2010 it is expected to reach any- relatively
rela low at $40 million, and Kam-
thing between $640 million and $1.5 $640 million. lani
l estimates it at $750 million. Shah
billion. Some enthusiasts say that by estimates that, by 2010, the indus-
2015 the size of the industry could be — Abhi Sha
Shah
Shah try would be worth $640 million, and
as big as $15 billion. Co-founder and CEO of Clutch
lutcch GGro
Group Kamlani puts the figure at $1.5 billion.
Despite all optimism, the fact is
Reasons for increase
crease in business Corporate
orate clients seemm to be in that LPO business is in its infancy, un-
Recession and nd the desire on the part of the process adopting backend legal
ess of a like the BPO and ITO sectors. In com-
legal firmss and multinational corpora- outsourcing
o ng into
in their business mod- parison with the BPO and ITO indus-
tions, particularly
cularly based in the US, to els, as Kunoor Chopra of Law Scribe
els tries, the revenues generated by LPO at
cut costs has turned legal outsourcing
urned leg says, “What I found very interesting
sa present are much lower.
into an industry. It was encouraged is that corporate clients are not in- According to Chopra, “In the fourth
by resolutions passed ed by some of the troducing us to their panel counsel
tr quarter of 2007, there were in excess of
state bar councils in the US supporting because they want the law firms to 45 BPO contracts with contract value
such outsourcing. seriously build offshoring into their in excess of $25 million. To date, to my
Abhi Shah, co-founder and d CEO of business model.” knowledge, there hasn’t been a single
Clutch Group — the company named Outsourcing of lowend legal tasks LPO deal of this value.”
as the number one among LPOs in the is reducing the costs of LPOs by as Signs of maturity are visible in the
2008 version of The Black Book of Out- much as 50 to 90 percent. Shah says LPO industry, as Chopra says, “The
sourcing – says recession has opened the top 200 associates charge more deals are moving from project to
new vistas for LPOs in four different than $300 an hour, whereas partners full-time employee team based, and

JANUARY 2009 79
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sector/lpo
with this the size of the deals are a viable business without both these crease, as Kamlani points out. Some
also increasing.” arms of the business.” firms are reportedly working overtime
Market research firm Forrester Re- Without a guaranteed client flow to get more share of legal outsourced
search, which Kamlani refers to, has from the US or the UK, and the sup- works from Japan.
predicted that about 35,000 lawyer jobs port of a large BPO or ITO organiza-
will shift offshore by 2010, and this will tion, or a US corporation or law firm, Indian legal firms & LPOs
increase to about 79,000 by 2015. coupled with good financial backing, Indian law firms have generally
“If you take the low end of the LPO it would be impossibly difficult for an refrained from the LPO business even
bill rate,”he says, “say $30 per hour and LPO to establish itself in the market. though they have an advantage as
assume an average LPO lawyer bills Kamlani suggests innovation and far as the talent pool is concerned,
1,800 hours per year, then 35,000 LPO focus on specialized skills as the as pointed out by Abhi Shah. A few
lawyers would generate approximately keys to success of the LPOs. He says, are still in the business, but many
$1.75 billion [by 2010].” “Always invest in knowledge, and sup- others closed down. They faltered
plement it with sound global manage- mainly because of their limited
Business prospects ment skills.” exposure to technology. Some ex-
“We are looking forward to more than perts like Kamlani point out those
double our workforce [from the present legal firms earn as much as $200 on
strength of 300] by 2010,” says Shah, an hourly b basis.
whose Clutch Group is set for all kinds He says,
sa “The LPO price structure of
of organic and inorganic growth. cannibalize their [Indian
$20 to $75 will canni
Kamlani also believes his company practice business.”
legal firms’] legal pra
can clock a growth rate of over 100 There seems another reason why
percent by 2010. The LPO business legal firms in India have not e embraced
has, however, its own share of prob- the
e LPO business. They view th the LPO
lems. It’s not difficult to set up an LPO, industry
try as the first step towards
tow ds u ulti-
thanks to lack of regulatory require- mate liberalization
eralization of the Indian
dian legal
n le
ments that need to be fulfilled for an industry as Chopra points po nts oout.
ut Their
Indian willing to start one, as pointed apprehension can b be understood
e und der in
out by Chothani. In addition, the in- the context of the Ch Chief Justice of In-
hief Ju
frastructure needed is particularly ad- remark some
dia’s rema tim back, albeit in
me time
Legal talents in India have
vanced in India. LPOs, thus, proves to an informal fu function,
unctition that the Indian
be Low capital-intensive industry. One ement
learned to implement legal system
ys em will
m wil ll ultimately open to
of the leading LPOs, Mindcrest, for in- Si
Six Sigma tools andd foreign playe
players.
p yer
stance, started with only five lawyers
other m ure
methods to ensure
in 2002, and now it employs over 450 The
he future
fu
futuure
legal professionals and engineers. It is, consistent qua
quality Thee le
legal outsourcing industry seems
therefore, no surprise that LPOs have delivered in the mos
most to
obbe going through a process similar
mushroomed within a short span of to what was seen in the early days of
efficient manner.
time. When Chopra started Law Scribe BPO development. Consolidation will
in 2004, there were only five players —S
Sanjay Kamlani
am
mla
an take place in the field, and weaker
in the market. Contrast
ntrast this to the players will be pruned out. Deals
present situation,n, with over 100 to 150
Co-CEO,
EO, Pangea3
PPan would get bigger gradually, and the
LPOs already registered, as Shah re- present trend of project-based deals
veals. This has led to a situation where CCountries of origin
ori could give way to full-time employee-
there are many small, poorly financed Bu
Business generated by LPOs originate based deals, something already ac-
LPOs trying to o cement their place in mostly in the US and the UK, which
mo complished in the BPO sector. The
the market. contributes almost 95% of the $250
con industry is immune to the political
“There are about ut 15 to 20 serious billion industry. The US comprises
bi environs in the US as well, as the state
players in the field with h a stable infra- 77 percent; the UK’s contribution is
7 bar councils in the country have wel-
structure,” says Chopra. 18 percent; and the rest of the world comed outsourcing. Some of the ex-
LPOs also depend on effective mar-
ctive ma makes up for the remaining 5 percent, perts like Kamlani do see LPOs being
keting and sales teams in the cou country according to Shah. players in special economic zones of
where their customers are based, and He says, “It is, thus, obvious from India. The writing on the wall is clear
a strong and effective delivery team in where business will come.” — whatever be the difficulties, entre-
India. Chothani says, “It is extremely Outsourcing from rest of Europe preneurs will continue trying their
difficult, almost impossible, to build and Japan has shown significant in- hand at LPOs. DAR E

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