The financial crisis in the US may open up a Y2K-like opportunity for Indias legal processing outsourcing (LPO) firms. The $700-billion US treasury bailout package will mean a steady stream of ancillary workin legal and financial analysis of the troubled assetsto LPOs in India.
LPOs across India FE spoke with have senior managers who had worked with large global legal firms, and are betting on substantial legal work filtering to India.
This opportunity has the potential of being the Y2K for the legal offshoring sector, says Ajay Agrawal, chief solutions officer of UnitedLex, a 300-staff legal process & consultancy firm in Gurgaon. Agrawal expects work like analysing the eligibility and value of the troubled assets on behalf of the treasury department to be key growth drivers for the sector.
Sirisha Gummaregula, chief operating officer of QuisLex, a Hyderabad-based legal outsourcing firm says, Analysis of contracts outstanding with banks going through mergers, and review of contracts describing assets of banks going through bankruptcy are some of the work LPOs are positioned to do.
Gummaregula equates the current scenario to the time the Sarbanes Oxley Act was passed in 2002, saying, Anytime a new control, evaluation or review issue comes up, such as the one to deal with the financial market meltdown now, there will always be additional work for professional service providers.
Of course, top gainers of the package will be the Big Four accounting firmsPwC, DTT, E&Y, KPMG and at least the next ten global service providers. But Big Four, which had signed on the balance sheets of many affected banks, will now need to spread the business out to other service providers to protect themselves from a conflict of interest. Here, Indian LPOs believe the argument in their favour is strong. Indian outsourcing industry has become renowned for its six sigma-type process expertise and consistency, says Sanjay Kamlani, co-founder & Co-CEO of Pangea3, a Mumbai-based LPO.
A combination of legal manpower and technology makes India an attractive option for clients in the US to outsource work.
On an average, legal costs borne by companies in the US increases by 5 to 7% every year and the cost arbitrage offered by India, where every year 80,000 fresh lawyers join the profession, is too good for US companies to resist, says Navtej Saluja, vice-president & head of intellectual property & legal process services at Evalueserve.
While top global law firms, such as Clifford Chance of the UK and Baker & McKenzie of the US, have offshore units in India that serve as their overseas back-office, they are not equipped to offer the complexity of work provided by some of the organically founded LPOs, according to Agrawal of UnitedLex.
Though no one is sure of the likely business that will come to India from the current package, some guess it could be $3 billion (roughly Rs 15,000 crore) and up. But some are not optimistic because of the mixed feelings in the US towards outsourcing. It is questionable, given that it is an election year in the US, whether the US government will offshore work to India, says Ashutosh Gupta, vice-president and head of investment research at Evalueserve. This could be a possible reason for a delay in work coming to India.
The US treasury has meanwhile appointed its first legal consultant, Simpson, Thacher & Bartlett, a New York-based law firm that has conducted legal work for big hedge funds, about ten days ago to provide strategic legal advise on the bailout. The initial assignment is reportedly worth $300,000.