Patients outsource medical care to AsiaBOMBAY, India � Bradley Thayer, a retired apple farmer from Okanogan, Wash., traveled 7,500 miles to get his torn knee ligament fixed, and says he paid a third of what it would have cost him in a U.S. hospital. The full article will be available on the Web for a limited time: http://www.thestate.com/mld/thestate/news/nation/12736000.htm (c) 2005 The State and wire service sources. All Rights Reserved.
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LAW FIRMS SEND CASE WORK OVERSEAS TO BOOST EFFICIENCY
By Tom Ramstack
THE WASHINGTON TIMES
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Law firms are outsourcing some of the work on their cases to other countries, joining a growing national trend of trying to cut costs by using a labor force paid at a lower rate than American workers.
"Clients are entitled to get these things done in an efficient way," said Jim Shea, managing partner of Venable LLP, one of the Washington area's biggest law firms.
His firm has used Indian companies to draft patent applications for Venable clients. The foreign companies also have done "coding" of legal documents in which they index and annotate them before transferring them to computer software.
The Indian firms can do legal work for about $40 an hour, compared with $120 an hour charged by many U.S. law firms.
Mr. Shea said the quality of work does not suffer from using foreign workers because it is reviewed by U.S. lawyers.
"We apply the legal experience and expertise we're required to apply," he said.
Other Washington law firms that occasionally outsource legal work include Arnold & Porter LLP and Howrey LLP.
Although most of Howrey's outsourcing is done in the United States, some of its contractors have partnerships with companies overseas.
The work is limited to coding and electronic data processing, said Brian Conlon, Howrey's chief information officer.
About 695,000 lawyers and 200,000 paralegals were employed in the United States in 2002, according to the U.S. Bureau of Labor Statistics.
About 1,300 Indian workers provide services for U.S. lawyers, generating about $52 million in revenue, according to Evalueserve, a business and legal research firm with more than 800 employees in India.
By 2015, their billings to U.S. firms would increase to $970 million at the current growth rate.
Alok Aggarwal, Evalueserve's chief executive officer, said the kind of "grunt work" done by his company avoids any privacy problems for law firm clients.
"Of course, many U.S. lawyers have expressed their reservations about Evalueserve doing legal research for them, and this concern is often related to confidentiality aspects and quality of deliverables," Mr. Aggarwal said. "However, once we do a few pilot projects with them, we have been able to overcome their reservations."
In addition to patent drafting and coding, the company writes simple contracts, leases and legal memoranda.
Growth of work outsourced to India would make up 2 percent of new legal jobs in the United States in the next 10 years at the current rate, according to Evalueserve.
Major corporations that outsource legal work include United Technologies Corp., Oracle Corp. and Bayer AG, whose officials did not return calls and e-mails for comment.
More than 3 million U.S. jobs have been outsourced to other countries in the past four years, according to the U.S. government. More than 13 million are forecast to move offshore in the next 10 years.
Many of the jobs have been concentrated in manufacturing and information technology, and Internet connectivity and Indian economic policy have made the country friendly to foreign business.
"It's only in the last year and a half or two this has started to gain the focus and attention of law firms," said Liam Brown, chief executive officer of Integreon, a New York outsourcing company for professional services founded seven years ago.
Of the company's nearly 1,000 employees, about 950 work in India. Its clients include some of the largest investment banks and law firms with offices in the Washington area.
He said outsourcing of legal work is unlikely to move beyond support services to include advice or representation of clients.
"That is core to what a law firm does," Mr. Brown said.
American Bar Association officials say they know law firms outsource work to foreign countries, but they have not seen problems arise from it.
"We have not either endorsed it or opposed it," said Nancy Slonim, the association's deputy director for policy communications.
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'You have to get over this notion we can't grow' — To beat us, MNCs will have to change the way they do business, says Infosys CFO Mr Mohan Das Pai
Krishnan ThiagarajanVishwanath Kulkarni
Bangalore
,
Sept 25
THE going seems good for the Indian IT software industry. But then, never is fear of bad news more pronounced than when the good news is aplenty. Can the Indian biggies continue to add manpower and grow as they have done so far? Won't the IBMs and the Accentures of the world beat them at the Indians' own game - the offshore game, that is? Is there some sign of a downturn in the offing in Europe and even in the US markets?
Business Line thought this a good time to meet Mr Mohan Das Pai, Chief Financial Officer, Infosys Technologies.
Bagging large deals matters. Have Indian companies worked on enough such deals?
You have to break into the club. Once you are in a couple of large deals, you are there in the picture. Credibility is then established. And now, please remember that there are three players who could be $2 billion-plus in India. These are not small companies, each with more than 50,000 people.
What is the point at which we could see some structural changes in these big companies? Small companies experience this when they reach a certain size and are swamped by the big companies. How about the biggies themselves?
Market is going to the offshore model. It is playing to our strength. So, we are not fighting against the model. The next key issue is that we have our strategies right about moving up the value chain and we are now executing it well. Third, the clients like our proposition.
A couple of years ago, people talked about acquiring assets and people from the clients' books. What is the talk now?
That was the model then. We went and told our clients that that model does not work to their advantage. If they do that, then they are tied to the vendor and at his mercy over several years. So, we advocated the breaking up of a deal and bringing in multi-vendors. More and more people are accepting this.
Then does it become pure volume-based business? Then the scope for pricing-upsides is very low, because of competition or volume discounts or even because that power has passed onto the customer.
No. So long as there are very large players in the market, there is a pricing umbrella that is maintained. But if offshore becomes a very large part of business, then this pricing umbrella of large players does not exist, and then pricing could be challenged.
Look at Taiwanese manufacturers. They had a pricing umbrella. The chip manufacturers in the West disappeared and the industry migrated to Taiwan and Asia. Then it became a fight for market share. Now, China is the new kid on the block and price has become very important in the fight. Price volatility is high.
In services, so long as price umbrella remains and it doesn't weather too much, we are quite okay.
When do you think this would change, with the pace of change we are witnessing? Also, clients are now asking if the entire work could not be done offshore.
That would remain for a few more years.
Looking at the deals you have struck, do you think your deal wins were slightly lower than that of competition, say Wipro or Satyam. You do have significant numbers but has pace of addition been lower?
No. I think we have added at a pace much better than most people. It also depends on how you approach this issue. One could sign a deal and say that I could expect to get $20 million-30 million in the next four years. But, unless there is a guarantee that you are going to do X amount of business, there is no commitment from the client's side. In our case, we have five clients with more than $50 million revenues per year. We could technically say that we have five, $250 million five-year deals! Because, technically, the business is coming... . But we can't go to the market and make that statement because there is no document from the client that guarantees that.
As deal sizes get smaller, is it getting more and more specialised either as verticals or horizontals? The regular work might come to the pure play players, but there are small players who have a niche capability.
There have always been specialised players. But it's not a scaleable business. It's like consulting. The key issue is that you can't become a specialist in very many areas.
But, how far can you keep adding manpower resources? Manpower and infrastructure related to it could be challenges.
I think we should get over this notion that you can't grow. Look at the largest player in the world - it has 2,00,000 people. The second largest is 1,30,000. Likewise, we deliver services in 30 countries.
What is your take on the action around you from global competition?
MNCs have reached a point where they have no choice but to follow the (offshore) model - it is disruptive. Global delivery model or GDM has become ubiquitousQuality standards are high and so, people in the business are coming here to test shop. The difference between them and us is that we have a GDM. This gives us a unique advantage. Some of them are coming to India in a big manner. But coming to India does not merely mean putting up a few people here - there are a lot of management techniques there, and a lot of human and quality issues there. We have been here long enough in the business to perfect response to those issues.
Most of your global competitors are multi-cultural and in multiple locations.
It's not just that but the way the model works. For example, our people here are in touch with the customer directly. They talk to him and deliver the goods directly to the customer. So there is a direct point of contact. Onsite and offshore folks work as a seamless team. They are very sure about what they are doing and where they are going. To reach that stage, you have to change the way you do your business. That's key.
With newer services contributing increasing percentages of revenues, there are clear issues of domain expertise and the nature of client relationships. Do you think that GDM is still as disruptive as it was two years ago?
Yes, it is. For, the largest quantum of growth globally in terms of people is going to be here. It is easy to mistake revenues for growth but you can't ignore the people involved. For example, the revenues you would generate from India compared to that with the same number of people outside India is about 30-40 per cent. If you focus only on revenue figures, the impact is smaller. Offshore exports last year went up from $12 billion to $17 billion last year. That's $5 billion additional revenue and meant that 2,00,000 more people were employed. The revenue alone is small in a global context. The people addition number compared to numbers added globally is 20-25 per cent.
(With inputs from Bharat Kumar)
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Up for grabs
Raja Simhan T.E.
MNCs are grabbing Indian software companies, especially niche players. Even as the trend is bound to gain momentum, the software industry needs to focus on building intellectual property capability and grooming the next-generation entrepreneurs.
TILL last month, Revathy (name changed on request) was happy to be part of one of India's best product companies — iFlex.
Today, she is even happier - to be a part of multinational firm Oracle that has bought her company.
IFlex is among scores of Indian software companies catching the eye of multinationals. Companies acquired by multinationals range from small to large players, including Hughes Software, Future Software, inSilica, Ygyan Consulting, Fortune Infotech, Vision Healthsource and Daksh.
A common thread linking the acquired companies is their specialisation in a particular sector. Further, some of these companies have a large number of employees.
It is easy for MNCs to acquire such companies and scale up quickly instead of setting up an India presence from scratch, which will not only be time-consuming but also a costly proposition, say analysts.
iFlex and Oracle have worked closely for years on building complementary products for mutual customer benefit, and nearly all of iFlex's customers are joint customers with Oracle. Ygyan, with its niche skills in SAP, was a good target for Cognizant Technology, which strengthened its SAP practice through the acquisition.
Similarly, the Pune-based Fortune Infotech with its BPO (business process outsourcing) services was an ideal candidate for Covansys.
The trend of multinationals acquiring Indian software companies will not stop with this list. There are many more acquisitions in the pipeline, especially of tier-II software companies and small companies with specialisation in a particular domain.
And fuelling the acquisitions are factors such as availability of niche players, advantage of offshore capabilities, and good price.
Subu D. Subramanian, Director and Senior Vice-President, Satyam Computer Services, says there will be an increasing number of multinationals looking at Indian companies for acquisitions. However, they will be looking mainly at niche players.
Customers are forcing their vendors to have a strong India presence to take advantage of cost and quality of work. "Give me the India advantage" is the slogan of clients of multinational firms, he says.
Multinationals have two or three ways to enter India. They can partner with Indian companies or scale up operations organically. However, both these could be time-consuming while clients want things to happen quickly. The option left for multinationals then is to acquire a company, and start work offshore immediately, he says.
According to Subramanian, earlier the India advantage was cost. That's not so any more. It is now a combination of cost and quality of work, and manpower. CIOs (chief information officers) and CFOs (chief financial officers) abroad have understood this message clearly, and will prevail on their companies to set up presence in India, he says.
Further, multinationals that did not take advantage of the India offshore advantage two to three years ago have seen the benefits the country offers their competitors having a local presence, he says.
Alok Shende, Director, ICT Practice, of consulting firm Frost & Sullivan, says multinationals are looking at Indian companies having a global presence, especially in North America. Till now, around 90 per cent of the acquisitions have been exercised based on the low-cost model, and the rest were based on intellectual property (IP) - iFlex is an example of the latter, he says. Multinationals will now look at small and medium-sized Indian companies with good IP. However, there are not many Indian companies with IP. This is an area that Indian companies and entrepreneurs will need to focus on, he stresses.
With many Indian companies going the multinational way, the country needs to have new entrepreneurs coming out with innovative solutions and products, feels the Nasscom President, Kiran Karnik. "However, unfortunately, there aren't many," he says.
Askedwhether there will be a dearth of big Indian brands in the software industry in future, Karnik says, "Yes, this is an issue we need to address. With the availability of a readymade talent pool doing highly-skilled work, we cannot stop multinationals acquiring our companies. The need of the hour is to groom a number of next-generation Indian entrepreneurs. This is a tough challenge facing the industry."
According to Partha Iyengar, Research Vice-President, Gartner India, multinationals will look more at service-based Indian companies for acquisitions. Since time is running out for many multinationals to take the offshore advantage India offers, the compelling alternative for them is to acquire a company with 200 to 300 people and scale up quickly. For multinationals, the first step will be on the people or HR side, he says.
There is also increasing pressure on tier-II Indian software companies to scale up in size. "It is going to be a survival issue for tier-II firms. They need to merge among themselves or become a target for acquisition. However, till it becomes a survival issue, mergers and acquisitions will not happen among tier-II firms," he says.
raja@thehindu.co.in
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