India’s legal services industry is growing at a rate of about 40% per annum”, according to a report by Daisy Khanna, of KPO Consultants, a New Delhi-based consulting company which provides business solutions exclusively to the Legal Process Outsourcing (LPO) industry.

While driven in large part by India’s LPO sector, the industry as a whole is equal in size to the United States and sits atop the world’s 4th largest recipient of project-driven foreign direct investment, as Ernst & Young report.

India’s legal services sector

The legal services sector appears to be composed of three distinct sub-sectors:  Lawyers providing sophisticated, oftentimes cross-border legal work to corporate clients.  Lawyers provide primarily domestic legal services to individuals and small businesses.  LPO’s, provide “support functions such as document review and legal research”, according to KPO.

India’s traditional legal services sector

According to Kian Ganz, publisher of LegallyIndia. com reporting in LiveMint. The Wall Street Journal, India is “on a par with the US” in the number of practising lawyers. However, a small number of those lawyers are focused on providing high-end legal services on sometimes cross-border, international work. That part of the legal services sector in India “has huge room for growth and needs to grow. So that Indian companies and foreign investors get high-quality legal advice” Ganz argues.

Legal Process Outsourcers (LPOs)

“A number of law firms… including Baker and McKenzie, Allen and Overy, Venable LLP, Arnold and Porter LLP, Eversheds [and] Clifford Chance…have set up their captive centres in India for supporting their legal services.  Further, the number of LPO vendors has increased with the emergence of new LPOs. Currently, India is home [to] more than 100 Legal process outsourcing vendors”, reports KPO.

The KPO report cites “a sharp rise in the LPO business with revenues increasing by over 100%”, according to Sanjay Kamlani, Co-Founder and Co-CEO of Mumbai-based LPO Pangea 3.  The Economist provided a vivid glimpse into the India LPO world in 2010.

Room for growth

US law firms likely to send more work to Indian LPOs

Kent Zimmermann, Partner at Zeughauser Group, recently stated in a Bloomberg Law report that [US] law firms [need] to “get lean” by reducing headcount over [the] coming months. [He] also note[d] that unless the economy improves by mid-2013, three to five AMLaw 200 law firms could go out of business.”  She further stated that “There has been a quiet shift to use less expensive resources – including internal pools of talent that cost less, and (Legal Process Outsourcing companies) LPO’s – which provide lower-cost attorneys. Many firms are using LPOs at the request of clients, and “this trend is permanent” says Zimmermann.

According to Seth & Associates, a New-Delhi-based law firm, the U.S. is doing the majority of legal outsourcing.”  With Kent Zimmermann’s projections in mind, it appears likely that US law firms will be turning with greater frequency to India-based and other overseas LPOs in the near future.

Opportunity for India-based international lawyers

While the LPO market is poised for further growth, there is room for improvement in the way in which India-based cross-border focused law firms can go about capturing business, as Kian Ganz has pointed out.

The Economist recently reported that India’s growth rate is constant at between 5% and 6%, despite domestic challenges to growth.  Bloomberg BusinessWeek reported recently, “India’s new Finance Minister [Palaniappan Chidambaram], appointed July 31st by Prime Minister Manmohan Singh, hopes to spur growth with lower rates and policies to restore investor confidence.”

Beneath the recent reduction in overall GDP and concerns about barriers to growth. However, is an economy that is the 11th largest in the world by nominal GDP. The third largest by Purchasing Power Parity [PPP].”

[India remains] one of the fastest-growing economies in the world”, “recently recording a growth of over 200 times in per capita income from 1947 to 2011″, according to Wikipedia.  Indeed, as the Indian Government points out, domestic telecoms, infrastructure, and monetary sectors are growing apace as a result of “larger inflows from Foreign Institutional Investors, and wider participation of domestic investors, particularly the institutional investors.”

LPO competition globalizing

“Recently, new frontiers for legal outsourcing have emerged in geographic areas closer to their target client markets. Other established LPO providers can be found in Argentina, Australia, China, France, the Philippines, Singapore, and South Korea. Each offering unique advantages concomitant with their distinctive geographic location, language capabilities and regional expertise.” as Wikipedia reports.  Therefore, India-based LPOs need to ensure they are competing for US and other businesses as effectively as possible.

Posted by Asia Law Portal

A forum for discussion of news, information & opportunity in the Asia-Pacific legal markets.

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