2009 – The year of offshore legal services?
- January 6, 2009
Inside the Mysore office of SDD Global.
Looking Back
I vividly remember the ITechLaw Conference at Bangalore in early 2007. The theme of the L.P.O. track was whether legal services could be effectively off shored to India. The L.P.O. panellists were often on the defensive and under attack from their international counterparts. The theme of the L.P.O. track at the 2008 edition of the conference was markedly different. Confident L.P.O. panellists made case presentations and gave examples of how their services saved time and cost for their clients. I am sure that the 2009 edition of the Conference to be held in New Delhi in February, will show-case a rapidly maturing industry making important strides in delivering quality legal support across the world.
2008 was an important year for offshore legal services. One of the highlights of 2008 was the American Bar Association ethics opinion 08-451 on legal outsourcing (“ABA Opinion”) which supports the outsourcing trend as “a salutary one for our globalized economy.” While the ABA Opinion is not binding, it signals an important positive shift in attitude towards offshore legal services. The other important factor that began in 2008 and will continue to shape developments in 2009 is the global economic crisis. The economic crisis has made offshore legal services a compelling proposition not just on cost but overall “value-delivery” of legal services. An early sign of this is the Association of Corporate Counsel’s (ACC) Value Challenge initiative launched in November 2008. The ACC which is the industry body for corporate counsel in America has launched the initiative to “reconnect value and costs for legal services”. One of the aims of the initiative is to help “regulators across jurisdictions understand how to authorise the cross-border practice ..........as they represent their clients in an increasingly borderless (and even multinational) practice environment” (emphasis mine). With both the bar associations and corporate counsel calling for a more proactive approach to offshore legal services, the industry in India is gearing up for an important 2009.
What can we expect in 2009?
As a focused legal talent management house, Rainmaker is regularly mandated by legal services players on staffing, consulting and training assignments. We are brought in when there is money on the table (i.e. a project) and work needs to get done and done well. In the last few months of 2008, we witnessed a significant rise in enquiries, mandates and large scale projects with L.P.O. players. The trends for 2009 that follow are gleaned from developments that we know of or were party to in 2008.
Scaling Up
Several large L.P.O. players have made statements in the press regarding their plans to hire in large numbers. This is not just idle talk, as we are already witnessing large scale (100+) staffing projects in action. Some L.P.O. organisations have also taken out additional office space and some are in advanced stages of planning for multi-location facilities to cater to future projects in the pipeline.
From conversations with key decision makers in the industry and our own mandates we estimate that the industry will hire 6000-7000 people in 2009.
Consolidation
In 2007-2008 the industry saw the entry of major names such as Infosys and Wipro. It also attracted small, yet optically significant funding from private equity players. In 2009, these trends will continue where organisations with the necessary backing and infrastructure will successfully scale-up and capture the market. The smaller players in comparison will find it increasingly difficult to grow and challenge the more established players. We will see smaller players exiting the industry and larger players increasing their market share. To use a much clichéd phrase, in 2009 we will see the men separated from the boys.
Rise of captive centres
The term offshore legal services as referred to in this article, does not refer only to legal process outsourcing or L.P.O. The term also refers to “in-sourcing” as successfully practiced by some I.T. and financial majors that have captive legal teams in India. GENPACT and Cisco are some examples of major corporations successfully adopting the in-sourcing model. These captive legal teams provide legal support to the legal and corporate departments of the business across the world.
The “Value Challenge” launched by corporate counsel in America will only further this trend among large corporations with the scale to make in-sourcing a viable proposition. The in-sourcing trend may not stop with corporations. Large international law firms may increasingly look to offshore legal services as a means to innovate globally and manage costs. Clifford Chance made headlines when it set up a knowledge centre in Gurgaon. A large American law firm also announced its plans to set up a captive unit in Pune. 2009 may see more examples of international firms and corporations setting up captive centres in India.
Foreign competition
“Right shore” may replace “Off-shore” in 2009. In addition to the Philippines, countries such as Israel, Korea, Mexico and South Africa will compete with India for the offshore legal services pie. The South Africa L.P.O. industry made headlines in late 2008 with the formation of an industry body (SALPOA) to promote the development of offshore legal services providers in South Africa. While India retains in scale and cost, mature players in the industry will have to come together if the true potential of the Indian L.P.O. domain is to be realised.
Type of work flowing to India
Document review and patent related work constitute a majority of the legal work that is outsourced to India. The sub-prime mortgage crisis and its fall-out have resulted in a flow of foreclosure related work to Indian LPOs.
As Sarbanes-Oxley followed Enron, it is likely that some form of “market oversight” or regulatory change will follow the global economic crisis. The L.P.O. industry may in the latter part of 2009 benefit from such regulatory change, if compliance related work is seen to be offshorable. Whether or not that happens, a safer prediction to make is that the volume of document review work and foreclosure related work will increase.
2009 promises to be a big year for offshore legal services. Just how big, will depend on industry readiness to meet the expectations and challenges ahead.
(Ritvik Lukose is Vice President, Rainmaker. In December 2008, Rainmaker and the I.G.N.O.U. announced the launch of the Post Graduate Diploma in Legal Process Outsourcing (PGDLPO). The PGDLPO program commences in February 2009 and will also see leading L.P.O. players contributing learning content and practical education to LPO aspirants through the distance education format. For more information please visit http://www.ignouonline.ac.in/pgdlpo/)
