Knowledge spas will create jobs, wealth

The 25,000 square foot Mumbai campus of Integreon Managed Solutions is a knowledge spa. Behind locked doors, more than 1,000 people are busy doing everything from drafting contracts for law firms in the US 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 specialised knowledge.

Lehman Brothers Holdings 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 liberalises its own banking and legal-services industries, domestic opportunities will combine with outsourcing to create thousands of new 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 homegrown 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-a-year industry. It was dwarfed by call centres and back-office services such as help-desks, 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 company.