Pune, Maharashtra - The US$146 m (in 2006) legal process outsourcing (LPO) industry in India is on a rapid growth path, and is expected to grow to $640 million by the end of 2010 according to ValueNotes’ estimates. Corporates and law firms are offshoring large volumes and more complex work and have started to take advantage of the labor arbitrage that has been exploited by other industries for well over a decade. Increasing workload and rising costs are forcing legal counsel and law firms to offshore to cost effective service providers.

The difference between legal and other industries is that corporate legal departments, and not law firms, were the early promoters of legal outsourcing. Outsourcing in the legal market has been client driven rather than industry driven. This fact is further validated by a recent survey conducted by ValueNotes to find the willingness of law firms and corporate legal departments to offshore legal services. The survey reveals that corporates will offshore more aggressively by 2010.

It was found that corporates find offshoring more suitable as they have substantive legal work and are more comfortable with the concept of offshoring compared to law firms. Moreover, successful precedents in offshoring of IT, BPO, F&A and other processes have made them more confident. Given the benefits of offshoring and its cost-economics, corporate in-house counsel will be able to provide a wider range of in-house legal services, while sending the manpower intensive work offshore.

Some industry estimates show that document review generally accounts for 58% - 90% of the total litigation cost. This type of legal work is routine for corporate clients who are increasing pressure on law firms to outsource to low cost destinations like India and the Philippines where qualified lawyers and other professionals are available at a much lower rates per hour. Outsourcing will help corporates save on inflated fees of $300- $400 plus per hour charged by law firms in UK and US.

Neeraja Kandala, analyst at ValueNotes says, “Early adopters among US and UK law firms are gaining comfort with the idea of offshoring. There are several law firms that are inhibited by various concerns. Those who have held back are now seeing the success stories of some of their competitors, leading to more optimism now.”

Source: money.cnn.com

NEW YORK - The outsourcing of technology jobs has been a lucrative and controversial trend over the past 10 years. But with the dollar declining against foreign currencies, it’s getting more expensive for U.S. firms to pay for foreign labor, a factor that has increasingly become a source of concern for Wall Street analysts.

According to Janney Montgomery Scott analyst Joseph D. Foresi, outsourcing is based almost solely on labor arbitrage; if U.S. companies can hire labor cheaper in India and other developing countries, they will continue to take their business there.

“So far, there has been a pinch on margins for U.S. companies, but it is still less expensive for them,” he said.

There has even been some relief as the rupee depreciated against the dollar during the quarter ended March 31, making it more affordable for U.S. companies to hire Indian firms. A drop in the rupee’s value has not come fast enough for Satyam Computer Services Ltd., one of India’s largest technology outsourcing companies. Its U.S.-traded shares fell more than 5 percent April 22 after the company reported fiscal fourth-quarter profit below Wall Street expectations.

Goldman Sachs analyst Thomas Quinteros said that “rapid appreciation of the Indian rupee” has been one of the key risks for Satyam Computer Services Ltd., one of India’s largest technology outsourcing companies. Satyam last week reported fiscal fourth-quarter profit that missed Wall Street estimates.

The results were not that surprising _ in February, Satyam’s chairman said he expected “significant implications” from the U.S. economic downturn for Indian outsourcing companies.

The majority of Satyam’s sales are from the U.S. The company provides data-warehouse, systems integration, software development and other information technology services to General Electric, the U.S. government and other major clients.

Banc of America Securities analyst Abhishek Gami said the stock has been a strong performer but fundamental gains may be difficult because of the weak dollar, wage inflation and the need for expansion beyond the U.S. market.

Gami acknowledged the newly weakened rupee has “turned into a tailwind” for Indian companies.

“Though the rupee depreciation is not significant enough to deliver major margin upside, at least…offshore vendors have been saved from this source of margin headwind,” he said.

While the rupee stabilized in the last quarter , the weak U.S. economy is also bad news for U.S.-reliant outsourcing businesses like U.S-traded Wipro Ltd., which includes General Motors, Sony, and communications company Nortel among its customers.

According to Wachovia Securities analyst Edward S. Caso, Wipro is expecting muted growth in the first half of fiscal 2009 because of ongoing U.S. economic turbulence. A customer has already canceled a major project while other customers have said they want to defer projects.

While both Satyam and Wipro are hoping to ride out any rupee appreciation and the U.S. economic weakness, they are hoping for a turnaround later this year or 2009.

Wipro management has, says Caso, “emphasized the pause nature of new business, not its elimination.”

Source: computerworld.com.sg

SINGAPORE – The Sara Lee Corporation, a multi-national manufacturer of household items, has renewed its infrastructure outsourcing services contract with HP for another seven years.

The new contract adds more than 25 countries to the original deal.

Sarah Lee is a major American-based producer of frozen baked goods, fresh and processed meats, coffee, hosiery and knitwear, plus household and shoe-care products.

“We are focused on customer and operational excellence in order to meet our aggressive growth plans,” said Steve Merry, senior vice president and chief information officer, Sara Lee.

Global outsourcing reach

The new agreement will see HP providing IT infrastructure, managed print services, applications, web hosting, legacy maintenance, data centre and network services for Sara Lee in more than 35 countries across Asia, Africa, Latin America, Middle East and Western Europe.

HP and Sara Lee first signed an outsourcing services contract in December 2000, which covered 10 countries in Western Europe, namely Denmark, France, Germany, Hungary, Italy, Netherlands, Portugal, Spain and United Kingdom.

Source: www.marketwire.com
Accenture, IBM and Infosys Are Top Three on Global Outsourcing 100 List

Established U.S.-based companies surpassed overseas competition to earn the top two spots on this year’s Global Outsourcing 100, the annual expert ranking of the world’s best outsourcing service providers compiled by the International Association of Outsourcing Professionals (IAOP).

Accenture was ranked the number one outsourcing service provider for the first time, coming out ahead of IBM, who had garnered the leading position since the list’s inception three years ago.

Half of the top 10 companies are from India, reflecting the country’s strong outsourcing growth. Infosys Technologies was number three on the Leaders List, representing firms with annual sales of $60 million or more. The other top-ranked India-based firms were Tata Consultancy Services, Wipro Technologies, Genpact and Tech Mahindra.

Two companies based in France — Sodexo and Capgemini — also earned the highest rankings from the independent panel of recognized industry leaders. Hewlett-Packard of Palo Alto, California, came in number eight on the list.

“The power balance in outsourcing is shifting,” said Jagdish Dalal, IAOP’s managing director, thought leadership, who led the judges’ panel. “The intensifying global competition was reflected in this year’s ranking with companies from 19 countries vying for recognition.”

More than 60 percent of the winners on the Rising Stars list are based outside the U.S., indicating that the companies to watch in the future will be from emerging countries. First-time honorees include Beyondsoft of China, LawScribe of the U.S., and MERA NN from Russia.

The data also provides a unique industry snapshot and reveals its continued fast growth. Revenue among Leaders grew 24 percent in 2007, compared to 16 percent growth the previous year. These companies averaged $1.7 billion in annual sales and engaged 27,000 employees globally.

IAOP established the list as a resource to help companies compare providers using an objective methodology. It includes both Leaders and Rising Stars, as well as 25 sublists based on geographies, services and industry.

Similar to the request for proposal process, companies are ranked on quality following a rigorously judged application process that examines 18 criteria. Final rankings are based on a weighted average on demonstrated competencies, size and growth, management capabilities and customer references.

“At a time when companies that outsource are scrutinizing their providers more closely, the criteria our judges used are increasingly important in differentiating the top players in the industry,” said Michael Corbett, IAOP chairman. “The Global Outsourcing 100 is a comprehensive and useful guide to help companies research and compare service providers.”

Source: economictimes.indiatimes.com

LONDON/BANGALORE/HYDERABAD: LN Mittal may not prefer ArcelorMittal being called an Indian company, but when it comes to IT outsourcing, the world’s largest steel company goes to India. Satyam Computer Services and MindTree Consulting have entered into framework agreements with the Luxembourg-based giant as part of ArcelorMittal’s decision to consolidate all its technology subcontracting, done by several vendors, to just two partners.

“It’s expected that approximately 70% of the subcontracted activities in the scope of this initiative will be carried out by the new vendors, allowing internal ArcelorMittal IT employees to focus on high-value adding activities,” the steel major said in a statement.

The companies declined to discuss the value of the deal, but analysts in Mumbai said it would be a revenue booster for both Satyam and MindTree, given that the IT needs of a company, with sales of $105 billion, are unlikely to be modest. ArcelorMittal said the specifics of the services to be provided by these two firms would be defined in discussion with all key stakeholders. Analysts said the value of the deal would depend on the specific projects to be won by either of these companies.

MindTree, in a separate statement, said it will deliver IT services to ArcelorMittal’s Western European operations in partnership with Sopra Group, an incumbent provider of the steel company. It derives more than a fourth of its revenues from manufacturing clients.

For Satyam, which has already been serving ArcelorMittal for the past three years, the new deal marks a significant expansion of that relationship. Manufacturing is the largest revenue contributor to the company, accounting for 27%. Satyam has 90 clients in this segment.

ArcelorMittal said the projects would bring in cost-efficiency and flexibility to its IT operations. The move is an effort to streamline and consolidate its global IT supply chain, following an in-depth evaluation of the processes. There will be no direct ArcelorMittal job losses as a result of this initiative. ArcelorMittal’s financials for 2007 show revenues of $105.2 billion, with a crude steel production of 116 million tonnes, representing around 10% of world steel output.