On the outskirts of New Delhi, India’s chaotic capital, once arid farms and grazing lands have been turned into the new town of Gurgaon, a forest of ultra-modern, glass-and-steel office buildings where hundreds of thousands of Indians are employed in vast call centres. 


Working at odd hours — in sync with clocks of the countries that they service, the young call centre employees field Western consumer queries and complaints, chase debt, and handle other customer relations tasks for a wide range of global companies, including IT firms, banks and other financial service companies. 


The calls these workers make and receive are a big business in India — generating around €9bn in annual revenues a year. The business process outsourcing industry adds to the estimated €18bn India earns each year from its massive software outsourcing business, involving IT experts, based mainly in southern India’s information technology hubs, Bangalore and Hyderabad.


But with India’s labour costs rising — and local companies facing stiff competition from eastern European and Asian rivals for new call centre contracts, India is under pressure to move up the value chain to higher margin, knowledge-based activities if it wants to ensure a fresh wave of growth for its maturing outsourcing industry. 


“Indian companies no longer have a significant cost advantage on a global scale,” believes Soumitra Dutta, professor of business and technology at INSEAD, the Paris-based business school. “They don’t have a choice other than to move to higher value-added services.”


Tucked away amid the call centres inside one of Gurgaon’s sleek, air-conditioned office towers, UnitedLex, a three-year-old but fast-growing Indian start-up, is doing just that — using around 500 Indian lawyers and other skilled professionals to offer legal support services to Western companies eager to cut down their massive legal bills.


Among its projects, UnitedLex has 75 lawyers and medical doctors combing millions of pages of internal emails, annual reports, clinical trial data, and medical publicity material belonging to GE — to identify all relevant documents — as the US-based company prepares its defence for a high-profile pharmaceutical product liability lawsuit. 


Other UnitedLex lawyers are overhauling all the contract templates for a Fortune 500 company, while a different set of lawyers and engineers is carrying out research work for the preparation of Western companies’ patent applications and their protection.


Far from slowing with the global downturn, UnitedLex, like other Indian legal process firms, is experiencing rapid business growth, as companies in litigious Western societies try to cut down on what is estimated to be a €4.75bn US market for litigation support services. 


Ajay Agrawal, a co-founder of UnitedLex and its chief solutions officer, says his company is in the process of doubling its headcount, from the 500 professionals it started the year with, to around 1,000 by June, as recession-hit companies seek cost savings.


Along with the US downturn has come the mammoth task of reviewing covenants, contracts, and financial documents for banks now facing the spectre of protracted litigation from US homeowners and other parties injured by the sub-prime crisis.


“Work is coming in torrents,” says Agrawal. “Decision-makers in the West are going from a process of sitting on the fence or dipping their toes in the water, to now coming to us and saying, ‘Can you take over this function?’”


CPA Global, a 40-year-old UK-based legal support services firm, is also rapidly expanding its India operation, which specialises in intellectual property work for clients such as Microsoft. CPA doubled its head count in India to 500 employees in 2008, and says it will double again every six to nine months through the end of 2010.


Other specialised Indian legal process outsourcing firms, such as Pangea3, are also expanding, while even traditional Indian law firms are setting up special units hoping to capitalise on the growing demand for less expensive legal services.


For now, the tasks delegated to Indian legal outsourcing firms are generally the types of assignments done by US paralegals, or newly minted lawyers, rather than the type of work undertaken by veteran corporate attorneys. And ValueNotes, an Indian-based research company, estimates legal process outsourcing revenues were just $225m in 2007, yet that revenue grew an estimated 40% in 2008, and is projected to reach at least $640m (€505m) by 2010.


“If you have to send your work thousands of miles away, you would like to know whether that work is going to be done properly in the way you want, by the right kind of people,” says Bhaskar Bagchi, India country head of CPA Global. “There is always a kind of testing period.”


Yet now, he says, with many Fortune 500 companies acknowledging that they must reduce law fees, the inexorable logic of legal service offshoring is growing. “It’s a great mix of quality and economics,” adds Bagchi. 


That logic appears to be finding resonance for other knowledge services as well. ValueNotes says Indian firms are already handling an increasingly diverse array of higher margin jobs for Western companies — from market research and product design to engineering services, writing and content development.


These initiatives are still in the nascent stages — building on the foundation laid by the success of IT offshoring and the large business process outsourcing industry. However, growth in most activities is expected to slow, given the current global crisis; the pressure on Western governments, and firms, to keep jobs at home; and companies’ unwillingness to undertake new initiatives, even those that may help lower costs in the long run.


The discovery this year of major financial fraud at Satyam, one of India’s largest IT outsourcing companies, has also been a setback in the current risk-averse climate.


Yet Som Mittal, president of India’s National Association of Software and Service Companies, says the long-run tendency of high-end jobs to migrate offshore will remain, helped by innovative Indian companies that will woo business in new, ever more challenging, skilled — and lucrative — areas.


“Until now, people have moved to India what they thought could be moved,” says Mittal. “In the next ten years, rather than a follower role as we have played, Indian companies will help their customers, or their parents, drive this transformation.”