The Economic Times

The Economic Times Spotlights section The Road Ahead featured Pangea3 Co- CEO Sanjay Kamlani in an discussion about India’s economic growth in 2009. Sanjay gives a thoughtful overview of the current and future economic trends in the LPO market as it relates to India’s economy.

Economic Times spotlights Pangea3 as the industry-leading legal outsourcing company.

 India’s Economy has been one of the stars in Global Business in recent years. The growth has been supported by Markets reforms, huge inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital market. Like most of the world, however, India has faced testing economic times in 2008. Going forward, the new economy is defined by a simple question that has no simple answers - What do we do now? The game keeps changing, which means that the job of high impact leaders is to anticipate the next wave, to make sense of the new world of business and to outthink the competition. Keeping this in mind, corporate India is looking forward to finishing strong in 2008, while also moving progressively into 2009 and most importantly, keeping their eyes on the prize. As organisations evaluate the performance of the year gone by and set ambitious goals for 2009, they are making the future worth looking forward to again.

(Compiled by Priya Nair, Sheetal shrivastava, Yasmin Taj)

Sanjay Kamlani Co CEO, Pangea3

We have seen a dramatic increase in business in the LPO market in recent times, particularly from the litigation and corporate compliance / risk management verticals. In litigation (electronic discovery and legal research), this increase relates both to the increase in litigations resulting from the sub-prime debt crisis, and also from the increased need for companies to manage their legal activity within constricted budgets.

We expect this trend to continue to result in increased litigation business throughout 2009.

Similarly, we expect to see substantial growth in the risk management and corporate compliance verticals as companies are forced to comply with increasing regulations around risk assessment and disclosure. Every negative economic event that has occurred in the past several years ranging from the collapse of Long Term Capital Management, Worldcom, Enron, the Madoff funds, and the entire sub?prime debt debacle, all relates to the lack of transparency.

With constricted legal budgets and an absolute need for general counsels to manage their legal activity within those budgets, they are going to demand fixed price services rather than the traditional unlimited variable hourly rates that US/UK law firms traditionally apply. Since LPOs in India are known to offer this flexibility and sharing of risk from a fee structure standpoint, LPOs are well poised to win considerable market share.

In terms of geographies, I believe that going forward we will see more work coming in from Europe and Japan. We have seen an increase in work most recently relating to the consumer credit protection legislation in the UK which enables certain consumer debt holders wipe out their debts when banks have not strictly complied with those rules. Unfortunately, I expect to see continued deterioration in the economic environment globally and as a result the global spend on legal services is likely to shrink. However, I do believe that the LPO industry can grow in this environment because the lower cost value proposition that we offer should enable LPOs to substantially increase its share of the global legal spend which will more than offset business that is lost due to the contraction of the legal industry overall.

Subhro Bhaduri, Executive VP, HR Kotak Mahindra Bank

The year 2009 looks promising, both in terms of business and job opportunities, though, most of the organisations may still want to remain conscious in their approach. The competition would be stiffen And, to some extent, there will be unrest amongst the budding aspirants with regard to their career prospects, but one should not reach for the panic button. The overall macroenvironment should show signs of resilience. I don't see any dearth of opportunity for high performing individuals, even during the toughest times.

R Chandrasekaran, President and Managing Director, Cognizant

The IT industry which played a significant role in the economic growth of the country went through a tumultuous phase towards the end of the year 2008 due to the economic crisis in the US which is the biggest market for most IT firms. But industry experts are having a positive outlook towards 2009 as there are newer avenues for growth.

Going forward, the IT industry will continue to benefit from the pressures on companies to adjust to the new environment and embrace cost saving initiatives. In response to the economic cycle, companies will increasingly resort to global sourcing to rationalise costs by adopting services such as application maintenance, ITES and BPO.

There will be great demand for offshoring as many clients will turn to offshoring companies for helping them with optimising their cost efficiencies and adapting to the changing industry environment. Also, there will be demand for consulting services, process design services, and deployment of newer technology in order to address evolving market dynamics. With significant vendor consolidation, clients will look to offshore a much broader range of services than they had in the past, which means the potential size of relationships will gel materially larger. This will be a big catalyst for growth.

On the recruitment front, the focus will shift from quantity to quality and the emphasis will be on productivity. Also demographic and skill shortage trends in many parts of the world will call for access to global talent pools. Generating revenues will no more be about adding headcount as companies will try to break the linearity between headcount and revenue growth. Firms will invest more in services such as automation, consulting, and analytics, where the revenue-per-individual is higher.

The IT industry will focus more on virtualtsation and optimisation and emerging technologies like Green IT, Grid Computing, Service Oriented Architecture (SOA) and Software-as-a-services (Saas) will witness steady growth and wider acceptance.

Sunil Godhwani, MD & CEO, Religare Enterprises

We expect 2009 to be a year of consolidation for the equity market. Economic growth will slow down to about 5.5%, but interest rate and inflation would also come off sharply one can expect about 1 % inflation in May. Crude oil prices will remain soft between $35-55 resulting in lesser pressure on BOP and hence on the current account deficit.

Corporate India will report poor results in December, March and most likely in June quarter, but those are expected and are factored in the stock prices, down on an average 55% last year. The fiscal and monetary policy actions to lower rates would yield results with a lag of about 6-9 months, and hence second half of 2010 is likely to be better. Low commodity prices will cushion the margin to some extent, although fall in stock prices would hurt a few companies having overseas quasi debt obligations. Overall, one could expect consolidation in corporate world, M&A activity might get a boost and buyout of distressed assets would get a leg-up.

One would expect large fiscal stimulus from the government to boost infrastructure spending. That would help the economy with a large multiplier effect. One would expect the new government after the general election this year to have more number of seals in the parliament so as to be more decisive in pushing reform process faster. Gross capital formation and planned investment spending need to be boosted and revenue expenditures need to be reduced - a strong political will would be needed - possible only if the coalition government has a dominant partner, which has been lacking in the recent past.

Prince Augustin, Senior Vice President, Human Capital, Mahindra & Mahindra Automotive Sector

In 2008, several Indian automobile companies announced joint ventures and expanded their operations; this was compounded by the entry of multi-national players like BMW, Volkswagen, Renault Nissan, Daimler, Ashok Nissan, etc. This led to the creation of various opportunities in the employment market. But promising Indian hopes faded away with the melt-down of Wall Street. And suddenly, we were facing the problem of excess employment! Due to the high level of attrition in the manufacturing space and also, in a quest to maintain internal parity, the only available option was to offer market-competitive compensation that resulted in an increase in the overall cost. In 2009, this issue dominating the automobile industry will be positively addressed.

In 2009, it is very certain that India Inc. will respond successfully to the challenging road ahead. This year, I would suggest job candidates to not look at changing their jobs for short-term gains. Opportunities will still be available in the market and you should pursue it only if it is in line with your long-term career aspirations.

Also, it's vital for every automobile company to now shift their focus and pursue three activities crucial for the growth of this sector: 1) Manpower planning and focus on right skilling, 2) usage of more innovative workforce engagement initiatives and most importantly, 3) building capability through experiential learning.

Orhan Abbas, Emirates' Vice President, India and Nepal

The challenging economic climate has forced many in the airline industry to look at consolidation and rationalisation. The unsustainable players will be weeded out, while those with strong business fundamentals will survive. In the long run, this can only benefit the industry, making it leaner and even more competitive.

The aviation industry in India has battled the surge in crude oil and a slump in tourists arrival especially in latter half of 2008, but industry experts are hopeful of recovery by mid-2009. This optimism mainly stems from an unexpected fall in crude oil prices. Crude oil is currently hovering below US$ 40/barrel; a decline of nearly 70 per cent from its peak level of US$ 145/barreI in July. The sharp decline of oil prices will provide an opportunity to airlines to rationalise the price structure.

If the prices of ATF remain in the range of US$ 45-55 per barrel, then most airlines will trim their fares so as to pull in travellers.

Republished with permission.

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