LPO versus BPO: The Battle For Credibility

The supplier market for legal process services can be broadly segmented into three groups:

  • There are the (relatively) large pure-play LPO providers who have global customers and are building strategic relationships with their clients. In reality there are really only a handful of these companies.
  • Below them are a large number of smaller LPO suppliers who specialise in tactical, or project-based, work for their clients. Because the LPO market as a whole is fairly nascent, there is a lot of churn of suppliers in this group, with new ones being created just as quickly as others fail.
  • Then there are the Business Process Outsourcing suppliers who have moved into the LPO market. These tend to be large, global organisations with a legacy of Knowledge Process Outsourcing, Finance and Accounting Outsourcing and even IT Outsourcing. LPO is simply another service line to move into.

The question is; which of these groups will ultimately succeed in the marketplace?

In our work as outsourcing advisors, we have issued LPO-based Requests-For-Information to over 50 providers, and have personally visited the delivery centres of a number of these in India. Add in our own research, and this experience has given us an unparalleled insight into the suppliers, how they operate and how they might fare in the future. We’ll obviously reserve some of those views for our own clients, but the comparison we want to make in this article is between the LPOs (in particular that first group of larger, established players) and the BPOs who want to play in the LPO space.

Perhaps the first thing we should say is that there are very credible providers out there who we would have no issues including on anyone’s long-list; the market is mature enough now that there are some very satisfied customers extracting real value from their relationships with their LPO providers.

So, when putting those long-lists together, and bearing in mind that you might be entering a relationship that will run for many years, how should you approach the issue of selecting between the nimble-yet-immature LPO players or the large and stable BPO guys?
If you look at the situation right now, one of the key learnings from our recent India visit was the credibility gap that still exists between the LPO and BPO players. Whilst the LPOs could offer roomfuls of qualified, experienced lawyers, and client lists from some of the most respected companies in the world, the BPOs were still focusing on process and technology, with only a handful of LPO-ish projects, some of which were simply serving their parent organisation.

If you were to put your GC in front of one of each of these (which we did with one of our clients) then, today, it would be the LPOs who would win hands-down. Having lawyers involved in running the company as well as providing the services, and being able to demonstrate established and satisfied clients for services similar to the ones that you might use, are really the only two things that matter to them. Suppliers can talk about processes, methodologies and technologies all day, but unless they have those two things then they’ll fail to get the attention most likely deserve.

So, should the BPOs just give up now? Far from it. The bedrock of process and technology is an excellent place to start, and expensive and time-consuming to build if you don’t already have it. Getting the right people in place is what these firms do best, and getting some relevant clients is only a matter of time.

As a customer, it really depends on whether you want to be the one who takes that risk (as a ‘foundation client’) now, or you wait until they have some more experience under their belt. There are pros and cons to each, but it will be important to look at it in the context of your overall sourcing strategy, especially what that might look like in a few years time. But, one thing is clear, either through organic growth or acquisition, it surely is only a matter of time when the BPOs are competing credibly alongside the LPOs.

2 thoughts on “LPO versus BPO: The Battle For Credibility

  1. An excellent insight into the current balance of power in the LPO supplier market.

    As you say, looking purely from the perspective of the GC, at the moment the LPO majors are the most immediately attractive and will no doubt continue to win deals for this reason alone. However, if the perspective is widened to consider the very real procurement issue of maintaining ongoing competitive pressure between a number of strategic suppliers across various service lines within the organisation (ITO, BPO, KPO, LPO) etc, then the balance starts to tip back towards those BPO majors who are committed to the LPO sector and steadily gaining track record.

    Getting this decision right will require not just external advice of the LPO market and relationship deal principles and governance framework but real cooperation between the legal and procurement functions. Hopefully there will already be a close working relationship between the GC and CPO as a result of jointly managing contractual disputes with the organisation’s suppliers and customers but this now needs to be applied rather closer to home as the organisation becomes a potential customer for external LPO services.

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