Playing on a new court

The Indian IT industry has a new court to play on — Legal BPO. But as global firms outsource work to India, domestic players will have to address concerns of data security and service quality to score in the game.

THE Indian IT industry has a new court to play on - Legal BPO.

With international law firms, the in-house legal departments of MNCs, and legal publishing and research firms, particularly in the US, increasingly looking at sourcing services from India, Legal BPO may well be the next big opportunity for Indian firms.

Indian firms, till now, have cornered only 2-3 per cent of the potential market, says a Nasscom report.

"While the size of the Indian legal BPO segment is still very small, the success achieved by early movers has established the proof-of-concept, which is the key to unlocking the potential in new waves of offshore-outsourcing.

Estimates of the current addressable market potential for legal services outsourceable from the US alone are pegged at $3-4 billion.

Though there is little hard data available to quantify the legal offshoring segment of the Indian BPO industry, it is estimated that only about 2-3 per cent ($60-80 million) of the potential market has been tapped so far," says the latest Nasscom report on Legal BPO.

The increasing maturity of the business process outsourcing industry has prompted businesses to review their service delivery models, in order to seek ways of leveraging resources from lower-cost offshore locations, it says.

"The legal services segment is a relatively newer segment that has witnessed recent interest and is believed to hold significant market potential.

Though a bulk of the legal services work considered offshoreable comprises para-legal and secretarial support, a few companies are beginning to `push-the envelope' to offer a broader range of more value-adding services such as contract review, patent writing, litigation support, general research and review," it says.

Global spending on legal services is estimated to be at least over $250 billion, with the US accounting for more than two-thirds of the market.

The report observes that increasing levels of interest in offshore-outsourcing of legal services to India have been aided by a steady growth in demand for legal services.

Other factors tilting the scale in favour of India include:

# The demonstrated benefits of offshore-outsourcing.

# Access to skilled managerial and technical resources at a significant wage differential.

# Time-zone advantage enabling 24x7 operations; and

# English language expertise.

"The legal services outsourcing segment in India is still at a nascent stage, with no known large `one-stop' service provider.

Currently, the market comprises a fair mix of captive centres established by large law firms/multinational corporations as well as third-party providers," it says.

Firms providing offshore legal services from India include the in-house legal departments of large multinationals such as General Electric, Oracle, Sun and Cisco, that have moved some parts of their in-house legal departments to their India-based units and units of large multinational law firms (Schwegman, Lundberg, Woessner and Kluth have a subsidiary called Intellevate, which has two centres located in India, Nishith Desai and Associates has incubated IPPRO in Bangalore, and Patent Metrix, a US firm based on the west coast, has a subsidiary in India).

In addition, there are offshore-centric service providers, which include pure-play legal service providers such as Pangea3, Atlas Legal Research, Lexadigm and Lawwave; as well as other service providers with a division focusing on providing legal or patent support services such as Evalueserve, Office Tiger, and Manthan Services.

"It is reported that there are about a dozen pure-play firms offering offshore legal services from India, and the total number of companies offering some form of offshore/outsourced legal services is about 50," it says.

The total employee base engaged in providing legal BPO services from India (both captive and pure-play third-party units) is estimated at about 600-700 employees, while the billing rates for legal BPO in India range between $12-125, depending on the nature of services provided.

A note of caution

The report, however, points out that despite the huge potential of legal BPO, the experience of early movers has thrown up a few issues given the sensitive nature of legal work.

"Buyer markets have expressed concerns about data security and service quality. Some lawyers also have concerns about outsourcing work to professionals whom they have not trained themselves," it says.

Moreover, the ability to outsource can also be impacted by the fact that lawyers cannot represent two businesses on opposing sides of a legal dispute unless both sides waive the conflict of interest prohibition.

"On the supply side, since resources trained in US legal case laws are quite scarce, firms often have to invest a fair amount of time to train professionals in legal writing and for undertaking work beyond the basic levels," the Nasscom report says.

Differences in the academic curriculum and their acceptability in each country, as well as regulations governing the profession across geographies, may also restrict the scope of offshore legal service delivery.

For instance, lawyers qualifying the bar in India need to take the corresponding examinations in the US — before they can practise there.

"In spite of these challenges, legal BPO holds significant potential for offshoring and there is enough room to manoeuvre around the constraints by redesigning the existing models for delivering legal services.

Underlying this belief is the fact that demographic shifts in countries such as the US are expected to make it necessary for organisations to rely on offshore resources," concludes the Nasscom report.

World's first outsourcing industry conference in Dubai

Dubai Outsource Zone announced yesterday that it will host the World Outsourcing Forum, the first global conference focusing on the outsourcing industry, in Dubai from September 27-28, 2005.


The Forum will bring together senior decision makers and professionals with a stake in the outsourcing industry from around the world to discuss a wide range of strategic issues in an industry that is changing the face of the global economy.

"The event will provide a great opportunity for sharing visions, ideas and best practices in the outsourcing industry, which is transforming the way the corporate world runs its business," said Ismail Al Naqi, the Director of Dubai Outsource Zone said. "While the Forum will bring together the global outsourcing fraternity, it will also raise Dubai's profile as an emerging destination for outsourcing," he added. The Forum will feature debates on industry standards and implementation, strategic growth through international partnerships, adaptability, suitability and operational strategies for turnaround, as well as spotlight case studies from leading multinationals.

"Outsourcing has become a key strategy for many multinational businesses to raise cost-effectiveness, access talent and enhance efficiencies, but until now the industry has lacked a focal point to support these user and vendor companies," said James Magee, Director of the World Outsourcing Forum.

"The World Outsourcing Forum has been designed to fill this gap. The event will help the industry exchange insights on the key directions and opportunities in the outsourcing sector," he added. The Forum is being organised by the ITD Group, leading international development organisation, which organises major outsourcing events like Outsource World UK and Outsource World New York, in association with leading regional event management company ITP Events.

The Forum has lined up an impressive array of high-profile speakers representing various perspectives.

IT offshoring is a strategic imperative for global firms

The Indian IT industry is at an inflection point. I strongly believe that India and Indian firms are ready to leapfrog into the big league, transforming in its wake not only the global IT landscape but also the very roots from which we operate.

NASSCOM: An Interesting Offering for Outsourcing

Bearing in mind that the vast majority of BPO employees in India are graduates, NASSCOM's program demonstrates further commitment to raising standards for BPO. The development is well considered and should be welcomed, and is likely to be widely adopted by the Indian offshoring industry, by potential employees and employers alike.

Included in the aims of the NASSCOM (National Association of Software and Service Companies) initiative are the provision of a national standard for recruitment of entry-level talent for BPO, and also the enablement of offshoring organizations to develop the ability to cut costs through a more rapid recruitment phase.

News of this initiative comes hot on the heels of a report that the UK's AA -- Britain's largest travel publisher -- has decided not to offshore some of its operations, despite potential savings in excess of 20 million pounds (US$36.8 million).
Staying at Home

The AA stated that it would keep its call center Latest News about call center operations in the UK in an attempt to differentiate itself from its competitors, and also because it appears to believe that the quality of service is better in the UK than overseas.

Nevertheless, the BPO marketplace in India is expected to continue its tremendous growth over the next few years, and the new certification standard has been developed by NASSCOM in order to improve the quality of service the industry can offer its western customers.

According to the NASSCOM Web site Learn how the leader in Internet services can help you start and grow your business online. Network Solutions. Go Farther., candidates will be assessed in the areas of listening and keyboard skills, verbal ability, spoken English, comprehension and writing ability, office software Get your FREE Oracle Database Software Kit today! usage, numerical and analytical skills, and concentration and accuracy.
Education Counts

NASSCOM is also encouraging state governments to commit to the NAC to improve their recruitment schemes, attract investors for the BPO sector and forge a link between education and employability.

Bearing in mind that the vast majority of BPO employees in India are graduates, NASSCOM's program demonstrates further commitment to raising standards for BPO.

The development is well considered and should be welcomed, and is likely to be widely adopted by the Indian offshoring industry, by potential employees and employers alike.

UK is net gainer from IT outsourcing and offshoring trends

The international trend towards outsourcing IT-enabled services is benefiting the UK as foreign firms are increasingly offshoring in the UK.

Figures from the Office for National Statistics in its latest Labour Market Trends survey show that in spring 2005 UK employment in IT and call centre occupations stood at .05 million people – up 8.8% on the previous four years.

The increase in jobs in the sector compares with employment growth of 3.2% across the economy as a whole.

The survey found that 271,000 people were employed as ICT managers, 124,000 as software professionals and 276,000 as IT operations technicians.

The figures show no change in the level of “imports” of computer and other business services – through outsourcing away from the UK – as a percentage of output. Although outsourcing has increased, it has not increased more rapidly than output.

But export levels of computer services – where UK IT staff provide services to overseas firms that have outsourced to the UK – are higher than import levels, making the UK a net producer and exporter of services.

The survey also shows that the outsourcing trade in both directions is overwhelmingly with English-speaking countries, particularly Ireland.

Services outsourced from the UK to India are worth less than 40% of those outsourced to Ireland. A greater value of services is outsourced to both Australia and Canada than to India.

UK call centres thrive despite offshoring

UK call centre staffing has not been adversely affected by the trend for offshoring, according to a report from the Office of National Statistics (ONS).

Rather than being in decline, jobs at call centres have been growing at three times the average rate across other sectors in the past four years.

The growth is partly attributable to the impact of offshoring posts created in this country, such as by New Delhi-based HCL Technologies, which announced 600 new jobs in its Belfast call centre this week.

The sector employed 1.05 million people in May 2005, made up of 670,000 in IT services and 375,000 in call centre and customer related jobs, and representing an 8.8 per cent growth in four years.

The UK is a net exporter of computing and other business services, including call centres. But redundancies in the sector, though falling since 2001, are higher than the national average, ONS said.

Robert Wint, marketing director at call recording and analytics software firm Verint Systems, said: "The research proves the healthiness of the UK call centre market. However, this isn't cause to be complacent.

"There will always be good, largely financial, reasons why companies choose to outsource certain types of mass volume customer transactions offshore."

Matthew Vallance, European president of Indian IT services group ICICI OneSource, believes that the figures confirm the view that the UK and Indian outsourcing markets can grow together.

"Outsourcing work to India will help the UK address the shortfall in workers that are being predicted in the future," he said.

Crossing the Himalayas: China and India's IT Partnership Is a Force That Won't Be Ignored

“I strongly believe if we join hands together, we will certainly be able to set a new trail in the IT business world.” This was the message from Chinese Premier Wen Jiabao on his last visit to Tata Consultancy Services (TCS), Asia’s largest IT services company, based in India. The premier’s words couldn’t be more true. The two-way trade between China and India reached $13.6B in 2004, up dramatically from $3.0B just four years ago. The IT industry was already playing an important role in the increase in trade between the two countries, and will continue to do so, potentially growing to a market worth $30B as part of the partnering countries’ five-year plan.

The Bottom Line: Working together, China and India, the world’s fastest developing countries, will dramatically speed their penetration of the global IT services markets.

What It Means: China’s software industry didn’t really start until the late 1980s. Like many other industries, it remains highly fragmented, with the top 10 companies holding only 20% of the market share. This compares to India’s top 10, which command 45% of its market. Also consider that only 5 of the 8,000 software service providers in China have more than 2,000 employees. Lessons can be learned from India, with not only a software industry that is double the size of China’s, but with global companies competing heavily around the world, including TCS, Infosys, Satyam, and Wipro.

All of these companies have operations in China now because China has what India needs:

* Talent—More than 100,000 IT engineers graduate from colleges every year in China, and many students come back from U.S. and European assignments with Western software development thinking. This helps Indian companies ease the fierce competition for skilled programmers they are seeing at home.
* A rich market—China is the hottest Foreign Direct Investment (FDI) destination, with numerous global companies present that need IT services. Domestic organizations are also improving their IT infrastructure, a result of business demand and government encouragement.
* Support—Like India, China has established software parks in many cities, with associated policies to support software companies. The Premier’s visit is another important indication.
* Proximity—Indian consulting companies need to be physically closer to existing Western and Asian clients that are selling more products inside China.
* Better programs for the market—The heavily regulated Chinese market requires better customized programs, including the accounting and billing software used by Western companies. India Inc. partnerships with Chinese companies will facilitate this.

India has what China needs

And China wants to boost its own IT industry by learning from the experience of Indian companies. The similarities between China and India—economy, culture, and geography—together with the successful models of India software companies create an extraordinary prospect for the partnership.

Take TCS, for example, which has already derived benefits from the relationship. As the first Indian IT services company in China, TCS has developed a strong presence in Hangzhou, with more than 200 associates forming an integral part of its delivery centre. This is also the first TCS engineering services centre outside India, which is supporting customers from the United States, Europe, and Asia-Pacific with multilanguage ability. This, in turn, reduces the pressure on its internal facilities.

TCS has also been adding consistent value to China’s IT industry. Consider the following:

* Training local professionals in China on software project management, which will help manage teams and deliver large projects from China.
* Delivering software and engineering systems from China
* Collaborating with some of the leading universities in China to carry out joint applied Research and Development (R&D).
* Developing renowned quality process theory, which will be beneficial to Chinese software companies.

All these build up a solid base for collaboration

For Western companies still struggling to compete with low-cost labor in the manufacturing industry, it sounds like a double-outsourcing nightmare. Professionals won’t just look at IBM and Accenture when they search for their next job or business system. But the road for this collaboration is rough. Uncertain factors between China and India and how to maintain stable growth are testing this partnership (see the AMR Research Alert article “Explosive Growth: Can India, Inc. Handle It?”).

Nevertheless, Western service providers should not underestimate the impact of this partnership. In their efforts to reach global goals, all companies in China are facing similar difficulties, such as regional protectionism, the reluctance to support companies in which Intellectual Property (IP) does not stay in China, the disregard for IP in many cases, plus language issues and more. How to handle these will determine who wins.

Conclusion: The partnership between China and India will shape the global IT industry. No one should neglect this inertia. But just like climbing the Himalayas, it is not easy to predict the size of peaks and troughs, nor how long each will last. One point, however, is unquestionable: China plus India is greater than China versus India.