Legal Process Outsourcing Becomes a Ripe Target But Nearshore Players are Slow to React

When the news broke recently that Microsoft is going to outsource more of its legal processing work to the BPO division of Wipro Technologies, in Bangalore, we couldn’t …

When the news broke recently that Microsoft is going to outsource more of its legal processing work to the BPO division of Wipro Technologies, in Bangalore, we couldn’t help but wonder: Why not send some of that LPO work to companies closer to home?

There’s no lack of BPO companies in neighboring countries like Costa Rica and Mexico, to name just two. (And as one observer told us, LPO is basically another form of BPO.) Well, the biggest reason is simple: It’s hard to find a Nearshore firm that’s doing LPO.

India Dominates

Ed Thomas, an analyst with the IT services team at global research firm Ovum, has just wrapped up a report that provides an overview of the LPO market. “The report doesn’t include any specifics about Latin or Central America as delivery models because no one mentioned them,” he said. “India is by far the dominant location.”

(The Philippines would be next in the standings, and China and Sri Lanka are growing. “A lot of companies want to have nearshore facilities in that region,” Thomas said.)

Nearly everyone we spoke with said that when it comes to LPO, India has what Thomas called “two very significant advantages that put it head and shoulders above everyone else”: superb command of the English language, and a legal tradition based on British common law.

Another big advantage is India’s experience with the “P” word. “India is very good at process,” attorney Jordan Furlong, a partner with Edge International, told us. (Check out his recent post The Evolution of Outsourcing.) “BPO is very process-driven, and Indian companies have shown that they’re great at systemization. They know how to take a task, break it down into components, and assign each task to someone that’s going to provide the best cost and the most efficiency.”

India, he said, also has something else: Plenty of people trained in the legal arts. “The country graduates about 80,000 new lawyers every year. By contrast, that’s the total number of all the lawyers in Canada.” [Furlong is based in Ottawa.]

Entrepreneurship has played a huge role in India’s dominance of the fledgling LPO market. “If you go back and think about why India has succeeded as an outsourcing destination, it’s because of the entrepreneurship that existed,” said Jagdish Dalal, managing director of thought leadership at the International Association of Outsourcing Professionals. “What you need is a bunch of investors and entrepreneurs who are ready to say ‘Let’s do this.’”

 

Early Innings

LPO is a new game, and there’s still time for new players to get into it. Everyone we spoke with emphasized that.

“It’s important to remember that LPO is still in its nascent stages,” Ed Thomas said. “We shouldn’t overestimate the market. It’s quite small as it currently stands. But in the long term, there are going to be opportunities there for Nearshore companies that can overcome certain challenges.”

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Those challenges include cracking a market that involves “a lot of trust between vendor and client,” he said. “Clients like to see previous successes. It’s not easy to just form a startup and say ‘We are now providing LPO.’ There’s a reluctance among legal firms to use LPO in the first place.”

(Wipro has been handling legal tasks —  patent and trademark filing — for Microsoft’s IP and licensing division since 2008. So the two firms have that all-important thing: a relationship.)

But again, the benefits we’ve all heard about being geographically close to clients will help providers of LPO in the same way it has helped providers of IT services. “It’s useful to have a lot of face-to-face interaction” when doing legal work, Thomas said.

“Once the market matures a bit, in three to five years, we will see jobs going to Latin America,” said Alok Aggarwal, chairman and co-founder of research firm Evalueserve, which provides KPO and LPO services.  Companies there would have a chance at acquiring LPO work “that does not require too much English writing or speaking.” The propensity for “legalese” makes it not easy for people even in India and the Philippines to do LPO  tasks, Aggarwal said, but “work such as tagging, e-discovery, and categorization can be done by nearshore companies in Latin America even today.”

Aggarwal recommends that Nearshore firms that want to get into the LPO business “approach clients with the aim of doing paralegal work” like e-filing and docketing.

“LPO is a whole lot more smoke than fire right now,” Dalal said. “There’s a lot of talk, but not enough going on to say this sector has hit scale.” Dalal said he thinks Panama and Costa Rica could be likely players in the LPO game. Panama has English and proximity to the U.S., and Costa Rica’s government has shown a knack for inviting foreign companies to invest.

“We’re not looking at an outsourcing phenomenon where the nearshore companies in the Americas are missing it,” Dalal said. “It’s still fertile ground.”

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