BPO, LPO, KPO and Bollywood

In Mumbai, I visited processing centers affiliated with the US investment banking industry. These firms are insistent that they are not in the BPO industry but are engaged in "knowledge processing," which has been captioned "KPO." The concern is that the high level work being done in subjects such as financial analysis may be mistakenly confused with call center work. I learned that investment and financial analysis, modeling, and similar financial tasks are ripe for outsourcing and that the India-based firms doing this type of work are hiring mostly MBAs and even PhDs. Some Indian-born professionals are "coming home" to India to pursue opportunities here that may be greater than those abroad, with recruits from the US and Canada asking to extend their temporary tours in India. The newspapers report that the top graduates of the top business school in India were offered 2.38 jobs each in 2006, with salaries as high as US $85,000, but anecdotally the word is that top salaries being offered by the financial services industry range up to $250,000. This may account for increasing talk of outsourcing to countries like China, as India's cost advantage slims down. I was given evidence indicating that the BPO industry today accounts for as much as 5-7% of India's GDP. On the other hand, these KPO jobs are extremely difficult to get -- for the second time, I was given an estimate that the number of university graduates who are "employable" by the BPO/KPO firms is in the single digits (i.e., less than 10% of the total number of graduates). Yesterday's paper reported a country-wide household income level of less than $1,500 US, which makes it obvious how rare and desirable the BPO, LPO and KPO jobs must be. (However, with so much of India's population earning livelihoods in rural areas, a country-wide average income figure is not very descriptive.)

In the investment banking-related firms, the security measures described in previous posts were supplemented by a personal escort to the ladies room, with my host standing by constantly so I would not be out of sight. At the entrance to one company's parking area, I counted 12 security guards at a single check-in station.

On a more amusing note, I took a detour to Jaipur yesterday on my way to a final round of meetings in Delhi. Jaipur is an ancient city that was ruled by the Mughals and by a king known as the Maharaja of Jaipur until India's independence. Independence aside, my guide and people in the hotel here continue to refer to the deceased maharaja as the king, and his grandson (now 10 years old) apparently will be known as king eventually as well. The maharaja's palace in town (the City Palace) was the setting for a wedding party yesterday, so the royalty of India have joined other international royalty in earning gate fees for museum entrance and premises rental. Gate fees at the palaces include a separate charge for cameras (and the charge for a video camera is higher than the charge for a still camera -- these folks know how to protect their IP! At the end of the day, eating dinner in a posh restaurant in the Taj Rambahl Palace Hotel, a waiter pointed out an elderly woman with an escort of 5 people, as the widow of the last maharaja.

In the Amber Palace on a hill atop Jaipur, the history lesson provided by my guide was somewhat lost on me because a Bollywood movie was being filmed and the singers and dancers were so colorful and lively that my attention was diverted from the old palace and tales of long-dead kings and queens. I've always loved these movies, with their sometimes corny story lines, bright costumes, and highly choreographed dance routines. I caught some photos of the dancing group which will be added to this post, and later met the producer (I didn't have a pen handy but I believe his name is Khan) and a bystander to the photo informed me later that the producer is also a well-known Bollywood actor. He might have been disappointed I didn't recognize him, but a reader of this blog might -- if so, please identify him in a comment...

In earlier posts, I've reported on the array of vehicles on the roadway in Indian cities. To this, after visiting Jaipur, I add elephants and camels, as well as hand-drawn rickshaws. The mind boggles at seeing an elephant with a brightly painted face lumbering along in the middle lane of 3 lanes of heavy traffic. Neither the animal nor the motorists seem bothered by the mix.

Lee with Anoop Hegde, Country Manager, First Indian Corporation, and Vinaya Chandran, VP, First Indian Corporation, in Bangalore

February 18 - On to Mumbai (still called Bombay here)

A visit to the Indian affiliate of a US-based title insurance company in Bangalore opened my eyes to several realities of the Indian real property market. First, there is no title insurance protection for buyers of land or homes, meaning there is no title insurance industry and property owners do not obtain attorneys’ opinions that they have marketable title. A person buys a home or land with no assurance that his title is not subject to adverse claims. If there is a dispute, the courts are available, but cases involving claims to land can take up to 20 years to work their way through the courts.

A US-India based company is working to change this, but it will be difficult because many title documents are not registered with the government (the transferors and transferees avoid the registration fees) and government documents are not as easily accessible as in the US. There is an Indian right to information act, but one cannot obtain multiple documents at once through this law; rather, one must specify the parcel of land for which ownership and deed documents are desired. This might be a long-term impediment to development of a comprehensive title plant for Indian land, but it doesn’t appear to have suppressed a booming real estate market. Both the newspapers and locals report increases in land values of 30% or more in a single year recently. Even middle class people such as attorneys are renting, rather than buying, because of land prices. Moreover, there is apparently no uniform system for rating a prospective homebuyer’s credit, such as the FICO score in the US. Each bank and prospective lender performs its own examination of a potential borrower’s ability to repay.

Presently, however, at least one major company is offering title insurance on Indian property, but only for properties owned by foreigners, and then only for commercial property (not residential). While the local market is ripening, title searches and initial preparation of title insurance commitments for US property are prepared on an outsource basis by India-based companies that research title based on digitized copies of land records, assessment records and so forth. These are then sent electronically to the US. It dazzles the mind to think of a title researcher in Bangalore reviewing the exceptions to title of a property in Boston, but it is happening. India based companies know that as costs are reduced, their parent companies might be under increasing pressure to reduce rates for insurance policies, so they are thinking creatively about how to make the industry more efficient.

A quick flight from Bangalore to Bombay (Mumbai is the new name) demonstrated the difference between India and US air travel. For a domestic flight, documents and hand luggage were examined three times between the counter and the plane, yet on a 1.5 hour flight, a hot meal was served. Both front and rear exit doors were used to deplane, so the whole process was more efficient than in the US. Jet Airways uses e-tickets and handles luggage efficiently. It is a great relief in Indian airports to be met by a driver from the hotel because the airport terminals are super-crowded and there seem to be 3 porters for each passenger. It’s a scrum among the porters when the baggage arrives, so you have to think fast or your two pieces will be on separate carts under the care of separate porters.

One hour in light traffic to the hotel, and even in half-light, Bombay is a study in contrasts. There are modern high-rises and the sea on one side of the car, and small children begging by knocking on the car windows on the other. People who have visited India before told me not to respond to begging children (for various reasons) but it’s heartbreaking and hard to look away. To reach the car windows, these kids (and some are really small) have to dart in and around some of the most aggressive traffic I’ve ever seen – the traffic here makes Rome and Bangkok streets seem tame. The music of urban India is the din of car horns. Added to the buses, cars, trucks, pedicabs, moto-rickshaws, motorcycles, scooters and bicycles I’ve seen in Bangalore, in Bombay there are also horse-drawn carriages and cattle drawn carts.

Today (Sunday) was a day of leisure, so I hired a car and visited Ghandi’s residence in Bombay (now a museum), drove along Marine Drive and saw the Mosque, shopped for sarees and salwar kameez garments, ate lunch at the Delhi Dhaba, and saw both the dhobi (community laundry) and the red-light district. I talked to Guajarati and Punjabi people and now believe that English is not as widely spoken as I previously believed – almost everyone knows a few words, but except for the educated people, most people I asked said that only half the people speak English. I hope to be able to add photos to my blog soon, because the football field-sized areas where institutional laundry is being washed and dried in public is an amazing sight.

Yesterday, I took at 3.5 hour train trip to Pune, which is known as a university city with quite a few law schools (17, up from three a few years ago). I visited a new legal process outsourcing company and gave a short talk to about 35 staff lawyers who were curious to know how lawyers practice in the USA and how they might help their American counterparts work more efficiently. These lawyers don’t have the luxury of private offices – they work in close proximity to one another, seated in rows, all in one room. The working conditions didn’t discourage them from asking questions ranging from “what is diversity jurisdiction?” to “can evidence be filed electronically in US courts?” It was a wonderful chance to see Indian lawyers in action in an LPO. In 25 years of law practice, I haven’t seen lawyers this eager to work and succeed – the LPO industry (estimated by one businessman at 55 companies) is sure to present a major challenge for the legal profession in higher-priced countries.

The LPO I visited in Pune had meaningful security systems in place to prevent breach of client-related confidential information, such as personal lockers for employees’ possessions (none may be taken into the workspace), client-only computers in the work stations (no servers or disc drives attached), key cards to enter the work area, and personal background checks for all lawyers. Other BPO shops have engine compartment and trunk searches for each vehicle entering their compounds, hand wanding of visitors and employees with metal detection devices (on the way in AND on the way out), surprise sweeps of computers to see what pages have been downloaded by employees, and reward programs for reporting suspected security falws. The VA lawyer who left his laptop containing veterans’ personal information in his car wouldn’t have made it in an Indian LPO.

Still, the trip to Pune and back (7+ hours by train, even on the “easy seats”) was no picnic and the business community is probably eager for the opening of the airport that promises to serve international traffic. The crowd in the Bombay CST train station brings to mind a public emergency shelter, with people sitting and sleeping on the floor, as every available seat is taken and there is simply not enough room for the thousands of people thronging the station. Still, train travel is a way to strike up conversations and I talked to teenagers (reading “Chicken Soup for the Teenage Soul”), a textile manufacturer, and a software engineer – all were open and apparently happy to answer a foreigner’s questions about their lives and their country.

Random Facts from the News Headlines

Question of the day (answer at end):
What is the business of a store whose sign reads "Your Last Stop Shop?"

A few things on everyone's minds these days - India has qualified for the World Cricket Championship in the Caribbean in March - apparently the team wasn't expected to qualify and there may be a national holiday if they win. There are 600 million cell phone users in India! The government announced a plan to adopt and care for girl babies to prevent the continuing practice of foeticide, as there are only 821 girl babies for each 1,000 boy babies in Delhi and the practice is continuing. There aren't enough brides to go around. That means the families have to be creative - I met a woman in Bangalore who is bride-shopping on the internet for her two sons (and they live in Detroit and Rochester). The pop-ups on the websites here have a wild variety of match-making services.

Answer - it's a mortuary and embalming salon (this from a street sign in Mumbai).

Information Technology Law Conference Report

The conference in Bangalore attracted about 300 people, of which nearly 60 were speakers from law firms, technology companies and legal outsourcing companies. It opened with a call by Dr. F.C. Kohli (referred to as the father of the Indian software industry) for technologists to create software in India’s 22 non-English languages so that the 600 million uneducated Indians in rural areas can access information to improve their livelihoods and their lives.

I thought the best presentation in the two days was the session on private equity investing in India, with detailed and substantive coverage of the tax implications and effects of various investment structures by attorney Bijal Ajinkya of Nishith Desai Associates (Mumbai, Bangalore and other cities), and guidance on the legal complexities associated with private investment in India by Stephen Mathias of the Bangalore office of the Kocchar & Co. law firm. (Rohit Kochhar, founder of the firm, is the author of “Doing Business in India,” published by Thomson/West.) Ms. Ajinkya described the tax advantages of utilizing India’s tax treaties with Mauritius, Cyprus and Singapore to structure capital investments, with special recommendations for structures applicable to Sharia investors (governed by Islamic law) and Japanese investors. Mr. Mathias outlined the specific limits on investments in listed and unlisted equities applicable to foreign direct investment (FDI) vehicles and foreign venture capital investment vehicles (FDVI). This session demonstrated a high level of technical knowledge by the law firms involved and made it clear that investing in India should not be considered by the uninitiated or the unrepresented.

Yesterday’s session on legal process outsourcing (LPO) sounded a warning to law firm lawyers everywhere: the LPO industry in India is booming. The panel featured two US-based private practitioners and executives of three India-based LPOs. The US lawyers recited a laundry list of potential obstacles to LPO (e.g., waiver of attorney-client privilege or work product privilege, quality of the Indian attorneys engaged, unauthorized practice of law concerns, ethical concerns about disclosure of the LPO relationship), but these arguments were dismissed by the LPO vendors who insist that their attorneys are not practicing law, either in India or in the US, when they undertake research assignments, litigation support tasks and patent searching for foreign law firms and corporations. (The Indian LPO vendors do not provide services to Indian corporations or firms.) Moreover, the lawyers employed by the LPO firms have US and UK legal training and are supervised by lawyers with experience in some of the best-known law firms in the world. Apparently, working for the LPO firms is quite desirable for Indian lawyers, and the LPOs claim they have no trouble recruiting from the best law schools in India and abroad.

Quislex, a 100-lawyer based LPO headquartered in Hyderabad and New York, is run by two Columbia Law School (NY) graduates, Sundari Pisupati and Ram Vasudevan. Both worked in major law firms before starting Quislex. Ms. Pisupati was valedictorian of her law class at The National Law School of India University, the country’s top law school, with five gold medals for outstanding achievement and medals from the President of India and Chief Justice of the Supreme Court of India. In India, they would call her a “topper.” Other emerging LPOs include Bodhi Global and New Galexy; the latter’s chief executive graduated from Cornell and his colleagues all trained in law firms in the US or the UK. In addition, “captive LPOs” are cropping up in India, as US companies set up India-based groups of in-house lawyers to supplement their in-house law departments. Dell has 7 lawyers in Bangalore, who act as “virtual contract managers” and “virtual legal counsel” for Dell’s sales team. The Dell LPO is only 18 months old, but will grow to assume additional responsibilities and perhaps even reduce Dell’s reliance on outside law firms, according to Sudha Munireddy, one of the lawyers in the Dell LPO group.

One factor driving the Indian LPO industry (besides comparative low rates of Indian lawyers vis-à-vis their American and European counterparts) is the prohibition on foreign law firms practicing here. (An obstacle to identifying qualified Indian firms is the prohibition on their having web pages.) Without this bar to foreign firms, which some Indian lawyers say will eventually be eased, major US and European law firms might simply acquire LPO offices and operate them as their India branches. (Might this be part of the strategic/growth/exit strategy for Indian LPO vendors….?) Uncertainty about the future of permitted legal structures for Indian and foreign lawyers may make it wise for a law firm or company doing significant business in India to get to know LPO companies while they are emerging, as the best of them might eventually be snapped up by competitors, either as branches of firms or captive corporate legal departments.

Post conference, I hosted a drinks party with Columbia University and Columbia Law School graduates attending the conference (there were 7 of us), ranging from a 2003 MBA to two 1982 law graduates. Columbia Law graduates in India have their LLMs, for the most part, and all are multilingual. In their company, I could not help feeling a little provincial. We found each other by word of mouth and review of the speaker biographies, and as a group, we’re working for India-based LPOs, law firms, major multinational corporations, and the Seoul National University. Our impromptu gathering was my introduction to Grover’s Reserve 2004, a good Indian red wine. It is a Cabernet Shiraz blend, made from French vines imported to India, and the grapes are grown in the Nambi hills outside Bangalore. As I’m so fond of saying, “who knew?”

Regrettably, the conference hotel, the Le Meridien, is inconvenient to the city center, so I could not get to the women’s professional tennis tournament that is happening this week, and missed the Valentine’s Day celebrations which filled the restaurants and nightclubs. Walking is challenging (some might say suicidal) but I navigated the streets for an hour yesterday until I would have had to cross a busy street, where I lost my nerve. Today’s papers reported 4 traffic fatalities in Bangalore yesterday, including two pedestrians mowed down by vehicles and two motorcyclists killed by a truck, so caution seems smart in retrospect. Bangalore lawyers travel by taxi or private car – chauffeured cars charge them 800 rupees (less than $20) for an 8-hour day (including waiting time), but the hotel’s travel desk charges more than 3,100 rupees for the 8-hour day, which is leaving quite a few conventioneers feeling ripped off. Consequently, I haven’t seen much of the so-called “garden city,” which was cited as the second-best city in India to do business according to a World Bank study released this week. (Hyderabad is in first place.)

Impressive Outsource Shop

I visited one of India's leading business process outsource (BPO) companies to talk to management and supervisors who provide loan processing and loan servicing for US and UK lenders, particularly mortgage companies. The first impression you get is that the "campus" of the company is part of a different world from that of the community it's in. You drive to the site (nearly 2 hours to traverse 20 km) among an absolute jumble of vehicles of every known vintage (cars, motorbikes, moto-rickshaws, bicycles, trucks, and tractors) on incredibly busy (and occasionally unpaved) roadways with virtually no rules or traffic signals, and enter through heavily guarded gates to thoroughly modern office buildings in a landscaped park, with bicycles neatly parked in front of each building. Within the office park, if you have to travel from building to building (the buildings are spread about on more than 50 acres) you take a golf cart. Appointments move with Swiss precision here, and each officer and manager has a specific story to tell about his/her particular contribution to the overall success of the client's business. The enthusiasm of the team is infectious. The customer service managers are convincing in their claims that they actually enjoy and want to help loan applicants understand the available loan products and get them approved. They have initiated outbound calling customer retention programs that claim to reduce loan runoff by 30%.

Management is even more impressive -- they have big plans to not only carry out their US and UK-based clients' missions, but are working on process improvements that will enable their clients to save money. Production cost savings are shared between vendor and client. To keep employees happy, retention bonuses are paid to those who remain on projects for a year or more. Non-compensation benefits are highly desirable as well, and this BPO company has health clubs throughout its campus, food courts, a convenience store, sports teams, and even a hotel for visiting clients and important guests. Key staff spent the night onsite during the water tribunal decision-related strike on Monday February 12, so there was no break in service. I begin to see why American companies that have engaged Indian BPO companies say they do it initially for the price, but stay in India for the quality service. Getting these BPO jobs is not easy, though -- it's a prestige position for a university graduate (and university graduation is a pre-requisite for the entry level positions). The local papers report that only 25% of the university graduates annually are actually qualified for positions in major BPO companies, but one executive told me that the actual number qualified for a top-level BPO company is in the "single digits" as a percentage of university graduates.

The Cauvery Bandh

The state-wide strike was a non-event from the perspective of businesspeople holed up in the Le Meridien Hotel, because the gates to the hotel were closed and guests had to obtain the permission of the hotel to leave the grounds. (I stayed in and read 3-4 newspapers.) There was no possibility of watching the events on TV because the channels were suppressed all day. This morning's paper reports that the bandh (pronounced "ban" and a synonym for strike) was peaceful and complete, with only the elderly inconvenienced by being ripped off by the few taxis and pedicabs that were running, and most flights from Bangalore airport cancelled. However, the news reportage on the event was much less complete than it would have been in any US media. In fact, the leading stories in today's papers concern the likelihood the India team will win the world cricket match and upcoming valentine's day gift choices! By 8pm, people were back on the street, the restaurants were open again and one would not have known an entire state had virtually shut down for 12 hours. Dinner with another delightful lawyer in a restaurant known for coastal cuisine of southern India (the Kerala state), featuring various curry and vegetarian dishes served on a rice pancake, with large green banana leaves as plates. Also tasted my first Indian wine, which was not bad at all! Today is a visit to a leading software company reputed to have one of the most beautiful "campuses" in India -- the term campus is used to describe what I take to be an office park.

First Night Out

With a German-born and German-university engineering graduate of Indian descent who's returned to Bangalore to take advantage of the new global economy, I toured the downtown pedestrian area where the Mahatma Ghandi Road and Brigade intersect. On Sunday night, one day in advance of the big water-related strike, the streets were packed with people window shopping and eating ice cream cones. The women, in particular, in brightly colored sarees (each one uses 5-7 meters of fabric), walking in groups and licking their cones, made a charming picture (but one I could not capture in the low light). The highlight had to be the enormous crowd at the Bangalore Central Department Store, which was having a "Happiness Sale" with everything 2-for-1. Bloomingdales and Macy's don't see crowds like this even on Christmas Eve. The prospect of actually shopping was simply too daunting for me, a dedicated shopper. After a good dinner (not better than the Indian restaurants in downtown Washington, though), I returned to the hotel to try and make sense out of the strike called for Monday February 12.

Apparently there is a long-running dispute between the State of Karnakata (where Bangalore is located) and neighboring Tamil Nadu about allocation of water, and recently, the Cauvery Water Tribunal decided in favor of Tamil Nadu in allocating the water from the Cauvery River. To prevent any violence, which occurred 15 years ago for similar reasons of a water dispute, the government has called out 70,000 police, military and other forces to protect the city today. The railroad authority has also called a strike. My young friend Tom said that keeping cars off the road would prevent attacks on those with Tamil Nadu license tags (indicated by TN). The hotel has closed its gates and although I have not left the property today, I have seen a few cars drive by on the main road (Sankey Road) so the ban on cars is not absolute. I will watch for more developments on the amazingly large screen TV in the hotel room.

Safely Arrived in Bangalore

Not much to report yet on my end, but my colleague Karlyn Stanley (another Virginia based lawyer and speaker at the International Tech Law conference) had an interesting day yesterday visiting Lalbagh Gardens which she likened to Central Park in New York or the Retiro in Madrid; she also saw the Bull Temple before I arrived at 5AM -- you can obtain a blessing at this temple. Not much traffic on the roads at 5AM so I only saw 2 cows and a handful of pedestrians, and was relieved to reach the comfortable Meridien Hotel. Fair warning to all travelers through Heathrow Airport (London) -- you are permitted only one carryon bag, and that includes a purse. There are no exceptions -- you have to check or dispose of anything else, and the authorities are enforcing this rule with a vengeance. More later, after my first Indian dinner tonight (11 February).

En route to Bangalore

As I head out to the International Technology Law Association meeting in Bangalore, I am advised that there is a municipal strike called for 12 February and that it might be wise to stick to the hotel that day. Watch this blog for more on my travels throughout India, where I will be meeting with financial service providers, attorneys, and technology companies working in the US/India business community. ALN