Knowledge Services

 
 Shorter SLAs are the norm in LPO industry. Except for a very few deals, LPOs have not yet entered the realm where 3 to 5 year SLAs are the norm rather than the exception. Though in post-recession era, cost prediction has replaced cost reduction as the mantra of buyers of LPO services, a perceived disregard for the niceties of long term relationships is still seen in the market. While long term and solid relationships will mean assured business and success to vendors, the lack of it is synonymous uncertainty, a luxury that smaller LPO players cannot afford.

 Investment in LPO training is substantial given the fact that Indian legal education places less emphasis on skill-development, and is more focused on law students reproducing statutory provisions and case laws (change is setting in, though slow). As building legal knowledge and skill sets takes much more time and effort than building processing skills required in BPO employees, substantial costs will be incurred on training. The attrition rate of 23% necessitates significant investment in continuous training.

 Overall resource utilization in small LPOs is quite low although we do not have the data readily available to substantiate the statement. LPOs consider this data to be more confidential than their client lists. Chances are that we are more likely to be shocked by the percentage of non-utilization (if and when made available) than being pleasantly surprised since it relates to an industry that is reeling under an attrition rate of 23% and with very few LPO players being able to ensure continuous workflow.
 
 With the kind of "competitive bid for talent" that is prevalent in the LPO industry, the employee salaries in LPOs are expected to remain high which would in turn strain the cost arbitrage which is the life blood of LPOs and the smaller players will be the worst hit.

 Smaller and niche players may not have the ability to scale up when large scale spill over work gets off-shored.

 A considerable percentage of new LPO employees are often unproductive or cannot be billed at good billing rates till they acquire certain degree of expertise which may take anywhere from 3-6 months.

 While small projects are relatively easy to come by, LPOs need significant investments in marketing to clinch large contracts at attractive billing rates. Clients are more comfortable talking to sales teams that comprise of lawyers/professionals who are qualified within their respective jurisdictions and who talk the same "language" than general salesmen. The larger players with their financial muscle and significant marketing infrastructure are better placed than their smaller counterparts to take on these emerging challenges.

 Mushrooming of LPOs means that the rates that were considered possible at some time are still remaining elusive due to the eagerness of the LPOs to attract business. But equally important is the message underlying the saying that, "cost can get you in business, but cannot keep you in business".

 All these factors have already led to and are likely to lead more in the coming days to a race to acquire capabilities and clients which will drive inorganic growth wherein smaller players are likely to get absorbed by the larger ones.