The 25,000 sq. ft Mumbai campus of Integreon Managed Solutions Inc. is a knowledge spa. Behind locked doors, more than 1,000 people are busy doing everything from drafting contracts for US law firms to building regression models on stock returns for hedge funds.
Lokendra Tomar, who heads the knowledge-service practice at Integreon, used to be a fund manager. Matthew Banks, Tomar’s counterpart for legal services, was a lawyer in London. A Wall Street client, Tomar says, will typically come with a simple requirement, such as getting graphs and charts done for presentations; soon, it would be buying analysis.
“It’s like a rich lady coming in to get her nails filed,” says Banks, in support of my spa analogy. “If she likes your work, she says, ‘can you cut my hair? Do you do Botox?’”
“But the difference between us and a spa is that while some may view pedicure as a luxury, the work we do for investment banks, and consulting and law firms is critical to their operations,” Banks says.
Software code-writing and back-office transaction processing are already well-established businesses in India. More recently, however, the country’s lure as an outsourcing location has begun encompassing newer, more complex areas. From fixed income and equity analysis to litigation research and patent filing, India is fast becoming the world capital for services that require specialized knowledge.
Lehman Brothers Holdings Inc. has begun hiring engineering graduates in India to create a pricing group for exotic derivatives. The team’s work is focused on overseas markets.
As India liberalizes its banking and legal services industries, domestic opportunities will combine with outsourcing to create thousands of jobs. That isn’t all. A young talent pool in finance and law that’s at the cutting edge of global developments will become an important catalyst for future wealth generation in India. At least four Indian billionaires—not to mention hundreds of millionaires—owe their riches entirely to outsourcing of computer software-related work.
The same pattern may now repeat in consulting, investment banking and other professional services as savvy entrepreneurs take advantage of the country’s young, educated workforce to move an increasing number of tasks offshore. In such an environment, it won’t take very long for home-grown professional services companies to become world-class.
Already, about two out of five freshly minted law graduates in India are deciding to spend their early years of drudgery in a back-office company servicing international clients. The pay is better, and it takes two years to become a team leader. Such quick career progression doesn’t happen in law firms. Outsourcing halves a client’s cost of doing labour-intensive work. The legal discovery process, which involves reviewing millions of pages of documents before the start of a trial, is increasingly moving to India where junior lawyers cost a fifth of their US counterparts.
Four years ago, knowledge process outsourcing was barely a $1.2 billion (Rs5,640 crore then)-a-year industry. It was dwarfed by call centres and back-office services such as helpdesks, payroll processing and medical transcription, which, taken together, were more than six times as large. That gap is shrinking. Knowledge outsourcing may garner $17 billion in sales by 2010, according to Evalueserve, a business and financial research firm with more than 1,400 analysts in India, China and Chile. India’s share of these services may be 70%.
Analysts at San Mateo, California-based Gridstone Research review earnings statements, trawl through corporate filings made to the US Securities and Exchange Commission, listen in on earnings calls and finally collate all useful information on a proprietary spreadsheet-based data platform.
And all of this happens out of Mindspace, a swanky business park in Mumbai’s suburb of Malad. Wall Street heavyweights haven’t been far behind. Most of them have set up units in or around Mumbai, where they do back-end work for their global investment-banking and trading units.
Between them, JPMorgan Chase & Co., Morgan Stanley and Merrill Lynch & Co. employ thousands of workers in Mumbai.
Credit Suisse Group last month snagged Vineet Nagrani from Morgan Stanley to lead a new “global knowledge process deployment” team, which will develop sophisticated tools for corporate-finance valuation. Nagrani will be based in Pune, which is three hours by car from Mumbai.
When a third-party service provider is involved, clients usually ask for—and get—complete secrecy.
A law firm once sent a UK private investigator to Mumbai to verify security practices before sending work to India. “He was ex-Scotland Yard, and we thought he would pick holes in our systems,” says Joyce Thorne, head of training at Integreon. “Instead, he asked us to loosen up a little.”
The only customer whose identity Integreon’s Tomar is allowed to disclose is Clifford Chance LLP. The London-based law firm has engaged the service provider to build a 600 person centre in New Delhi. Integreon was founded in 1999 in New York as a company preparing presentation materials for consulting firm McKinsey & Co. The lure of cheap labour costs brought it to India in 2000. Now, it wants to expand in the Philippines, where US-trained lawyers and certified public accountants abound.
Knowledge spas are catching on.