U.S. Credit Crisis Has Been Boon for India's Legal Process Outsourcing

I've written a couple of times, most recently last week, about the ailing U.S. economy's impact on Indian outsourcing providers. Though some of them insist that America's economic troubles will benefit their business, the stock price of companies such as Wipro Technologies has dropped on concerns over cost cuts at some of their biggest customers, including U.S. financial institutions.

While it will take some time to determine whether BPO services will benefit from the down economy, as many contend, at least one outsourcing sector is gaining lots of business right now. As The Wall Street Journal reports, Indian legal processing outsourcing companies are being hired to help U.S. banks prepare for lawsuits filed by homeowners, investors and shareholders in the wake of the subprime-mortgage crisis.

For roughly the same amount of money they'd spend for paralegals in the United States, companies can have legal research performed by more experienced attorneys in India. While lower costs are attractive, they're not the only reason for sending legal tasks to India. Livemint.com quotes Anand Sharma, chief financial officer at Indian legal services provider Computer Patent Annuities Ltd (CPA):

In the short to medium term, there is rising litigation, the valuation of assets in the bailout package, bankruptcy, and it’s coming from all sides. Forget about cost arbitrage, I don’t think the U.S. is capable of handling this entire work.

While legal outsourcing only accounts for about $250 million of the $40 billion in annual revenues for India's outsourcing sector, according to the WSJ, it's expected to grow rapidly. The livemint.com story says the segment's annual revenues are expected to reach $640 million by 2011.

The numbers tell the story: a hiring increase of 400 percent this year at UnitedLex.; a 30 percent growth in revenues at CPA; and revenues that doubled in 2008's first quarter and then doubled again since then at Pangea3. Much of the work relates directly to the credit crisis. For instance, reviews of bank assets have increased by 50 percent in the past six months at UnitedLex.