Rising Competition Among Legal Process Outsourcing Providers Prevents Rise in Prices

The strengthening of business activity and rising regulatory scrutiny have underpinned demand for legal process outsourcing (LPO) services, with rising competition among service providers putting a brake on rising prices.

According to procurement market research firm IBISWorld, the LPO market is a mixed bag of both favorable and unfavorable conditions.

“Faced with pressure to reduce overhead costs, law firms and in-house legal departments have increasingly outsourced lower-end legal services to LPO firms,” the research firm said.

Over the past three years, heightened demand for LPO services has indeed contributed to price growth, but increasing competition among service providers appears to have kept a brake on price spike.

A large majority of LPO service providers, the research firm said, are small and medium firms and their operations are limited to small regions or countries.  The only two large players in this market are Pangea3 and Infosys.

While large firms offer a wide range of LPO and other related services, small and midsize firms tend to focus on a certain niche. According to IBISWorld, the abundance of suppliers and low service specialization make it easier for buyers to switch suppliers, thereby leveraging buyer negotiation power.

“Buyers have a stronger hand in price negotiation because most suppliers offer similar types of services,” the research firm noted.

According to estimates from Grand View Research, the LPO market is expected to grow to US$8.56 billion in 2020, from US$1.39 billion at the end of 2013. The same report estimated that LPO market is growing at over 25% on a consolidated annual growth rate basis and the United States is the strongest market.

IBISWorld says LPO service prices might go up if larger BPO firms acquire their smaller competitors to gain a larger market share and wider geographic presence. Such a scenario is most likely, the research firm warns.

Unlike other BPO services, LPO buyers must devote some of their own time to working with the service providers in order to implement their services.