The Hindu Business Line : Legal services offshoring may earn $600 m revenue by 2010

WITH the maturing of offshoring and increasing acceptance of India as a destination, a range of non-customer relationship management and non-transaction related services requiring not just skill but "knowledge" are being increasingly offshored with legal services emerging as one area that has generated significant interest, according to ValueNotes Database Pvt. Ltd here.

In a paper titled "Offshoring of Legal Services to India" which is a part of the company's "Outsourcing to India: Beyond Call Centre" series, ValueNotes Database has sought to "demystify the hype and provide concrete data and analysis on the state of legal services offshoring from India" and has estimated that "the overall addressable offshore opportunity in legal services" will work out to $4.5 billion by 2010.

The study's key research findings include the following:

* The global legal services market — which includes major developed English speaking countries, the US, the UK, Canada, Australia and New Zealand — is estimated to be around $190 billion in 2005, but less than five per cent of this is "off-shoreable";

* Currently, law firms are the largest service buyers from the Indian legal offshoring industry, contributing about 49 per cent of the total $61.6 million revenues. The others are corporations and legal publishers.

* The current employee strength of the Indian legal offshoring industry is approximately 1,800, with 78 per cent of the employment in third party BPOs. However, "captives" are likely to outpace third-party vendors in terms of growth over the next five years; and

* Growth projections indicate that by 2010 the legal services offshoring industry in India will employ about 24,000 people - a more than ten-fold increase over current numbers. "By 2010, we estimate the revenues from legal service outsourcing to be $600 million, or just 13 per cent of the size of the `addressable' offshoring market, estimated at $4.5 billion by 2010."

Captive vendors, according to ValueNotes Database, earn the most.

"The Indian vendor landscape can be divided as into captives and third party vendors. Captives include dedicated centres of international law firms like Lexadigm, and in-house legal departments of companies such as GE, Cisco, Oracle, DuPont. A new breed of law firms, being set up in the US or UK with offshoring (a captive India office) as an integral part of their business model are now visible, such as Intellevate and NewGalexy.

Third party vendors consist of "niche" BPOs that focus on providing only legal services, as well as multi-service BPOs that offer offshore legal services along with other services.

Some of the niche players are IP PRO, Patent Metrix, Pangea3, Mindcrest and Quislex. Prominent BPO players include the likes of Evalueserve, Datamatics, WNS and Manthan."

The study goes on to say that captives will increase their share of the market significantly in coming years, and will take on more complex and high-value jobs such as contracts, and IP research, which are otherwise considered too sensitive to be offshored to third-party vendors.

"Aggressive moves by larger multi-service BPOs which are adding legal services to their portfolio are likely to threaten many of the smaller vendors, who do not have the financial muscle and the capability to move up the value chain. Many low-value jobs, that are process and skill driven rather than knowledge based, will see erosion in billing rates, with the entry of competition - despite a significant growth in market volumes. Large international law firms will explore joint venture opportunities with existing Indian law firms or third party vendors."

"M&A activity will gain traction by end 2006 and beyond. Many of the smaller players will be unable to invest adequately to face competition as the industry matures in India.