SETTING UP FAILURE? IS INVESTING IN THE LPO INDUSTRY A MISTAKE?

SETTING UP FAILURE? IS INVESTING IN THE LPO INDUSTRY A MISTAKE?

Are new LPO providers wasting time and resources? Is the LPO Industry A perceived goldmine or an exploited one?

A criticism of the opinion (“How to start up your own LPO: and how not to”) by Sanjay Bhatia of SDD Global which appeared in legallyindia on 22^nd July, 2010 (available at: < http://www.legallyindia.com/201007221127/Legal-opinions/opinion-how-to-start-your-own-lpo-and-how-not-to>)

Should entrepreneurs think twice before looking into the booming LPO sector?

Investor's dilemma? 

The depiction of the dwindling legal process outsourcing industry as projected by Sanjay Bhatia of SDD Global in his article which appeared in legallyindia is not totally true. Indeed, upto a certain extent, we have to agree that not all the LPO’s generating all over the country are capable of achieving a very high quality status. The major reason that Bhatia points out in his opinion is that nowadays it takes more than a simple ‘office, staff and a website’ to start up an LPO. He believes that the boom in the LPO industry is over and we are now just looking at the fading end of it, to which some young entrepreneurs are falling prey to. To this I disagree. The industry, unlike what Bhatia says, is still in its nascent stage. It is growing and growing fast. Some LPO companies have established their credibility in the market. But can’t others? Bhatia’s article is a discouraging one for these new entrepreneurs. But how much of his reasoning is correct is what I shall try to analyse.

Of course, a newly set-up LPO needs clients. But isn’t that true for all enterprises? To be successful in any field by providing a service or creating a product, a company needs clients and customers respectively. That the western companies have to be ‘inspired’ to outsource their work to India is nothing new. Any client in any sector has to be inspired in one way or the other for them to take the services offered. The LPO sector is no exception. The attraction of being able to outsource work at low prices is always there. However, the credibility as well as the experience of the companies being outsourced to has to be looked into by the outsourcers.

Bhatia, in spite of all this, rightly states in his article the most important things to be kept in mind while opening a new LPO. However, the context or the picture that he projects is seriously erred.

ESSENTIAL COMPONENTS OF A NEW LPO:

Effective management is essential.
However it is not mandatory that it
should be US/UK based. 

1. A management team: Bhatia says that a LPO’s success is determined by whether it has ample US or UK qualified lawyers or not. In this regard, I wish to point out that having a management team comprising of US and UK lawyers is not an absolute necessity for setting up a successful LPO. Instead of having an ‘US or UK experienced’ management team, a LPO could do with a simple management and then for each project get guidance from the company which is outsourcing work to it. For example, say an US law firm L is outsourcing work to an Indian LPO A. By my logic, I think that A’s management staff does not necessarily have to be US- based for them to progress well. By no means will the presence of an US lawyer boost the credibility of the LPO. Firm L will not outsource even if A has five US lawyers in its management. This is simply because firm L, to get it work done properly, does not require an US lawyer on the managerial board of A. The lawyers of L can itself assist A as to what work is to be done and how. The work of an LPO is such that all that is needed is a dedicated team which meets deadlines. Foreign firms, companies and attorneys are already aware of the talent in legal research that the Indian students and graduates possess. They know that harnessing that will be  a boost for their organization for the simple reasons that i) they get it cheap and; ii) they get quality work. A firm can collaborate with an LPO with regard to what work has to be done and instruct it at every level. No foreign managerial board members are required to enhance credibility. There cannot be ‘communication lapses’ because there is a constant touch between the LPO and the client. The only factor essential on the part of a LPO to establish itself as a ‘serious player’ is to show dedication and hard work and slowly gather the interest of clients. Only this can lead to a further and further increase in the number of clients.

The Indian Staff chosen has to be competent
 enough to handle the project; their English
has to be good. This is a necessity.
And it is not impossible.

2.        A competent Indian Staff: It is true that, as Bhatia says, a competent staff is essential for the LPO’s success. I completely agree with him in this regard. And in fact, here even he agrees that ‘…All said and done, it is the quality of the work product that determines an LPO's success.’Bhatia are actually not so. First of all, let us try eliminating the number which will not go to an LPO for looking for work unless it is a very high-paying one. These include the graduates from the National Law Universities and the other top level law schools like Symbiosis, ILS, Amity etc. Say there are about 20-25 such Universities around India. Cumulatively, that comes to around 2000 students graduating every year. These students form the higher end of the economic pie who will sacrifice their LPO jobs to wait for law firm jobs. Let us add another 3000 to this pie from all other colleges. Thus, according to Bhatia’s estimate we are left with another 75,000 Indian lawyers. It is not true that the available recruits are the ones who are disastrous at English and cannot be hired for an LPO. Bhatia correctly points out that, in an LPO industry, writing skills occupy the forefront. However, he portrays a very wrong picture when he says that the remaining Indian lawyers/law graduates are grossly incompetent for this purpose. This is an insult to their education for the past five years. Among these remaining 75,000, even on an approximate, there are at least 20,000 odd graduates who are good at English and know the basic law well. The efficiency of the LPO will be determined by who they hire and they have to choose well, because even these 20,000 per year is sufficient to cater the needs of the rising LPO demand in the worldwide legal industry. These, along with a few proficient supervisors, can control the problem of the ‘misplaced comma’ which Bhatia concentrates on so much in his article. Precision is necessary and such precision can be obtained by what resources India has. The industry is not as bleak as Bhatia projects it, but choosing must be accurate in order for it to grow.

Training is a requirement for
the success of any LPO.
Such training has to be provided
by the client's themselves.

3.        Training programmes, which is better if provided ‘in- house’: Again, I have to agree that what Bhatia points out is indeed correct for the functioning of the LPO. It has to be trained to do the client’s work. However, that does not mean that the LPO employee has to be aware from before as to what the ‘intricacies of the US law’ is. On the other hand, it is simple supervision on the part of the client which will pay heed to this. The client will train the employees with regard to what work is expected to be done for them and how. Their training will be with respect to that specific project and not the intricacies of US law. However, this topic has been quite well dealt by Bhatia while analysing the ‘micro-level’ training, and I will not differ much from what he has stated. This kind of ‘in-house’ training by the client is absolutely essential and important for both the client as well as the LPO. There is no reason why both will not be happy to include this as a basis for their mutual growth.

It is true that a lot of importance is placed on quality of work. However, it is equally true that India is capable of handling such work and it new LPO’s with a proper management can proceed to capture the market of outsourcing in India. The bleak and dwindling image of the LPO industry as projected by Bhatia is not at all true. His component break-up and analysis of the essential for a new LPO in the industry is perfect. But his reasoning behind disregarding them in the Indian context is flawed. His article is discouraging and the picture portrayed is not at all true. The industry is rising and will continue to rise over the next decade. Employees have to be chosen correctly, proper supervision and management needs to persist. But all these are factors which are intrinsic for the growth of any company in any sector. None of the LPO entrepreneurs are wasting their time. They have to look for the best resources to tap into. Business will come. Credibility will be established. Work will be outsourced and managed. Lawyers will be employed. And the LPO industry will continue to grow.

Written by:

Anagh Sengupta.