The US sub-prime crisis may have affected the fortunes of Indian IT firms, which have clients with mortgage exposure, but the country's legal process outsourcing outfits are laughing their way to the bank as American law firms have begun offshoring the credit crisis-related work.

Law and high

• Indian houses 200-odd legal process outsourcing, besides services providers like Infosys [Get Quote] BPO and Wipro [Get Quote] BPO
• Value Notes estimates India's LPO market to reach Rs 2,770 crore by 2010
• According to LPO firms, the economic slowdown has resulted in law departments of US revisiting their legal processes and budgets
• The events that triggered the US crisis have resulted in an enormous amount of litigation

The portfolio includes legal analytics, discovery and litigation support, and first-line document drafting. This is in addition to the renewed demand for traditional LPO skill sets like bankruptcy filing and processing, and claims' scrutiny out of India.

The 200-odd LPO firms in India include SDD Global, Evalueserve, Integreon, OfficeTiger, CPA Global, Mindcrest and Pangea3, besides service providers such as Infosys BPO, Quattro BPO and Wipro BPO.

ValueNotes, which provides equity research and financial and stock market information, had pegged LPO market opportunities in India at around Rs 630 crore (Rs 6.3 billion) in 2007. The market, which stood at about Rs 260 crore (Rs 2.6 billion) in 2005, is estimated to reach Rs 2,770 crore (Rs 27.7 billion) by 2010.

The Mysore-based SDD Global Solutions' revenues are already up by about 50 per cent, and other legal outsourcing providers are reporting higher figures. Russell Smith, president and chairman of SDD Global Solutions, says most law firms have been very protective about the more lucrative 'core' work that they think only US lawyers should be doing.

"But a few of them are realising that to get in front of the pack, and to impress increasingly cost-conscious clients, they need to shift more than just document review to India," Smith says.

All of them have aggressive growth plans to match the new cash flow. Mindcrest, which had about 200 lawyers in its rolls in 2007, for instance, has now grown to a team of 450 people. The company is expecting its staff numbers to cross 800 within a year.

"The slowdown has resulted in law departments of US corporations revisiting their legal processes and budgets, including costs of litigation arising from the sub-prime fallout. As a result, getting legal work done efficiently and cost-effectively from quality offshore providers in India is a compelling option," says Rohan Dalal, managing director, Mindcrest.

Pangea3 has ramped up its headcount correspondingly by almost 50 per cent. "Recessions and depressions in the US generally don't reduce the need for legal work, but they do reduce the tolerance for high legal fees," notes an LPO industry source.

"Companies are more and more focused on IP portfolios, thereby increasing the level in which they litigate in connection with infringement," concurs Sanjay Kamlani, co-founder & co-CEO of outsourcing firm Pangea3 LLC.

"The immediate fallout from the economic slowdown has been that of US financial institutions turning litigious," admits Sheahan Verghese, partner with LPO firm Majumdar & Co.

"The sub-prime crisis in the US is also indicative of a strong recessionary trend and there are low-cost expectations vis-a-vis process and operational functions. This is driving more legal outsourcing to India. Not to mention the fact that work done by LPOs out of India is still 60 per cent more cost-effective than it would be in the US."

Bankruptcy filings in the wake of the sub-prime crisis and the resultant credit squeeze have also raised the demand for lawyers, whom LPOs are now planning to rope in from their sophomore years.

India produces over 80,000 lawyers annually, and there's a good pool to choose from, says Verghese.

"In Mysore, our commute times average less than five minutes each way, our attorneys have nights and weekends off and we all work on fascinating matters for Hollywood and other clients that some US lawyers would give their limb to work for. You won't find that mix in any of the big law firms in the so-called 'top-tier' Indian cities," Smith affirms.

Bhaskar Bagchi, country head, CPA Global, an outsourced legal service provider, adds: "The economic slowdown in the US and other economies has, in fact, motivated legal departments and law firms to turn cost conscious and explore offshoring options.

Notes Kamlani, "In the US, when you lose your job or your money, one sure way of generating cash is to sue somebody. If you are a company that loses revenues, there's nothing better than suing a competitor. Secondly, the events that triggered the recession in question - investments in sub-prime debt - have resulted in an enormous amount of litigation."

All this spells hectic days ahead for India's LPOs.