PUNE, INDIA: What applies to one industry doesn't necessarily apply to others, even if it's the case of an offshoot.

Captives (i.e. a company's in-house service center set up in a geography of low cost advantage instead of the parent location) in BPO industry have gone through a story that has redefined the dynamics of offshoring, outsourcing, inorganic growth and third-party players.

The LPO industry may not relive the same saga but there is still a renewed interest popping up in the field of captives, albeit a different flavour.

So if a Philips captive switches over to Infosys or a Citibank captive gets deposited in the TCS account, there are signs that parent companies are struggling with cost and scale issues with their offshore captive centres which simultaneously is an opportune time for Indian players in terms of inorganic growth or anchor accounts with major and longer revenue tenures.

Now with the US slowdown, the spotlight intensifies. In case of LPOs though, the spotlight is having a different spectrum.

To start with, India is being keenly looked at from a LPO resource pool angle.

Sabyasachi Ghosh, senior manager, Operations, Bodhi Global Services, a Pune-based LPO points out the increasing interest being taken by foreign firms for the city's law talent.

"They are possibly still in the search mode but they are surely trying to get their foot in and a city like Pune with possibly over 20 LPOs already has a lot of potential. Maybe it's just a format of trying their luck, where they hire resources and then send them abroad for training and reap the benefits if the model clicks."

Firms taking interest include both big corporates looking for their own legal service needs as well as legal service providers.

Another sign of surging captive action is the captive-within-LPO set up. Large Fortune 500 companies are exploring good service providers for dedicated captive teams.

Speaking with CyberMedia News on the sidelines of the fifth ITES summit 'Outsourcing Ventures' by VisionIndia in Pune, Rohan Dalal, MD of Legal Services offshore operations firm, Mindcrest tells:

"Generally captive trend is still at a small scale in LPO India. Mostly companies have small teams with their own lawyers specially trained for that company's work. But now we can provide our lawyers within our office for their captive work."

According to him, "The trend is increasing as the comfort level is going northwards on capabilities, data security, lawyers ability and intuitive skill requirements."

Mindcrest has about 50 lawyers dedicated on such exclusive arrangements in a total pool of about 500 employees.

Something similar has been attempted by Clifford Chance, the world's largest law firm that started offshoring some of its word-processing functions to Integreon and later Integreon set up a 300-seat facility in New Delhi dedicated to Clifford Chance.

This was claimed to be the biggest offshoring initiative ever undertaken by a law firm, with more than $18 million in annual operating savings

Is it about time to expect captive sell-outs, which have been a major trend in case of BPOs?

In a small and relatively nascent industry of the KPO ilk, the impact or availability of attractive options would be significant as a KPO specialist admits but much would depend on the number, nature and size of Legal process captives and valuations.

Does India or other geography have sizeable opportunities and if so do they belong to a giant corporate's in-housing legal service team or a foreign law firm's offshore office? The answer would determine the tack that inorganic growth for LPO players would take.

It would also depend on how distressed enough a captive is for a sell-out and the people issues that an acquisition brings forth.

If the opportunity cost fits, it would be a plausible idea, as the specialist feels. So far, captives in LPO space include dedicated centres of international law firms like Lexadigm, and in-house legal departments of companies such as GE, Cisco, Oracle, DuPont.

The same format is coming up with law firms also, in form of Intellevate and NewGalexy.

Third party vendors range from multi-service BPOs (like Evalueserve, Datamatics, WNS and Manthan that offer offshore legal services along with other services) to LPO niche players like IP PRO, Integreon, Patent Metrix, Pangea3, Mindcrest and Quislex. 

In the view of Rajesh Ahuja, senior VP and head of Human Resources, Boston Analytics, with the current scenario what would follow in about 2009 is a lot of M&A action in LPOs as a large population of third-party players graduate ahead after a two-three year lifecycle.

A ValueNotes study indicated that captives will increase their share of the market significantly in coming years, and will take on more complex and high value jobs such as contracts, and IP research, which are otherwise considered too sensitive to be offshored to third-party vendors.

Another recent survey conducted by ValueNotes to find the willingness of law firms and corporate legal departments to offshore legal services revealed that corporates would offshore more aggressively by 2010.

It was found that corporates find offshoring more suitable as they have substantive legal work and are more comfortable with the concept of offshoring compared to law firms.   

On the other hand, the threat factor is not a concern for Indian LPO players that though are relatively nascent on the learning curve, but have earned the confidence in the market to quite an extent.

Poonam Vasudeva, delivery head, LPO Services, Infosys on the impact of captives on the market, says, "We have seen some captives in this space but while they are pretty strong in case of KPOs, there are only a couple of them in case of LPOs, and that too not very significant or impactful yet."