Wednesday, December 15, 2010

Of Small and Big Fishes in this Pond

         A year or so ago, this blog had predicted that at some point, the smaller outsourcing firms will be swallowed by the bigger giants. And sure enough, here come the giants! Pangea3 was acquired last month by Thomson Reuters and the buzz is that there are several more large MNCs putting out feelers looking to acquire small working LPOs with a working staff of at least 50.
         Despite tax sanctions and outsourcing restrictive measures that the US administration has in place, legal outsourcing has grown. Not perhaps the meteoric growth predicted by business gurus, but the scope and variety of the processes outsourced is amazing.
          But are all small LPOs, ready to be taken over? Are they like our traditional Indian brides waiting hopefully, pretending to act coy, yet in reality eager to be acquired? 
         That I suppose depends much on what the firm sees its future to be. Cost considerations would be a major factor in taking the decision to merge with a larger firm. Even if the LPO is doing fairly well, the expense in maintaining the huge staff and infrastructure that is required for big document review projects, is considerable. Moreover, such projects especially large ones may not be as forthcoming as one would like them to be. While the firm may have lots of work,  often it is not enough to justify holding on to the extensive staff and premises, required for carrying out larger document review projects.  Firms handling only legal processes do not require large staff or impressive infrastructure which sounds good, but their climb up the financial ladder is slower.  Document review projects are the ones that really bring home the dough!
         When the LPO tide came in, several small LPOs sprang up with the sole intention of cashing in on the latest LPO craze. Most are now defunct. The few that have survived are the ones who did not hesitate to take on any sort of work that came their way. While some feel accepting any and every type of work dished out by law firms abroad, is not the right way to go about business, many start-ups  prefer to knuckle down and accept whatever is offered merely in order to stay afloat and live to fight another day.
          Personally, I think it’s better to have any kind of work than no work at all. Besides one never knows where a seemingly small project might lead to. One start up LPO in Pune that was affiliated to a large IT company was asked by a US law firm to design its website. It agreed very reluctantly but the decision proved a wise one because the law firm eventually became its biggest client.
           Generally speaking, the outsourcing service provider with a strong IT team that can provide tech support and a production team that is not chary of multi-tasking and not afraid to take on work, even work that might be somewhat out of their scope, is on pretty strong ground. But where legal process outsourcing is concerned, LPOs find it difficult to get their legal staff to cooperate on processes that do not exactly involve “legal” work. Most Indian lawyers come with a chip on their shoulder. Freshers particularly, the ink on their degree certificates not dry yet, are quite determined to do only “real” legal work. That most of them ultimately prove woefully inadequate to do it, is another story.        
          It is definitely not economically viable for the small LPO to hire separate non-legal staff to do the non-legal work, just to humor its legal employees. The Indian lawyer who wishes to enter the legal outsourcing field would do well to learn to multi-task and do the work on hand rather than take the high road. Once the small firm finds success, then whether it decides to be a small fish in a big pond or vice versa, it’s going to be a win-win situation  for not only its owners but also its employees.


Padmavathi Shanthamurthy said...

Interesting post, you have presented a completely different perspective.

The LPOs are no more "like our traditional Indian brides waiting hopefully, pretending to act coy, yet in reality eager to be acquired."

I would say the bold entry of Thomson Reuters into the LPO industry represents a serious, objective, outside validation of the industry. They are not necessarily interested in playing the coy Indian brides.

Rosemary said...

You're right. Someone else also said the very same thing-that the acquisition validates the LPO industry. Feels good doesn't it to be part of outsourcing?