The LPO industry in India, although still in relative infancy, has seen a few years of fast paced activity and in a matter of few years gained tremendous experience, owing to the recent downturn, which turned to be a boon.

Yet to establish itself on the global map and in the long run, the way IT and ITES has, it has to be prepared to leverage all the positive events and also be prepared to wither any socio-economic-political storm that may head towards it. While the industry owes its roots to free flow of work and capital between countries, this very freedom is under tremendous pressure and attack from many corners willing to snub efficiency and economic rationality for protectionism. The present analysis is aimed towards understanding these challenges and establishing successful strategies to help LPOs cope up with these events.

You don't need a MBA to understand the importance of long term planning in business, all you need is an understanding of the dynamics that modern day businesses operate in and the challenges they must endure to survive and flourish. Historically, we’ve had umpteen examples of businesses that failed because of managers taking a myopic view of the world around them. We don’t have to trawl through business books to find these examples; a cursory recollection of the events that unfolded in the past two years is more than enough. Some of the most recent business events help us to have a fair idea of how things go wrong and what challenges the interconnected and interdependent markets have to offer.

The events that I refer to in the paragraph above, also have a significant lot to teach us about the importance of long term planning for the now maturing legal processes outsourcing industry. In the subsequent paragraphs, I frequently use these recent events as a reference point as I try and bring to the fore some of these lessons.

We've all heard the oft repeated and by now clichéd saying about the proverbial silver lining around every dark cloud. However, I take the liberty of referring once again to the silver lining now visible as the global economy steadily emerges from the dark clouds of recession. With the benefit of hindsight, we now see lessons for companies and economies at large.

Amongst other things, the downturn made a strong case for companies to acquire a strategic agility making it an indispensable necessity to survive in the long run. This refers to a company’s ability to react to the changes that are brought about by events which could not be planned through our predictions of the foreseeable future.

Quite essentially any player in the market looking at sustaining itself in the long run must proactively plan for a long term sustainable profitability by effectively accounting for and addressing challenges that would invariably be thrown up. Most of the nascent industries, as we saw during the dot-com bubble do not have the benefit of hindsight to understand in detail the repercussions of most of these changes and the newer models mostly remain untested.

Summarily, some strategies that may prove significantly effective in steering the Indian LPO ventures successfully in the long run are as follow:

Pricing controls

Economic rationale is the testing point for all services-outsourcing models. Some argue that cost arbitrage is no longer in itself the sole driving force behind outsourcing especially in knowledge processes. However, while cost factor may transform into an incidental value proposition as firms rise up the value curve, yet an inefficient pricing model is sure to act as a deterrent in the long term even in the mature markets for high end and complex work.

Unlike recessionary times, when cost-cutting is the prime objective, in stable markets LPOs compete not only with the other domestic players in the market but also with the large pool of corporations and law firms which shall resume their resistance towards any offshoring/outsourcing outside of the traditional in-house workforce.

Relationship Servicing

LPO industry, though in a nascent stage is already climbing the curve at a significantly rapid pace. At the top of this curve are the mature industries such as financial industry including banking sector. LPOs can significantly look forward to learn from the feats and follies by emulating some of the successful strategies.

Herein lays one of the most important lessons: Service industry achieves its business through either of the two offerings:

1. Relationship offerings, and
2. Transactional offerings.

While the former takes much time and resources to cultivate, the latter is a one-off event. Without doubt, both are equally important for long term profitability yet, everything kept constant, the LPOs with highest number of returning customers i.e. those with better relationships with clients shall remain better equipped to go the long way. It is important to treat every transaction into a prospective long term relationship.

The best example for this is once again from the banking industry. In the good times, as the number of customers soared, transactional banking started outpacing relationship banking. This myopic strategy proved near-fatal for many banks in the downturn years as those banks which invested and retained customer trust over the years became the obvious choice.

Branding

It is difficult to summarize the impact of branding as it is difficult to quantify and measure the actual impact on the bottom line. However what can be safely asserted is that there exists a positive correlation between a well known brand and sales. It is important to deliver quality and it is equally important to deliver better ‘perceived quality’. Brands are the most important intangible assets that LPOs need to cultivate. Cultivating a brand in itself is a long term process as it not only requires performance but also a successful projection of delivered performance in the minds of the customers.

According to many strategists across the board, branding is not a singular exercise in the exclusive domain of the top brass and the marketing men but rather a more wholesome ‘experience’ and in which everyone from the shop floor to the board room has a significant role.

Brand, or rather the ‘brand experience’ represents the sum total of all the perceived qualities valuable to the customer.

In a quality sensitive realm like legal outsourcing where the acceptable room for error is virtually zero – the company with the best perceived quality shall win the game in the long run.

Investing in people

Some day computers shall replace all humans in all businesses. However, till that day all companies have to repose trust in the numerous humans that form the backbone and spirit of the organization. People are the single most important asset to any and every organization. The performance of an organization in a service industry vertical like LPO is directly proportional to the performance and attitude of people within the organization.

The people strategy encompasses all steps from recruiting the right people, keeping them updated with the necessary skills required and ensuring their optimal utilization.

To sustain your organization for the long run invariably includes an ability to retain your people and keeping their performance at optimal levels at all times. The LPO industry spans multiple jurisdictions and is higher up on the use of technology, hence a higher need for keeping people always ready for the next technology or the next demand from the clients.

Core Competencies

This simple yet effective formula for long term sustainability, as given by the renowned strategy consultant C K Prahlad, emphasizes that in the long run corporations must shed all peripheral activity and focus on the aspects core to its business.

For service industry verticals like LPOs this will be essential as a lot of its business shall come from corporations adopting this principle and opting to optimize their efficiency by using the services of niche players.

Most of these strategies have, as stated earlier, used the current economic downturn as a convenient reference point; the simple reason for this is my belief that times to come would be as dynamic as the ones we’ve seen. Business cycles would overheat, plateau and bottom out and the same would continue to happen time and again and only those quick to learn and adapt will last to survive through the next change of guards.

We saw how the rules of the game changed all around and some sectors benefited by what economist now refer to as “constructive destruction”. Simply speaking, large corporations (which include law firms) were subject to immense pressure to adopt better ways of production by utilizing innovative modes of deliveries- and in the process adopting more efficient means. In the process Legal Process Outsourcing sector gained repute by standing up to the opportunity and offering efficient and economically rational solutions.

While economists around the globe are busy predicting the path to recovery ranging from a double dip “w” or a sharp v-curve, one thing is certain- we are inching closer to a global recovery. Together with signs of the first green shoots, there will be newer and unprecedented challenges that will need immediate attention.

Managing the LPO industry will require immense foresight and application. Some of these strategies will help LPOs play the long game and survive the newer challenges when the economies in the west return to normalcy and when the current sensitivity to efficient production and pricing of services take a back seat giving way to protectionist measures once again.

Author: John Smith, Consultant, KPO Consultants

About KPO Consultants

KPO Consultants is the pioneer consulting company which provides business solutions exclusively to the LPO industry. We work with the established and aspiring LPOs to set up their LPO ventures and overcome their complicated business problems and also help management make big decisions affecting top line growth of their company. KPO Consultants offers consulting in areas of strategy, operations, technology, marketing and sales, human resources, and strategic alliances. We also provide end-to-end support across entire business lifecycle; building business synergies from the scratch till realization of its benefits and ongoing developments. We have served several clients in the United States, the United Kingdom, Singapore, Philippines, Mauritius, India, Canada, Australia, and many more countries.

For more information, please visit our website www.kpoconsultants.com or write to us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .