Knowledge Services

Drafting contracts makes every attorney feel like they do high-end legal work. Even when doing outsourced contract management services, we feel we are at par with actual in-house contract attorneys. The reason is that contracts are entered into for the purpose of doing business, which always involves high-risk and therefore gives us a high. For example, real estate sales contracts, commercial contracts are entered into with the prospect of doing business with profits. Therefore, drafting a good contract and considering the business and legal risks involved is essential to save our clients from expensive lawsuits in future.
 
Here are a few things that I learnt from my experiences in contracts management projects that kept me "connected" to my client's contracts -

1. Getting to know the client's business - whether by reading up on them, their industry or asking the client to give us background information on themselves
2. Asking the business heads why they entered into such contracts - get some background information on the business requirements that prompted them to enter into this deal
3. Asking myself how adding/deleting/modifying some of the clauses would help the clients
4. Trying to understand the internal need or purpose of reviewing/abstracting/redlining contracts that deviate from the client's set standards or fallback provisions for the same type of agreement

All contract management professionals should be trained on all kinds of contracting work such as reviewing, drafting, negotiating, abstracting, redlining, re-drafting etc. and gain expertise on all types of agreements such as MSA, SLA, NDA, Partnership Agreements, Joint Venture Agreements, Purchase Agreements, Sales Agreements, Commercial contracts etc.

Execute mock projects/assignments that would help in getting familiar with all types of contracts. For example: A reviewer may initially be assigned to perform contract abstraction work only on MSA's. After that he or she should then be asked to review NDA's etc. Constant feedback should be provided they should maintain a training database that can record their improvements over a period of time.

Contract reviewers could also practice negotiating contracts with the help of sample agreements amongst their team members. This would boost their confidence in the art of negotiation with third parties and striking good deals for their clients.

Posted by Suresh Kumararaj at 10:19 AM | Permalink | Comments (0) | TrackBacks (0)

Please prepare a document at the beginning of the project outlining the scope of the project. Tell the Vendor's team why you are undertaking this exercise and what you hope to assess and gain by way of information. One of my clients was in the healthcare industry and she made it a point to always hammer it to my team that the reason she was doing an assessment on the contracts was because she wanted to know which of her regional contract managers was negotiating the best in the country and which of them needed to be given the boot! This made it amply clear to us that the pricing provisions needed utmost scrutiny in the contracts and we actually developed ways to track different types of pricing and grade the contracts by each region! Think about it - this is the stuff a GC's dreams are made of. She got so much visibility in the company because she held a high level meeting and made a change at a business level. All because she told us what her end goal was!

Posted by Pakhi Bagai at 12:17 PM | Permalink | Comments (0) | TrackBacks (0)

Unfettered consumerism that the US economy embarked on with the baby boomer generation seems to be getting shackled as the recession of the century, engendered by the crisis in the financial economy, engulfed the real economy.

This is the generation that learned to live beyond means. Much beyond, infact, as their debt to disposable personal income peaked at 130%. So much so that income ceased to be the criteria for consumption pattern. Wealth did. As cheap credit fuelled strong growth resulting in increased consumption demand leading to further growth, asset prices continued to defy gravity. MEW (Mortgage Equity Withdrawal for the unintiated) became the buzz word. As economic logic took leave of their senses, the boomers felt that they reached their el dorado. The insatiable (nay uncontrollable) urge to splurge led them to devastate their wealth with the foolish notion that the wealth would rebuild itself, as the prices will continue to rise. Little did they realise that Murphy's law will catch up with them.

Something had to go wrong and it did. Unfortunately for them, conducive economic environment meant that things soured much later than they should have. And when it did, it appeared like a tsunami.

Result? 3 out of every 5 baby boomers do not have enough to save, as per an article by Wall Street Journal. It is expected that the return people can hope to earn on their assets has fallen, particularly for those who switch into bonds or annuities to guarantee a fixed income. The average yield on U.S. government, corporate and mortgage bonds stands at about 2.4%, while stock-market valuations suggest a long-term return of about 6%. At those levels of return, some 59% of people aged 56 to 62 will be at risk of not having enough money to cover basic living and health-care costs in retirement, estimates Mr. Van Derhei. If market returns are higher--8.9% for stocks and 6.3% for bonds--the picture isn't a lot better: The percentage at risk falls to about 47%.

In effect, the baby boomers are shattered and consumption is likely to remain muted for times to come. They are spending less and, looking at the pathetic state of their retirement fund, they are more likely to consume less and save more going forward.

My feeling is that this is going to spawn a generation of thrifty consumers, a generation that has seen the devastation wrought by their ancestors, a generation that is experiencing a hard to get job situation. As the unemployment data shows, unemployment among the youth is high. Very high in fact. In such circumstances, it is very difficult to expect another generation of reckless consumption. While this is good for the economy in the longer term, the pain that will be felt during the transition from recklessness to a more responsible behaviour will be immense. There can be no penance without pain.

Posted by Kunal Kumar Kundu at 10:15 AM | Permalink | Comments (0) | TrackBacks (0)

There has been an explosive growth in the LPO industry in India in last few years.

Currently, bulk/majority of the revenue in LPO currently comes out of Document Review which is considered to be lower end of LPO value chain. The fear surrounding such work is always that over a period of the time these services get commoditized. The commoditized business is easier to replicate and hence entry barriers for competition is lower. To add to woes of LPO Service Provider beyond cost arbitrage client do not perceive any value add of the service provider. This creates significant long term sustenance issue for LPO service provider. 

LPO service providers in India have also ventured in the following services:

• Contract Management
• Intellectual Property Services
• Legal Research Services
• Litigation and Administrative Support Services

I have an analogy here.

One can't help but notice the growth of IT services just a decade ago. The services offered then were largely on labor cost arbitrage, application development and maintenance (ADM) to be specific. Now India is a leading IT Service provider. Now, top IT services providers manage end to end processes rather than just ADM.  Moreover the nature of outsourcing has moved  deeper  from  one that required single capability to multi-capability like ADM, Infrastructure Management, Project Management, Consulting, PLM, Validation and testing, analytics, business intelligence, predictive modeling, BPO  to name a few .

LPO Industry as it matures will also move from primarily traction processing to process outsourcing to being a value added legal services partner.

However to be a true legal service partner, clients will require transformation partners who can understand their business and provide value added services.
This leap however requires a different set of skills, mindset, organizational capabilities and strategies.

If one goes by the same trend as IT Services, I reckon that the following skills and capabilities (not exhaustive though) will be a part of any legal services engagement in very near future:

Quality and Process Management: These skills are key to any successful engagement.

Utilization of Technology for LPO Domain: This involves continuous improvement on the quality, process, turnaround time, consistency etc., through development of specific and reusable technology, IT tools, most of them developed in house.

Knowledge Management: This is key for knowledge intensive services like LPO. As any (fast) growing industry, attrition will be a problem in future in thin industry which makes this skill critical for this industry.  Every client in LPO space has its own associated processes, terminologies, methods, procedures, rules, nuances, a lot of which may change routinely.  A robust KM process will ensure alignment of the LPO engagement with the client.

Project Management and Transition Management: These capabilities will be required for management of any large/complex project or engagement especially in a multi service LPO environment.

Associated BPO Services: There are associated services with any process and LPO domain is not an exception. These services will be required as the client engagement in LPO domain deepens.

Global Sourcing: Getting right skills at right place and time will go a long way in maintaining competitive edge for LPO firms. Deeper engagements will require onsite-offshore model.

Consulting: These services are provided as a value add and for upselling. These services will be offered as the LPO firms build domain expertise. The services can be as varied as consultation on CRM to benchmarking for law firms.

One may simply argue that any new service starts as a simple offering and progressively gets inclusive, deeper, complex with interdependent disciplines as the service matures. Hence, the same will also apply to LPO services. My point is that though that is true, standalone transaction focused LPO service providers will find it incredibly hard to scale up on the skills mentioned above.

Hence the LPO industry today requires multi-service players as it matures. These players are/will be much better placed in terms of business value add to customer and also in terms of overall competitiveness.

Standalone transaction processing oriented players unless they are able to find niche or acquire domain skills, will be acquired or loose competitiveness.

Posted by Tushar Anand Jiwane at 8:40 AM | Permalink | Comments (0) | TrackBacks (0)

Sadly, it's all so funny. Today's employment numbers were too bad and market fell again. Lots of investors sold off and they collected their money to invest in US Treasury. This is becoming far too predictable. With every bad news (and they are coming fast and thick again), investors move to buy the so called "safe asset", US Treasury. The yields continue to be pulled down under this massive expectation. The investors are quite close to irrational expectations from the US government. The government has Federal Reserve on its side, alright -- but they too have limitations. Investors better look for safer places like EM/Gold than Treasury/$.

Posted by Dev Ashish at 3:21 PM | Permalink | Comments (0) | TrackBacks (0)

Well quite a bit.

The slowdown in the real estate sector has already started reflecting in huge drop in Chinese imports of commodities. Primarily due to this, the Baltic Dry Index (BDI) has fallen by nearly 60% in the past 2 months. 

The Baltic Dry Index is a daily average of prices to ship raw materials representing the cost paid by an end customer to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts. The BDI is one of the purest leading indicators of economic activity. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand.

Free Fall in the BDI

Source: Bloomberg

The BDI has long been seen as a leading indicator of global demand for commodities, which in turn indicates demand from consumers of manufactured goods.  The main driver for the recent drop seems to be concerns about the cooling off of China's steel sector.  Steel is the biggest user of iron ore and Iron ore, copper  & coking coal account for more than a third of the Baltic dry freight.

Sharp drop in Chinese Commodities Imports

Source: Reuters.

China being the world's largest buyer of key base metals like copper and aluminum (consuming about 40% of the total global supply) and being one of the largest consumers of iron and steel, a cooling down of the Chinese economy, particularly in the real estate sector is not a good news for the commodities market.

Posted by Rajarshi Majumdar at 8:27 AM | Permalink | Comments (0) | TrackBacks (0)

There has been a lot of discussion about high fiscal deficit that India is experiencing right now especially with respect to the current debt crises in Europe and America. Here are my thoughts:

Composition of Public Debt:
Currently India's Central Government debt is 54.35% of GDP which looks relatively high especially given India's high fiscal deficit.
Central Government's public debt is largely internal. Out of the total public debt, only about 8.5% is external debt (about $250 Billion). Out of the total external debt, only about 20% represents short term debt. (See Source: 1 below) 
Keeping external debt at manageable levels has been a conscious policy of the GOI, especially after the 1991 crises.

However, India is in a different league all together.
India's tax regime will go through a paradigm shift in next few years. There are other factors, apart from GDP growth that'll lead to a sustained northward movement of tax to GDP ratio.
Here's how:

GST and Direct Tax Code:

Implementation of GST and direct tax code, by all indications should happen from April  2011.
Direct tax code will simplify the indirect tax regime and procedure. This is expected to bring in more direct tax due to increase in compliance. Ditto with GST. GST will simplify the indirect tax structure and India will truly become a single market.

Inflation:

India's WPI inflation for past decade has averaged 5.2%. (See Source: 2 below)  There is no reason to believe that the there will be any substantial downward movement in the trend in medium term. This high inflation will also lead to higher tax collection in nominal terms, everything else being equal.

UID Project:

Enrolling for Unique ID Project (UID) will start in FY12. This initiative will go a long way in ushering in transparency. This initiative will also simplify governance and bring in capabilities to the government that they have only dreamed of. Transparency will (hopefully) reduce the black market activities, tax leakage and should lead to tax buoyancy apart from the benefit of sharply targeted subsidies.

Demographic Dividend:

India starts getting demographic dividend now. Demographic dividend causes economic boom as the proportion of working population to total population peaks.

The combined effect of all the above, over a period of time is substantial movement of TAX-GDP ratio northwards.

Source 1. Govt. of India
Source 2. Reserve Bank of India

Posted by Tushar Anand Jiwane at 3:26 PM | Permalink | Comments (0) | TrackBacks (0)