Screen Size Just Got Wider

After traditional offshoring, it is the turn of legal and real estate services to be outsourced to India.

October 3, 2007, by Nandita Dutta

BPO isn't an emerging sector in the traditional sense. But try LPO, MPO, RBPO and you see the difference. These aren't just acronyms. Instead, they epitomise the evolution of the ITES-BPO industry in India that's starting to look beyond a cost-only model to a cost-plus-value model. What began as basic data entry operations and moved to back-office processing a few years ago is now gravitating towards complex processes that involve decision-making and research-based support. As a result, non-traditional areas like legal services, real estate, media and entertainment, among others, have sprung up as new avenues to exploit India's knowledge and cost advantage.

Discovering Realty
In 2003, Ntrust Infotech spotted an opportunity in lease abstraction services. This entailed transferring data from paper lease into an enterprise contract management system. This isn't data entry work, insists Janakiraman Ramachandran, Chief Operating Officer of Ntrust Infotech. “Unlike data entry, where information is straight away transferred to an online system, the language in a lease may run from three to 120 pages. To cull out this information and summarise isn't easy,” he adds. Looking ahead, it is advantage India. Ramachandran is optimistic: “With tenant and owner companies finding it difficult to hire skilled lease administrators and an irregular work-flow, outsourcing is expected to pick up.”
                    
Zenta is another real estate BPO that looks at lease analytics and administration. Says Devesh Bahl, Business Leader at Data & Analytical Services at Zenta, “If the Empire State Building is coming up for sale, the seller may hire Zenta to do a cash-flow study of the lease rentals to see how profitable the proposition is. Once the sale goes through, the buyer may retain Zenta to take care of the financial accounting related to the running of the property. This involves financial modeling and extensive knowledge of the local real estate market. Similarly, if a customer wants to buy a house, Zenta would administer the whole process (credit appraisal, loan disbursement and future administration)-except real estate consultancy services. “The expertise and skills required to do this work are distinct from the process oriented outsourcing work, and herein lies the true challenge and opportunity for entrepreneurs. Margins in the segment are also distinctly fatter.”

High profits follow skills, and the legal profession offers high-value opportunities, provided you act as an extended arm of an overseas legal firm. Mysore-based SDD Global, a legal outsourcer floated by New York-based law firm Smith Dornan Dehn, says it has helped Sony Pictures with legal work in its next blockbuster film and provided litigation support to 20th Century Fox on behalf of Sacha Baron Cohen. Says company President and Chairman, Russell Smith: “We do almost everything from drafting motions, preparing legal briefs and memoranda, discovery documents, appeals, summaries of witness statements and creating print, videotape and animation exhibits for trial.”

The business flow in the legal space is rising. According to industry analysts, revenues are expected to touch $640 million by 2010, up from $146 million in 2006. Lokendra Tomar, Senior Vice President of Integreon, says the scarcity of talent in Western markets and pressure from clients to reduce cost are driving LPO to countries like India. Engagements vary from low-end support services like document review and coding all the way up to litigation support.

In the business, being connected with the legal profession overseas provides a big edge. Pangea3, a large player in legal outsourcing, and among the first to enter the space (in 2004) was the outcome of a dinner conversation between founders Sanjay Kamlani and David Perla, both US legal professionals. Private equity players are also taking a keen look- Sequoia's recent infusion of $7 million in the company is an indicator.

Movies, Soaps and Print
Media and entertainment is another promising area. Deepak Kapoor, Founder-Director at Altivoleous Infotech, a boutique content outsourcing firm, claims that any pre-press work can be outsourced to India including copy editing, formatting, picture editing, abstraction and indexing because they are labour intensive work. “The entire line of work is outsourced to us,” adds a spokesperson for broadcaster NDTV, which last year floated a joint venture with BPO major Genpact to offer media outsourcing services to global enterprises. More recently, Infosys BPO and media firm TV18 joined the fray in another partnership. Evidently, media and publishing offshoring is seeing heightened activity, and PE investors and venture capitalists are prowling around for ripe pickings. In June this year, Bangalore based fund Helion Ventures invested an undisclosed sum (news reports put it at $10-15 million) in Mindworks Global, a company that provides editorial and design services to global media firms.

A Price Waterhouse Cooper report released last year said even if 1% of all the media work is outsourced to India, it'll be a $6 billion opportunity. That's a big slice for any media person to consider an entrepreneurial race.

Making Inroads
In the quaint innards of the countryside, entrepreneurs have discovered yet another leaf of the outsourcing tree-rural BPO. The opportunity is less about the customer, more about the supply side for skills. Although seen as a community initiative or as part of their CSR programme, rural BPO can be a profitable business venture. As Sriram Raghavan, Co-Founder & President of Comat Technologies discovered. “We have established proof-of-concept and are now looking to scale up,” says Raghavan. By using its existing IT infrastructure (tele-centers set up as part of the Karnataka government's Nemmadi project) during the night for data entry work, Comat is helping an American bank to clear cheques that remain unprocessed by a high-speed scanner. With one client already under its belt, the company is in talks with a domestic telecom major and a banking major to replicate this success. Contrary to popular belief, talent is not a problem. “Most villages have educated unemployed and those are the people we can tap,” says Raghavan, adding that Comat's rural BPO employs 40 people across 12 centres. Satyan Mishra, Managing Director of Drishtee, the parent organisation for Quiver Infoservices, a rural BPO outfit, says mindset is one of the biggest problems that rural BPOs face. “If our pilot project can be successful in Madhubani, a small town in Bihar along the Nepal border, it can work anywhere in India,” he says. Clearly urban geeks are waking up to the potential of rustic India.

Moving Higher
Tapping into knowledge to move up the value scale, wherever they might happen to be, is the new mantra in ITES. “There's a definite move towards higher value-add in the Indian ITES-BPO market-we hear everyone talking about it,” says TJ Singh, Research Director for Gartner's outsourcing group. For example, in finance and accounting outsourcing, BPO vendors are going beyond transaction processing to look at the full range of functions that sit withing the CFO's office. This could include a range of services like financial planning, budgeting and forecasting, treasury, tax regulatory and compliance.

Or take the case of a BPO vendor that's moved from claims processing for an American insurance major to mortgage underwriting and actuarial services. Or in the human resource outsourcing space, where vendors are beginning to look at HR analytics, total HR outsourcing and talent management. Sulakshana Patankar, Executive Vice President of WNS Global Services, says this move up the value chain is possible, thanks to the increased sophistication of Indian ITES-BPO providers. This is spawning new opportunities. But, with the promise of gains come challenges, and the ITES sector has its due share. For those with the courage to take them on, a new wave beckons.