Of Chop Shops, Visa Fees & Outsourcing

It seems like the first clarion call of a nation united in its opposition to restrict and curb the free will of its capitalists who have for long gone ahead with their businesses with profit as their only guiding force. Come hail, storm, or sunshine, (read Russia, Iraq, Afghanistan and the scores of other countries) the American capitalist has relentlessly marched on in his pursuit of larger playing fields and greener pastures. His actions have governed the fate of the world. He was lauded and his innovation was hailed as the benchmark of a society based on individual gain, free will and profit motive. So then why now, when in his quest of lowering his costs (especially in the storm of a severe downturn) and increasing his profit margins are his own supporters becoming his biggest detractors? Why is the American politician now going hammer and tongs after an industry that was, in the first place, created for and by his own brother? Is this an over-reaction? Or misplaced zeal? Or an attempt to distract public attention from increasing unemployment statistics that are negatively impacting Obama’s popularity? Are they pointing fingers at us so that none can see their own deficiencies?

As strange/impossible as it is to have a full House in Parliament in India, getting all 100 Senators to vote unanimously on a bill is near miraculous. On Thursday, the Senate unanimously passed a bill sponsored by New York’s Chuck Schumer to increase visa fees on companies that send workers to the U.S. if more than half of their America-based employees use work visas. To add insult to injury, the Senator also likened India’s blue-chip IT services company – Infosys to a ‘Chop shop’ or in common parlance crooks who specialize in taking apart stolen cars. Of course, there has been the necessary indignation shown by our industry experts as well as the NASSCOM which came out with an official statement deriding the comment. Can we now be certain that President Obama is not exactly a supporter of the Indian outsourcing industry? Can we also assume that this could be the start of a backlash that could only get worse if the American unemployment scenario continues to worsen? I certainly hope not.

While the increase in visa fees would hardly affect companies like Infosys, Wipro and their ilk, it is indeed sad to witness this garbed jingoism from a country that had come to define free enterprise and individual liberty as cornerstones of its interpretation of democracy. In an increasingly globalized world, are we not all tied together, albeit loosely, in a bunch? Are Boeing, GM, Ford, Bank of America, and a host of other companies not setting up their businesses in India and deriving significant profits? Why the double standards then Mr. President? Why brow beat about saving American jobs by restricting outsourcing operations? What percentage of American jobs have been outsourced to India? Is it large enough to warrant such a stand? And should we Indians even react to this verbal diatribe that Chuck Schumer has indulged in? Am hoping most of you say no, read this blog, and go back to working in the LPO/BPO/KPO/ITeS company with a smile on your face thinking that we are definitely making a difference somewhere—good or bad, small or big!

PARTING Thoughts: Outsourcing is the need of the hour and this convoluted debate can go on endlessly with both sides hurling accusations or there can be a consensus on the necessity for both sides to accept the need of the other and ride the wave together.

Law Firms in the guise of LPO’s - Is this a reality or hype?

So the writ petition filed before the Madras High Court by the Association of Indian Lawyers (Association), a Calcutta based organization having its branch offices in Chennai came up for hearing recently. The government appears to have scrapped plans to move the Chennai writ petition against 31 foreign law firms to the Supreme Court, as the petitioner's plea for an injunction against the foreign firms was stayed for two weeks until the government and foreign firms could formulate responses. Government counsel, and additional solicitor general of India, Muthukrishnan Ravindran, prayed for more time, citing pending discussions between the government and the BCI on regulating foreign firms. Reports suggest that the Government counsel did not mention law minister, Veerappa Moily's plans of 20 July that the case should be moved to the Supreme Court. The court ordered the respondents to file their counter-affidavits by the next hearing on 19 August, when the question of permanent stay would be adjudicated based on the written and oral submissions of the parties.

A little background into this: The writ petition not only deals with the issue of entry of foreign law firms, but also on the modus operandi currently adopted by these firms to provide legal services in India. A.K. Balaji, one of the representatives of the Association has filed this writ petition alleging violations under the Advocates Act, Immigration Act and a number of other issues. The Bar Council of India, Union Law Ministry, External Affairs Ministry and the RBI are amongst the Government respondents. There are 31 foreign law firms in the dock including UK’s Allen & Overy, Clifford Chance, Linklaters, Freshfields and US law firms, WilmerHale and Shearman & Sterling. Integreon, one of the largest LPO’s in India has also been dragged in this dispute. Several law firms including Allen & Overy and Simmons & Simmons have outsourced legal work to Integreon.

Some of the KEY issues as per the writ: (Bar & Bench: Writ Petition filed against 31 foreign law firms and an LPO – Immigration law violations also

Law Firms in the guise of LPO’s

The writ petition alleges that most foreign law firms exist in India through the Legal Process Outsourcing (LPO) outfits. The petition states that most foreign law firms have their back end offices in India, which not only does their back end activities, but also provides legal services in India. Clifford Chance is one such law firm, which has a back office in India. The Clifford Chance back office is supposed to undertake only office billing and technology related work for Clifford Chance and its best friend in Saudi Arabia, Al-Jadaan & Partners.

A Rational Take: This can only be determined by an inquiry, wherein should an LPO be found guilty of practicing Indian law, legal action indeed can be initiated against any such LPO. However, as propounded by many industry experts on all forums, Indian legal outsourcing companies generally neither have Indian clients nor do they “practice Indian law”. LPOs provide support services that facilitate the practice of law, for example litigation support, document discovery and review, drafting of contracts and patent writing. Barring the big LPOs, most outsourced legal work consists mostly of back-end, low-profile, labour-intensive para-legal work done under the supervision and on instructions of a qualified attorney authorized to practice law in another jurisdiction. So it really seems like a far fetched possibility since the markets LPOs target, the type of work they do, the talent pool they are looking at, etc. are all very very specific to promoting their line of business which is certainly not in the area of Indian law.

Entry of Foreign Law Firms – Immigration Law violations

The Association has not only questioned the entry of foreign law firms, it has also challenged the mode of entry of the foreign lawyers into India, as it has alleged immigration law violations by foreign lawyers. Most lawyers working at these foreign law firms, especially in the Capital market space visit India using tourist visas. A Magic circle firm associate who didn’t want to be named said “procuring tourist visas to India is the easiest way to visit India. Therefore, most lawyers opt for it, since our visits do not last more than two weeks at a stretch.”

A Rational Take: Fair enough, though a matter of factual inquiry again, should LPO/foreign law firm executives be found guilty of immigration law violations, they should be put in the dock. But to use this as an excuse to ban entry of law firms that are generating valuable employment in India seems like sheer foolhardiness. It’s akin to a case of throwing the baby out along with the bath water.

Law as a business as opposed to ‘Noble Profession’

Bar Council has imposed various restrictions on the practice of law in India including restrictions on advertisement of legal services by lawyers. The practice of law is treated as a noble profession in India, but the foreign law firms are treating it as a trade or business and a ‘money spinner’. The Association has annexed the pages from the websites of the foreign law firms and newspaper clippings about these foreign law firms claiming to have an India practice. It is alleged that these instances tantamount to ‘advertisement’ of legal services by the foreign law firms in India.

A Rational Take: And who are we kidding here again? Where does the idea of law as a noble profession go when legal luminaries in India defend companies like Union Carbide, or tainted ministers? Do we question their ethics? No, we do not. Right or wrong, they treat their decisions as professional ones and their profession as a business, certainly not as a noble or charitable act; so why then should the BCI bring the concept of treating law as a noble profession when it comes to foreign law firms entering India?

To propound the concept of nobility in the profession the BCI needs to do much more than simply use this as an excuse to follow a protectionist policy. How are foreign law firms different in their operations from Indian law firms? Are they not following business diktats or are they blindly basing all their decisions on preserving the nobility of this profession? There are hundreds of lawyers in India who are poorly paid. The argument about allowing the domestic market to develop is being put forth by large law firms working in a consortium to retain their hold over the market. It’s a typical case of the pot calling the kettle black wherein larger Indian law firms are doing exactly the same thing that they are presume will be done to them by the entry of foreign law firms. Are these large law firms not competing against other miniscule law firms in India which hardly have the resources to match theirs?

The BCI needs to revisit the Advocates Act, amend the same so as to ensure a level playing field for all and stop playing “Big Brother”. In a country that is churning out more and more lawyers every year, it would be imprudent not to see the writing on the wall.

Suggestions on Reciprocity

The writ petition also gives a host of suggestions on reciprocity. It suggests that if foreign law firms are allowed to ‘exploit’ 5% of the Indian legal market, then Indian lawyers should be allowed to exploit 5% of the respective legal market. The United States legal market is estimated at $300 billion (Rs. 1,50,000 crore) and the Indian Legal market as per RSG Consulting is estimated at $800 million (Rs. 3,200 crore). This may not be practical, as questions such as - What is the size of the Indian legal market that is being ‘exploited’ by these foreign law firms? Do Indian corporations need foreign law firms? Since most law firms or lawyers are tight lipped about their revenues and fees, fixing these percentages seem far-fetched.

A Rational Take: I am compelled to agree with the above questions raised by this author. This, by far, seems to be a flimsy ground raised to divert attention from crucial issues.

FACT 1: India is a signatory to the General Agreement on Trade in Services (GATS) which is an organ of the World Trade Organization (WTO) and is under an obligation to open up the service sector to member nations. 'Services' would include any service in any sector except services supplied in the exercise of governmental authorities as defined in GATS. "A service supplied in the exercise of governmental authorities" is also defined to mean any service that is supplied neither on a commercial basis nor in competition with one or more service suppliers. Under this definition, the legal profession is also taken to be one of the services which is included in GATS.

Fact 2: The fact is also that India is in the process of liberalising its economy. The opening up of legal services to competition from the international legal market is inevitable. Instead of perpetuating an endless debate about the pros and cons of the legal markets being opened up to foreign firms, it would be more rational to accept the entry of foreign firms in India which is now increasingly being seen as only a matter of time. For law school graduates and independent lawyers, the entry of foreign law firms in India means increasing job opportunities, and for the legal industry at large, it means raising the bar for professional standards, due to faster servicing, more efficient delivery and lower costs.

Hence India only stands to benefit from the arrival of foreign law firms and considering how much we love framing laws, needless to say their entry will be regulated by a copious set of laws to please even the harshest critics of this sane decision, when it is reached.

References

A Passage to India: Are Foreign Law Firms in the Country’s Future?

Advent of Foreign Law Firms in India\

Entry Of Foreign Law Firms-a Boon Or Bane For Indian Lawyers

http://indianeconomy.org/2008/02/16/liberalization-its-good-for-them-but-not-us/

http://www.legallyindia.com/20100322609/Law-firms/a-new-writ-filed-against-entry-of-foreign-law-firms-in-madras-hc

Raising the Bar in an Outsourcing Relationship ~ Maintaining Accountability Standards

A crippling downturn and the ensuing unprecedented financial crisis that followed left the economies of many countries in an abysmal state leading to many hard hitting business decisions. Companies have now had to look within to trim the fat and cut cost. In such an environment outsourcing has been looked upon as a favourable option for several process oriented tasks. A key requirement of outsourcing a legal process is the roll out of a specifically structured outsourcing arrangement that would govern this crucial relationship from the very onset.

As the demand for cost-cutting and subsequently outsourcing increases, the LPO landscape is dotted with numerous players – big and small – competing for their share of the pie. This increasing competition has led vendors to accelerate not only their turnaround times for deliverables but also sometimes leads to compromising quality for the sake of volume. This anxiety to deliver faster means that some outsourcing contracts can go awry, but by investing time and effort at the early stages of the contract, such mistakes can be avoided. To begin with, before a company even considers outsourcing a function in the legal department, executives should ask themselves whether they understand the current cost of that function and should map out its processes. Creating a comprehensive description of the function that is to be outsourced is essential so that in house counsels are able to effectively explain their requirements to their provider. Once the contract is signed, it is important for LPO vendors and buyers to continue to work closely together as business conditions and requirements shift, and as people and cultures evolve.

In an age where some of our biggest financial institutions failed due to lax accountability standards, we must be now more accountable than we have ever been in the past. Many companies view the outsourcer as a detached entity that, once briefed, should be able to run with the project with minimal involvement on part of the in house team, but outsourcing a process does not mean outsourcing accountability or competency. Accountability is the requirement, when undertaking an activity, to expressly address the concerns, requirements or perspectives of others and is seen a major purpose of external quality processes. In order to succeed, the LPO vendor will need regular, ongoing input and feedback from the client. In an interesting article available here, the author, Julia Staunton Hardinger, Esq, has developed a list of rules to follow for attorneys who wish to outsource part of the discovery process while still meeting the high level of professional responsibility imposed by the ethics rules of the ABA. These include:

• Conducting extensive quality checks and making timely adjustments accordingly
• Giving the first assignment to yourself.
• Maintaining constant contact with your team

To ensure accountability, buyers must consider protection of their assets in the outsourcing contract. For example, intellectual property and confidential information should be protected through appropriate confidentiality measures, along with personnel screening tests. Thus, good governance processes built on a framework of accountability are critical to a successful outsourcing relationship.

Turning Lemons to Lemonade

A crucial debate that has been raging on since the advent of outsourcing has been the one on the job loss and unemployment that outsourcing causes in developed countries. While one set of believers advocate the practice on the basis that outsourcing will have an overall positive effect on developed economies, since

a) it saves money for companies,

b) enhances opportunities for greater entrepreneurship,

c) and leads to higher level jobs for natives.

Critics, on the other hand, suggest that hiring foreign workers has an immediate effect on developed economies as it strips natives of jobs that otherwise would have been performed by them.

The LPO landscape is no different with most companies and law firms apprehensive of sending their legal work off shore for many reasons, one of them being the negative impact that this decision would have on the morale of their in house counsels/law firm attorneys. In a traditional profession such as law, where normal corporate decorum and growth path do not always apply, neither companies nor law firms want to be perceived as shipping jobs to cheaper destinations at the cost of work quality. However, the off shoring industry is facing many more issues besides this scepticism.

A while ago, Intel Corporation, for example, had a batch of patent applications the lawyers were handling in-house. They noted common issues, and decided these could be bundled and assigned out in common packages. So they put the jobs up for bid in an online auction. Among the firms Intel selected, one was in Australia and another in India. They did the work, but the quality was lower than what they were willing to put up with. An experience such as Intel’s is not an isolated one, and although the LPO industry is witnessing a forward momentum, it is essential that such experiences are weeded out and analyzed to ensure that such failures are not repeated. A quick glance at other outsourcing arrangements that have failed reveal the following main causes:

1. The buyer's unclear expectations up front as to its objectives

2. The parties' interests are aligned up front but become misaligned as the buyer's business environment or needs change

3. The provider's poor performance against service level agreements

4. The parties do not consider each other's interests to ensure their relationship is mutually beneficial

5. Poor governance structure for managing the ongoing relationship

6. Poor cultural fit compatibility of the parties

7. Poor communication; the parties do not proactively share necessary information with each other

8. Challenges arising because of the buyer's multi-supplier environment

9. The tendency of the buyer to back away from the solution it bought as the relationship builds. Buyers that are not committed to the full change management effort necessary for success end up wanting the provider to adjust the solution rather than pushing forward through the changes. (buyer response)

10. Some failures result not because interests fall out of alignment but, rather, because they were never aligned to begin with. Then when the parties manage the relationship and contract to the achievement of those interests, the relationship is doomed.

Despite the doubts about offshoring, however, there's a sense of inevitability about it. In fact, some law firms have embraced what they can't prevent. The most notable example is the British firm Clifford Chance. 2010 seems sure to bring more growth for LPO firms but ignoring failures or reasons thereof would be foolhardy for buyers and vendors alike.