Saturday, October 25, 2014

Global Legal Process Outsourcing Market 2014 -2010 – India Dominates as Europe Opens up

According to a NASSCOM-CRISIL study, India is a dominant player in the Global Legal Process Outsourcing industry and is expected to continue its growth at an average rate of 25%-30% annually. NASSCOM highlights that the Indian LPO sector has engaged more than 18,000 professionals currently with annual revenue of USD 960 million and is expected to grow to USD 1.3 billion by 2015. The global market is expected to grow to $8.56 billion in 2020, from $1.39 billion at the end of 2013, according to estimates from Grand View Research. The market is growing at over 25% on a consolidated annual growth rate basis. The US is the dominant market for the legal process outsourcing industry and Indian LPO players are seeing opportunities in Europe as financial services firms and companies on the continent look to cut costs. "Europe is opening up to legal process outsourcing and we see a lot of interest from India-based LPOs. Within a year or two we will start to see definite momentum in them setting up delivery locations on the continent," Andrew Burgess, director at UK-based outsourcing advisory Source said in an interview to Economic Times. "We have just seen demand from European banks which are facing regulatory pressures. We already have one European bank as a customer, another deal is just in closing and more deals are in the pipeline," Mohan Ayyangar, chief operating officer of LPO firm Pangea3, told Economic Times.

Indian LPOs have significantly moved up the value chain wherein initially legal research assignments related to finding case laws, statutes, rules and regulations were outsourced but  more work is now being outsourced related to preparing preliminary drafts of legal documents for use in foreign courts. Further tasks such as contract management, patent drafting, prior-art searches, due diligence and even litigation support, in the form of document review, are also being outsourced to Indian LPOs. Most of the LPO work done in India is outsourced by financial Services firms but other industry segments are also looking to outsource legal work to India particularly MNCs that operates in many countries need to maintain different legal documents and requirements as per the local jurisdiction requirements. "We are seeing an increased demand from Europe from global Fortune 500 companies that have operations in Europe and from the ones that are headquartered there. It's a very important market for us and we are expanding our existing operations," Pavan Vaish, global chief operating officer for UnitedLex Corp told Economic Times.

Europe presents a big challenge for Indian LPO players both in terms of Language and legal systems. “LPO services started in document review and the discovery space and the main pick up was seen in common law countries. We will have to look at LPO in Europe differently and look at more process-oriented services like intellectual properly, compliance and contract management," Kunal Purohit, country head for private equity-backed Integreon, told to Economic Times. Indian LPO is smaller in size but gradually increasing its size and is expected to continue its growth in the near future. Competition from countries like Vietnam, China, Hungary, Czech Republic and the Philippines is increasing but Indian companies will continue to dominate due to the quality of work and talent Indian LPOs offer, rather than their lower costs.

Global Procurement Outsourcing Market 2014 – Expected to continue growth

According to Everest group Research, the procurement outsourcing market grew by 12 % (YoY) in 2013, and is expected to grow by 10-12 per cent in 2014. Everest Group further forecasts the market will expand to between $270 billion (£158 billion) and $275 billion (£161 billion) in spend, and reach $2.2 billion (£1.3 billion) in annualized contract value in 2014 compared to managed spend of $254 billion (£149 billion) and $2 billion (£1.2 billion) in annualized contract value in 2013.

TechNavio's analysts forecast the Global Procurement Outsourcing Market to grow at a CAGR of 22.48 percent over the period 2013-2018. According to research from Information Services Group (ISG), the first half of 2014 has seen a decrease in the number of companies outsourcing procurement work and the outsourcing market as a whole achieved a record-high annual contract value during the second quarter, reaching $6.4 billion (£3.7 billion). Based on the performance seen during the first half of the year, ISG expects annual outsourcing contract value to grow 25 per cent over the year as a whole.

Everest Group also highlighted emerging markets of Asia Pacific, Middle East and Africa, and Latin America are driving the procurement outsourcing market growth and more end to end procurement process outsourcing deals also tripled in the past three years. Everest Group said: “The market is currently in a state of flux, with record new deal signings and a record number of terminations, simultaneously. Such volatility, attributed to switching of service providers, is an indication of reducing stickiness”.

The prime value proposition for procurement outsourcing still remains cost and spending cuts but other functions like category expertise, technology related and governance and compliance related is also on rise. Collaboration between procurement and other enterprise functions like Finance & Accounting, Human Resource, Supply Chain and Manufacturing. Accenture, IBM followed by Indian vendors dominate the market and India dominates the delivery location as most of the PO work is done from India based on the location of the number of Full Time Equivalent employees. Manufacturing segment followed by Financial Services, CPG & Retail, Energy & Utilities are the verticals that are outsourcing the procurement activities.

Procurement outsourcing is subcontracting of key procurement requirements of an organization to a third-party vendor who has expertise in the required domains which helps businesses to focus on their core business activities and benefit from reduced costs and spending generated by PO vendors. But businesses have to be careful in PO as they have to clearly define the performance criteria and SLAs so that the process moves in line with the business objectives. According to Abhishek Menon, practice director at Everest Group, “Procurement outsourcing makes an attractive business case for both buyers and service providers who have remained disciplined, vigilant and progressive.”