US bailout holds promise of legal outsourcing deals

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‘This year and next will be tough for IT & BPO’

New Delhi, Oct 27: The financial crisis in the US may open up a Y2K-like opportunity for India’s legal processing outsourcing (LPO) firms. The $700-billion US treasury bailout package will mean a steady stream of ancillary work—in legal and financial analysis of the troubled assets—to 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 firms—PwC, 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.