Offshoring – the practice of moving processes or services to another country, in order to improve business efficiency and reduce costs – is now an integral part of the modus operandi of western business, and the numerous companies that have gone down this route in recent years have derived immense benefits, not just from cost savings, but also in terms of overall focus and business development.

The practice of offshoring (or outsourcing, as the trend is more commonly known) has gained considerable momentum over the past years, and there is little doubt that it is here to stay. But even as it benefits the business interests of companies, many still believe that outsourcing is detrimental to western economies, not least because the creation of jobs in countries where labor is cheap is perceived to come at the expense of western workers. In a recent Harris poll, for instance, 52% of adults surveyed in America said that the loss of jobs to foreign countries represents the single biggest threat to the U.S. economy in the next five years.2  However, despite such fears -- which have been rampant since the beginning of the outsourcing trend -- there is no denying that the outsourcing route is one more and more companies are taking, and those that have already benefited from it have realized that it has much to offer beyond cost-cutting.

Indeed, organizations that have already outsourced certain business functions are not only outsourcing greater amounts of work, but also more significant work, and this helps to enhance both the value of the organization and what it can deliver to its clients. The outsourcing of a greater number of business functions enables workers in the U.S. to concentrate on the most core and essential functions of their day-to-day work, confident in the knowledge that while they sleep, workers in other countries will take over the relay and support their endeavors with quality work. The business process thereby becomes seamless in terms of delivery, execution and standard of work -- mandatory for any company that wants to be at the forefront of today’s global economy.
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1  with research and editing assistance by Divya Easwaran and Mike Cleaver
2  http://www.harrisinteractive.com/harris_poll/index.asp?PID=729

Globalization Is Inevitable

The world is truly flat, and it is becoming flatter as the years go by. New York Times columnist Thomas Friedman has said it so many times, and he is not wrong. Over the past years, several technological and political forces have converged, and that has produced a global playing field that allows for multiple forms of collaboration without regard to geography or distance – and perhaps soon, without regard to language, says Friedman.

Of course, the reality of the emerging global economy is that the workforce is experiencing higher turnover than ever before. The challenge is how to make that inevitable process less painful and share more of the wealth being created.

The Job Loss in the U.S. is Only “Surface”

At face value, it would appear that outsourcing service work to another country is detrimental to the U.S. workforce. This is only at the surface, though, and even as it inevitably will hurt certain individuals, the net effect created is a positive one for the U.S. The creation of jobs in countries such as India leads to the creation of new wealth, and a new class of consumers will have increased purchasing power to buy U.S. goods. Countries like India, to which jobs have been outsourced, make for new markets for the U.S. to export to, and this in turn creates revenue for the U.S..

The Cost-Saving that Blue-Chip Corporates Like IBM Achieve by Outsourcing Lends Itself to the Entire U.S. Economy

The outsourcing of service work also lends itself positively to the overall development of a U.S. business.  Workers can focus more on specialized areas and precious resources can be freed up to further these.  In turn, more specialized and focused businesses have a chance of creating additional jobs for more skilled workers by branching off into areas that require a special skill set. On a more macro level, the overall wealth of a nation like the U.S. can improve if companies are focusing on developing core businesses.

Indeed, companies such as IBM and other blue-chips of the technology world are fundamental to the U.S. economy. Studies point to the fact that if these companies can achieve significant cost-savings, then the nation as a whole benefits, since their contribution to the overall wealth and progress of the U.S. is fundamental. “If IBM is able to lower its cost structure, the U.S. economy benefits as a whole,” states the vice president of NASSCOM India, the IT industry trade group. “It is all about the overall mutual benefits rather than individual.”

Another industry that makes full use of outsourcing services is the financial services industry.  According to Deloitte & Touche studies, the top 100 global financial services firms – whose outsourced work spans the gamut from basic backoffice IT work to intricate, highly skilled knowledge services – topped out at more than $700 million in 2006.  It is no secret how important the business of Wall Street is to the U.S. economy, and as capital markets continue to develop all over the world, to the global economy.  While the outsourcing of financial sector jobs has undeniably moved the job of the more junior rungs to India and other countries, it has also created space for the more sophisticated, skilled workers to prove themselves. This dynamic also spurs future members of the financial services industry to really push themselves to do better and acquire skill sets above and beyond the ordinary.  In today’s world, therefore, society can no longer remain static; it is up to every individual to be the best that they can be in order to remain competitive, no matter what industry they are in.

President Bush, while not often considered a visionary in other fields, has defended outsourcing as the way of the future, for both the global economy and for the economy of the United States.  Indeed, globalization has paved the way for such a momentous collaboration between nations that there can be no place for protectionist policies, whether that be in the U.S. or elsewhere.  According to Outsourcing Journal, a publication of the Outsourcing Center, the demand for outsourcing services is only going to increase in 2007 and going forward. The Everest Group has predicted that the demand for applications maintenance and outsourcing will expand by at least 2.5 times in the next three years.  Currently, total demand is at $7.7 billion, which will grow to at least $18.6 billion by 2009.
 
The increase in demand for outsourcing services, though, is also changing supplier landscape, and there is a proliferation of suppliers, who now face margin compression due to price competition, an increase in overhead, and rising wages. Buyers of these services will have to rethink how they create relationships with suppliers. The good news, though, according to the Outsourcing Journal, is that prices are falling, so buyers will pay less for already bargain-priced quality service.

Outsourcing “Surface” Jobs Allows Greater Skill Sets to Develop, and  Higher Paid Workers to Benefit

Going back to the job story: According to forecasts, the U.S. unemployment rate will continue to rise in 2007 (http://www.forecasts.org/unemploy.htm). However, there are factors other than outsourcing that are driving this.

In the IT world, by way of example, several studies have found that outsourcing has actually resulted in more IT jobs being created in the U.S. According to the U.S. Bureau of Labor Statistics (BLS), more IT jobs are available in the U.S. today than at the height of the dot-com boom. Employment in the information super sector is expected to increase by 11.6%, the BLS states, adding 364,000 jobs by 2014. Information Technology contains some of the fast-growing computer-related industries such as software publishers; Internet publishing and broadcasting; Internet service providers, Web search portals, and data processing services. Employment in these industries is expected to grow by 67.6%, 43.5% and 27.8%, respectively. The creation of new jobs as a result of outsourcing calls for greater skills, and those who perform these jobs are, therefore, higher paid.

According to a study by consulting firm McKinsey, $1 of labor outsourced from the U.S. creates a global value of $1.45 to $1.47. Out of this, the receiving country (India) captures just 33 cents; the remainder goes to the U.S. in terms of new revenue, repatriated earnings and redeployed labor.

While the offshoring of information technology services continues to dominate the trend in the form of Business Process Outsourcing (BPO), companies in various industries have, over the past years, been outsourcing other, more integral parts of their businesses. Higher-end knowledge work, for one, is increasingly making its way from the U.S. and taking root in countries such as India, in the form of Knowledge Process Outsourcing, or KPO. The KPO phenomena, driven by the success of the BPO trend, is the wave of the future, many say, because India – the main KPO provider -- has a large pool of knowledge workers in various sectors ranging from Pharmacy, Medicine, Law, Biotechnology, Education & Training, Engineering, Analytics, Design & Animation, Research & Development, and even Intelligence services. As such, a KPO company can bank upon finding a delivery item that possesses the requisite professional skills to support any U.S-based organization in its high-end, knowledge-based services and core processes.

The KPO wave is recent, but already it has gained considerable ground, and experts predict further deepening, as industries such as financial services and law rely more upon Indian intermediaries. KPOs aim to capture the best in Indian talent available in different fields. India has 357 universities, comprising 15,600 colleges that turn out an average of 2.5 million graduates every year, so there is no shortage of talent.

Current estimates of the KPO market stand at anywhere from $1 to $3 billion. But according to a report by GlobalSourcingNow, the global KPO industry is expected to top out at a whopping $17 billion by 2010, of which $12 billion would be outsourced to India. The Indian KPO sector is expected to employ more than 250,0000 KPO professionals by 2010, a significant increase from the 25,000 it currently employs. A report by Evalueserve also predicts that India will capture more than 70% of the KPO sector by 2010.

In fact, the KPO boom is expected to overtake the BPO business, and as the KPO sector grows, over 300,000 new jobs will be created. Further, a report by Forrester Inc. estimates that an additional 35,000 new jobs will move to offshore locations by 2010, while a massive 79,000 more will shift to offshore locations by 2015. Again, nearly 70% of those jobs will be shifted to India.

LPOs Are Poised for Growth

Both consumers and forward-looking providers of legal services are on the threshold of taking full advantage of all India has to offer in terms of knowledge process outsourcing, as it shifts offshored services from commodity processes to higher skilled knowledge work, such as legal research, preparation of pleadings, docketing, proof-reading, transcription of recorded documents, litigation support, case studies, immigration visa processing, and even law firm marketing. The LPO (legal process outsourcing) industry has extremely high growth potential in India, and according to the latest estimates, may create 79,000 jobs there by 2015.

It goes without saying that the LPO trend offers great benefits. India’s legal services are affordable, efficient, and above all, skilled. Outsourcing legal work to India costs up to 80% less than the cost of using the services of American law firms.

But it isn’t just cost savings that make the LPO an attractive business prospect for U.S. companies and forward-looking law firms. As is the case with the BPO and the KPO, LPO users can avail of a range of benefits, not least saving time on getting important work done. LPO users can gain more operational efficiencies by focusing on core business activities while having access to a breadth of skills, technology and service offerings, at a reduced cost.

An Educated and Skilled Pool of Lawyers Make India the Ideal LPO Location

Of course, for an LPO to really be both high-quality and effective, it needs to be staffed with an educated, legally skilled workforce, capable of independent thinking, decision-making and analytical research. India is therefore the ideal location. There are currently over a million lawyers in India and an average of 80,000 more graduate every year from Indian law schools, many of them prominent. The generally acknowledged list of India’s top-ranked law schools is as follows:

1.   National Law School (NLSIU), Bangalore
2.   Nalsar University of Law, Hyderabad
3.   WB National University of Juridical Sciences (NUJS), Kolkata
4.   National Law Institute University (NLIU) Bhopal
5.   Government Law College, Mumbai
6.   Faculty of Law, BAH
7.   University College of Law, Bangalore
8.   Faculty of Law, AMU
9.   Bangalore Institute of Legal Studies
10. Faculty of Law, BHU
11. Faculty of Law, University of Madras
12. ILS Law College, Pune
13. Faculty of Law, Delhi University
14. Symbiosis College, Pune

The legal graduates India produces are equipped with analytical and research skills and the ability to write and speak in English. Like the U.S. and the U.K., India is a common-law jurisdiction rooted in British legal traditions and systems. Indian legal training and Appellate and Supreme Court proceedings are conducted in English; legal opinions are written in English; lawyers in India are trained with similar rigor and methodologies as those in the U.S.

The greatest asset in the Indian workforce is its high level of motivation.  Despite significant economic progress in the past years and India’s prominence on the global stage, many in this nation are still struggling to make ends meet. The prospect of being employed by an outsourcing venture that pays a regular and above-average wage therefore presents a golden opportunity to scores of Indians, who have a strong work ethic.

The geographical location of India lends itself extremely well to a 24/7 operation. The time difference between the United States’ Pacific Standard Time (PST) is about 12 hours, meaning that a job submitted at 6 p.m. PST reaches India at 6 a.m. and can be completed by 6 a.m. PST the following day. Depending on the time of year, India is 4.5 to 5.5 hours ahead of the U.K. and 9.5 to 10.5 hours ahead of New York and Eastern Standard Time (EST). This difference provides similar extended hours, especially crucial on quick turnaround assignments.

In the LPO Business, Attrition is Not a Serious Issue, at Least Not Now

One of the greatest problems the BPO business has encountered in recent times is attrition, or the loss of manpower at rapid rates to other, similar enterprises. Some BPO concerns have even ceased to exist as a result of high attrition rates.

In the LPO segment, though, attrition is negligible, thus far estimated at a mere 15%, according to EvalueServe. Any threat of a shortage of trained manpower in the industry is likely to be thwarted due to the vast pool of talented lawyers who are currently and will be in the future willing to join the LPO bandwagon. Furthermore, a sizeable percentage of the lawyer population is already trained in outsourcing work and is capable of training many more lawyers at lower costs.

However, at least one business research company, Valuenotes, expects that eventually there will be a shakeout in the search for talent, with the higher-end LPOs coming out on top:

"[A]s the industry matures, the battle will be fought over 'talent'. In this context, players focused on higher value services . . . will be better positioned to attract the best people, as compared to those operating at the low end offering services such as transcription, litigation coding and secretarial tasks. Not only will the high-end providers be able to pay better, the quality of work will ultimately be the magnet for the best talent."  3

If that is the case, then higher-end LPOs such as SDD Global Solutions, Intellevate, and Pangea3 seem likely to be the victors.

CHALLENGES TO THE LPO BUSINESS

It would be naïve to assume that the LPO trend does not face a challenge.  Like any other business line, the LPO track has issues with which to contend, some that have to do with the nature of the legal profession in the U.S., and others that pertain to India in particular.

Qualifications

One of the greatest concerns is whether the qualifications of the lawyers working in an LPO are up to the mark. The basic academic qualification required for employment with a legal outsourcing firm is a graduate degree in law. In addition, jobs in intellectual property and patenting services often require a strong scientific/engineering background.

One of the greatest strengths of India as a whole is the quality of education graduates in any field receive, and the legal field is no exception.  Legal education in India encompasses a wide range of commercial, procedural, corporate and financial laws, and a lawyer can specialize in several areas of practice, including international law and intellectual property law. Some law graduates even qualify as British solicitors with the Bombay Incorporated Law Society, after three years of articles (hands-on training) with a firm of solicitors that is recognized by the Law Society of England & Wales.

Confidentiality

Given the sensitive nature of most legal and other knowledge-based work, concerns about data security are still strong. This is despite the fact that some higher-end LPOs have security systems, such as fingerprint access controls, dedicated project areas into which non-team members cannot enter, and extensive background checks for new-hires, which are far more rigorous than those of U.S. and U.K. law firms. Getting over the security concern ultimately depends upon whether Western clients are willing to maximize efficiency by placing their trust in the high-caliber, professional set-up of the higher-end Indian LPO.

Training

Given the unique nature of U.S. legal work, some clients in the States are skeptical about outsourcing legal work to other countries and having work done by professionals whom they have not trained themselves, or who have not been trained by U.S. lawyers.  It has to be said, though, that at least a few LPO outfits have been mainly set up by U.S. lawyers, who have a thorough understanding of and vast experience in the practices and professionalism of the United States, and who endeavor to uphold those same standards of excellence in an India LPO.  These same lawyers play a key role in training their LPO personnel, such that they, too, maintain the highest possible standards.

Regulations Governing the Legal Profession

Rules and regulations governing the legal profession across various countries may also restrain the scope of offshore legal delivery. Indian lawyers, for instance, must pass the bar in the U.S. before they can technically practice there. However, Indian lawyers can still do much of the same legal work that is done by U.S. lawyers for U.S. clients, so long as that work is done under a licensed U.S. attorney.  Accordingly, India-based legal outsourcing firms do not require bar admittance or other professional licenses to provide legal support services to Western clients, including companies and law firms.
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3  http://www.valuenotes.com/BPO/freeBPO_Oct6th.asp?Writer=&ArtCd=86167

Over the past decade or more, the news media have been replete with stories about Bangalore, India’s hustling-bustling technology capital, and the seat of hundreds of outsourcing ventures.  Yet those who really want to get the best out of this business would be better served by setting their sights 130 kilometers south of Bangalore, on the former kingdom of Mysore -- a city that still retains a traditional quality and plenty of Old World charm, yet has been touted as the next destination for outsourcing in India.

Mysore Has Greater Potential than Bangalore

Back in the day, green and cool Bangalore was the kind of place that companies wanted to set their India businesses up in. Today, though, the IT boom has resulted in overcrowding, continuous traffic snarls, and high prices, and the need to accommodate the hundreds of companies and thousands of IT professionals and other graduates that have inundated Bangalore in a short span of time, has put great pressure upon the city.  

Mysore, by contrast, has much to offer anyone looking to set up a business. The City of Palaces, as it is still known, is as yet mostly untouched by the wave of so-called modernity that has crashed into other urban centers like Bangalore. It is an open, spacious place, blessed with good weather, and sound infrastructure. Mysore is 14 times less polluted than Bangalore, and it has escaped the kind of haphazard, uncontrolled and unsustainable influx of people from rural lands that other Indian cities have endured. The city is therefore far less congested, less stressful, and far easier to both live in and transact business in.

A recent and thorough study conducted on behalf of a Fortune 500 company planning to move to Mysore in 2007 confirms that in relation to Bangalore, Mysore has half the cost of living, and less than half the employee attrition rates.

Even though Bangalore has a nearly three-decade head start on Mysore in terms of industrialization, the latter shows promise of competing with the former because it offers a far better quality of life to anyone looking to settle down and set up a business. The city municipality is committed to maintaining that quality of life and ensure a relatively pollution-free, clean environment for its citizens.

History, Culture and Tradition Serve as the Perfect Backdrop for Business

The city of Mysore benefited greatly from centuries of rule by the Wodeyar dynasty, who not only focused on extensive town planning and careful, progressive modernization, but also paid a great deal of attention to education and the fine arts.

Painting and music have always been important in the history of Mysore, with several unique styles being developed in the city itself. The Maharajas of Mysore were great patrons of all the arts, and gave occasion to scores of talented people to prove themselves. Through the centuries, great artists have come to Mysore and their talent has been allowed to flourish.

From 1910 to 1945, the city underwent what was perhaps the most important facet of modernization it had ever seen, through the creation of steel mills, a railway system and a network of irrigation canals.  After India became independent, Mysore, like other kingdoms, was merged with the Union, but members of the royal family have continued to take a keen interest in the development of the city. Its citizens, too, are proud of their heritage and history, and ensure that art and culture remain as important as technological and economic progress.

In 1999, Infosys became the first-ever Indian company to be listed on the NASDAQ. Then on July 31 2006, the NASDAQ opening bell was rung for the first time ever by an Indian company, at Infosys’s Mysore campus – a move that signaled to the world that India, and Mysore in particular, are a significant part of an ever-flattening global economy.

Mysore has been drawing a lot of the IT business that might, in the past, have been destined for Bangalore, and in the first quarter of 2006 alone, companies in Mysore had already exported software worth Rs. 210 crore ($46 million), which would mean that approximately 850 crore ($188 million) will be exported in the fiscal year 2006-2007 by the 42 IT companies registered with Software Technology Parks of India (STPI).

Through the last decade, the government of the state of Karnataka has been enacting industry policies that are very favorable to foreign investment.  Not only has the government provided land, uninterrupted power supply and stellar internet facilities to the IT sector, it is also making persistent efforts to improve infrastructure, thereby encouraging further investment in the state. The state government is also funding the construction of a new international airport in Bangalore, as well as a smaller airport in Mysore, both which will make easier travel to Mysore.  In addition, the government is constructing a light rail system, world-class technology parks, express highways and several ring roads, all of which are for the sole purpose of encouraging the development of IT, and will, by extension, make it easier for anyone who is in the KPO/LPO line of business.

The government of Karnataka has also shown its commitment to the offshoring industry by awarding special concessions to software and IT-enabled companies in cities like Mysore, including the leading LPO there. Such companies are, for example, eligible for investment subsidies and 100% sales tax exemption on output for at least a five-year period.

The IT and IT-enabled industry in Mysore is, according to Karnataka’s leading daily The Deccan Herald, expected to create more than 40,000 jobs over the next few years, and investment in the sector is set for exponential growth.

With its already proven success in attracting IT offshoring, Mysore can easily take on the emerging KPO industry and provide it with the very best.

Like IT BPOs, the emerging KPO business is attracted to Mysore for the more affordable, top quality infrastructure and workforce it offers, as well as for the less hectic and congested environment it provides.  Land costs one third of what it is priced at in Bangalore.  Cost of operations are low in Mysore, as are attrition rates, and the pool of educated, talented individuals is as yet relatively untapped.

Mysore is known as a university town and is very popular with students from all over India and other countries, too.  Every year, the University of Mysore produces quality graduates in all subjects ranging from engineering to law, and such talent can serve both the BPO and the KPO/LPO industries.

In today’s world, many are striving to find the right medium between professional success and personal well-being.  Mysore has become a destination on the world map because it is the cradle of Ashtanga Yoga, the most vigorous form of this ancient Indian practice that has been acclaimed by many an overextended businessman as the perfect means of achieving work/life balance.

Yoga, which literally means “union,” is a discipline that is designed to lead to the union, or realization of the non-difference between, the jivatma or indwelling Self of the individual, and the pavamatma, or Universal Self.  Another way of repeating the ancient teaching that we are all one, and that divinity manifests in every person and every thing.  Perhaps the form that achieves this realization to the greatest extent is Ashtanga.  Mysore is home to Sri K Pattabhi Jois, who, with his grandson and heir apparent Sharath Rangaswamy, are arguably the foremost practitioners of Ashtanga Yoga in the world.  Their presence alone attracts thousands of aspirants to Mysore, among the more than two million people, who, along with scores of celebrities, claim Ashtanga as vital to their spiritual practice.  The relationship between Ashtanga and business success did not escape the notice of Business Week magazine, which recently ran an article on the pilgrimage to Mysore taken by many entrepreneurs. 4

Conclusion

1. More articles on Legal Outsourcing at Prism Legal Consulting