Negative short term impact on legal process outsourcing

Pune, India, 12 November 2009slowdown is short term. Post 2010, we expect the
Revenues from the legal process outsourcing industryindustry to pick up pace as the global economy
were US$320 million for 2008; expected to reachrecovers.”
$440 million by end 2010The service provider landscape of the legal process
In 2005, there were around 40 service providers in theoutsourcing industry has changed remarkably in the
Indian legal services offshoring segment; the numberlast 4 years. In 2005, there were around 40 players in
grew to 100 in 2007; and currently there are more thanthe industry. The number grew to 100 in 2007.
140 service providers in IndiaCurrently there are more than 140 service providers in
Over the last two years, > 20% of the total numberIndia in the legal services offshoring segment offering
of service providers discontinued their operationsservices ranging from legal transcription to complex
With the legal services industry going throughcontractual analysis and patent related services.
recessionary conditions, the legal process outsourcingEase of entry and over hyped prospects led to a
(LPO) industry has not escaped the impact of therapid increase in the number of players in the industry.
crisis. The economic downturn has no doubt slowedThe huge ‘potential’ opportunity led entrants to
down the industry and is changing the service providerbelieve that getting business would be easy. Few
landscape.bothered about the potential risks or the competitive
The offshore legal services industry grew at a rapiddynamics of the industry. This, coupled with the
pace until 2007. However, the slow down in the buyeruncertain economic conditions, resulted in many
market impacted the offshore industry resulting in aweaker players fading away from the competitive
drop in the growth rate. The industry that was growinglandscape. Over the last two years, more than 20% of
at a CAGR of 40+% over the last four years untilthe total number of service providers in the industry
2007, dropped to 28% in 2007-08, and further reduceddiscontinued their operations. Says Suheil Patel, analyst
to 16% for 2008-09. Revenues from the offshore legaland co-author of the report, “While there are
services industry were US$320 million for 2008 andvarious reasons for these shut downs, the economic
are expected to reach $440 million by end 2010.slowdown added to the troubles of some of the
This drop is primarily due to recessionary costservice providers. Fewer contracts over the last one
pressures impacting the global legal services marketyear, made it difficult for them to survive during the
and the subsequent affect on the number and valuedownturn. Moreover, some of the players failed to pay
of offshoring contracts. Many existing contracts wereattention to learning processes and acquiring the
exploratory projects (in the form of pilots), which wererequired knowledge.”
not extended / expanded into large engagements. APost 2010, we will see consolidation in the industry with
slowdown in terms of decision making to offshorelarger players acquiring capacity and capability, as well
from the buyer end also affected the number ofas international law firms looking for control over India
contracts.capacity. However, in the medium term numerous
According to Neeraja Kandala, lead analyst - Legalsmaller businesses will continue to mushroom, which
Services, “In the current scenario almost all offshorewill, in turn, create a large pool of acquisition targets as
legal service providers are battling - while in somewell as potential joint venture partners.
cases billing rates have come under pressure, in othersThe ValueNotes report, Legal Services Outsourcing:
the volume of work has shrunk. As the global legalCrisis Creates New Opportunities for LPOs, ( analyses
industry suffers, the offshore industry has also felt thethe offshore legal services industry in India and the
impact of the crisis. While revenue estimates till 2010changing service provider landscape.
are not very encouraging, we believe that the