How legal process outsourcing is changing the legal landscape
In a canteen in a business district on the outskirts of New Delhi, soft chatter is interrupted by the screech of seats being dragged across a tiled floor. Thirty men rise, eyes turned towards a flatscreen TV, to give a standing ovation to Sachin Tendulkar, legendary batsman in India’s beloved cricket team, who has just finished compiling a century against South Africa.
The canteen is located in a brand new, glass-fronted office block in Gurgaon, 30km from the centre of Delhi and 10km from Indira Gandhi International Airport. From the second floor, the phenomenal scale of ongoing development around the office is apparent; a skyline punctured with cranes, and dirt roads teeming with trucks and workers in fluorescent jackets. Thirty-floor, nearly-built office blocks soar above piles of rubble and clouds of dust. An immense metro track, being built to link Delhi with its main airport, sits atop colossal concrete pillars on the main road back to the capital, stretching far into the heat haze. Below, herds of cows meander between the pillars.
As the ovation for Tendulkar dies down, people filter out of the canteen and return to their desks, leaving a pack of reporters to finish off a rather spicy vegetarian lunch. We are halfway through a media tour of an Indian legal process outsourcing (LPO) centre at LPO provider CPA Global’s Gurgaon facility.
LPO – also called legal services outsourcing (LSO) – is an emerging phenomenon that most lawyers will already have heard about. India has seen the greatest expansion in the LPO industry, as senior lawyers and general counsel in the west begin to acknowledge that Indian lawyers can do the work of junior associates for a fraction of the cost of a City salary. At the end of last year, Allen & Overy signed a deal with LPO provider Integreon to outsource some litigation document review work to Mumbai and New York. Integreon says it undertakes work for 32 of the 50 biggest law firms, including magic circle firm Clifford Chance and national firm DLA Piper, and 11 of the world’s biggest companies.
Estimating the value of the growing LPO industry is tricky, but Forrester Research predicts that $4bn (£2.6bn) worth of legal work will be outsourced to India in 2015. A recent report on LPO by Value Notes, an Indian research company, suggests that 10-15 established LPO providers currently generate two-thirds of total industry revenues. Some 20% of LPO vendors have disappeared from the market since a boom in 2005, with the smaller, opportunistic players being forced out as consolidation takes hold. Value Notes ranks Integreon, Pangea3 and CPA Global as ‘pacesetters’ within the global LPO market. Integreon boasts eight facilities, Pangea3 has four facilities and four sales and marketing offices, and CPA Global has 16 centres in eight countries.
Emerging markets-focused private equity firms have begun investing in LPO companies – possibly a bellwether for the industry. Earlier this month, Actis announced it had invested $50m (£32m) in a significant minority stake in Integreon, and Intermediate Capital Group recently acquired a significant but undisclosed minority stake in CPA, which is valued at around £440m.
Ritu Solanki, a resident contracts specialist, admitted over lunch that lawyers in Indian law firms can take a somewhat snobbish view of those working in outsourcing houses in India. She insists they are wrong. A good salary, a good work-life balance and the excitement of working in a relatively untested industry are enough to spur her on, she says. CPA says it encourages staff to work a 9am to 6pm shift, it provides transport to and from work, and gives everyone a free lunch.
Outside, the facility is heavily guarded by security agency staff, who check each car for bombs and weapons. Inside each facility, admission to different offices depends on the security clearance uploaded onto magnetic passes. Rather than Chinese walls, frosted-glass partitions and doors marked ‘No Entry’ cut through the otherwise openplan workspace. Open a door for more than 15 seconds and alarm bells sound.
CPA operates two facilities in Delhi’s satellite business districts, with the other based in Noida. Admission to the main server rooms in both the Gurgaon and Noida facilities is guarded by a fingerprint access system that not even company vice-presidents can pass. After an hour spent surveying the security systems in Noida, it is easy to feel like an extra in a Mission Impossible film rather than a tourist in a Delhi outsourcing centre. The red swastikas (the holy Hindu symbol) daubed on top of the backup power units in the basement offer a welcome if somewhat disconcerting reminder that we are in India.
The Noida office deals primarily with IP work and employs few lawyers. Microsoft began outsourcing its IP services to the Noida office in 2005, and has seen its team expand from five permanent staff to 73. In all, the Noida office houses 560 staff, which is around 80% of capacity. Most staff work on ‘shared services’ teams, which cater for multiple clients. On the IP side, CPA claims to have more than 400 clients tied to its shared services teams.
Most corporate clients are wary of disclosing their use of outsourcing, as evidenced by the strict non-disclosure agreements put in place before this visit. However it can be disclosed that private healthcare company Bupa; imaging company Canon Europe; construction firm Carillion; computer hardware manufacturer Sun Microsystems; pharmaceutical company Novartis and Arsenal FC all work with CPA for either IP work or general LPO. IP firm Marks & Clerk has worked with CPA for some years, but other law firms choose not to be named. Perhaps they don’t want their clients to know that they are trying to save money when serving them with their next bill.
In both the Noida and Gurgaon offices, shared services staff sit at partitioned desks on expansive openplan floors. The view across the room is much like the view across a newly fitted City law firm office. Things-to-do lists adorn small whiteboards above each computer screen, some listing tasks, others names and smiley faces. Corporate branding posters on corridor walls remind staff of the ‘CPA Values: taking ownership, succeeding together, and achieving excellence’. Staff can use ‘breakout’ rooms, complete with coffee machines and libraries stocked with books chosen by staff, to take time out. In the Noida office, a ping-pong table sits in a corner of the canteen.
Client-specific teams sit segregated from their shared services colleagues behind the frosted-glass partitions on the borders of the room. In Noida, the Microsoft logo adorns the door of the 73-strong IP team, while in Gurgaon, a giant Rio Tinto logo marks the office of the new general legal services team set up by the mining giant in mid-2009. Security restrictions mean that the Microsoft and Rio Tinto offices are out of bounds, but some Rio staff are allowed out to talk to journalists under the watchful eye of Karlyn Stanley, recently appointed director of legal services at CPA.
Divya Kohli, legal support services manager, has an MA in law and is currently doing an MBA. Having been with CPA for five years, she moved across from the IP team to the general legal team to do contract and document review. Gaurav Sood, document review team leader, worked for six years in real estate before moving to CPA 18 months ago. Parminder Kaur, document review team leader, graduated from law school in 2005 and began doing document review for CPA. Ritu Solanki is also on the Rio team.
Every day, Rio Tinto lawyers post assignments for the CPA team on an electronic platform, known as an ‘e-room’. The CPA team meets at 10am every day to discuss assignments and split up the workload. Once completed, the assignments posted on the e-room are updated and Rio Tinto lawyers can rate the work that has been done. Information passes through the e-room, rather than by email, for security reasons.
But why have these young lawyers chosen to work in outsourcing rather than a traditional law firm? ‘It’s the international exposure,’ says Sood. ‘I have worked in law firms, but I heard about these upcoming legal outsourcers. It’s a whole new way of working and, with the exposure to international law, more holistic. I think that, in terms of complexity, the work we are doing for Rio Tinto is equal to that done in a law firm.’
Solanki says she likes the specialised nature of the work. ‘Law firms have a variety of work, but here I can concentrate on contracts work,’ she says.
One notable feature of the workforce is the age gap between staff and managers. Rakesh Kher, vice-president in HR, estimates that the average age of non-managerial staff is 26 or 27. One might assume that this gap indicates a high staff turnover, where junior associates work at the company for a few years to pick up experience before moving back to a traditional law firm. Kher insists that this is not the case, and that the company holds on to around 85% of its staff every year. In any case, the Gurgaon office is so new that staff turnover cannot be accurately measured, he says.
Kher estimates that the annual pool of law graduates in India is between 80,000 and 100,000. He says that CPA only recruits lawyers with degrees from ‘tier-one or tier-two’ law schools, of which there are 20 to 25, cutting the pool to between 20,000 and 25,000. Lawyers who want to work for CPA must speak English as their first or second language. Venu Nair, legal outsourcing vice-president, says that six of the 60 legal staff in Gurgaon have an international qualification in law. Junior lawyers are assisted by senior lawyers, known as subject matter experts (SMEs), when greater expertise is needed. Legal staff join as analysts, move on to become senior analysts, and then, if they stay long enough, SMEs.
Such is the confidence of CPA in the potential for growth in the LPO market that it has embarked on an ambitious plan to recruit 400 staff by the end of 2011 – equivalent to almost one new hire every working day. Indeed, the third floor of the Gurgaon office is eerily quiet – although kitted out like the floor below, every chair is empty. CPA is already targeting experienced lawyers and outsourcing staff from competitors for its hires, although Kher admits that it is a ‘challenge’ to get lawyers to drop aspirations of becoming a partner and work instead in outsourcing. But he claims that in many cases, CPA can pay more and offer better non-monetary benefits, such as a fair work-life balance.
In a bid to break down the traditional draw of partnership in a law firm, CPA has embarked on a branding campaign with a number of partner law schools to raise the profile of the company and highlight future careers in legal outsourcing. Kher says that CPA might recruit law graduates directly in the future and sponsor them through their studies. ‘The challenge that the top players have is getting first-year law graduates to consider a career in LPO,’ says Nair. ‘I lose sleep not because we have to hire so many people, but over whether we can hire the right people. By expanding the pool we should be able to meet demand with supply.’ Nair says that requests for work are coming ‘substantially from the US’ but also from the UK and the rest of Europe. ‘Law firms are particularly interested in mergers and acquisitions resources,’ he says. ‘A segment of the top-20 global firms have spoken to us.’
It remains to be seen whether LPO in India takes off to the extent being confidently predicted by those working in the industry. In the meantime, the top LPO providers will need to draw talent away from law firms and intercept law graduates before they take up traineeships, in order to create a strong platform of talent upon which to build. How long these lawyers choose to stay working in LPO is hard to determine. But the working conditions in CPA’s LPO facilities are far removed from the call centre stereotype, and at this early stage, staff appear genuinely happy to be part of something new.
