Interview with Evalueserve Founder Alok Aggarwal re Offshoring

Offshoring Legal Work to India – The Story of One Company
by Ron Friedmann

In March 2005, I spoke to Alok Aggarwal, co-founder of Evalueserve (EVS), a company in India that provides a range of offshore services. A big line of business for EVS is helping US companies with patent applications. Alok provided many valuable insights into the potential for and issues with performing legal work in India.

Alok’s background and the founding of EVS is part of the story. Alok has PhD in Computer Science from Johns Hopkins. He spent many years doing research at IBM. Around 1998, he moved to India for over 30 months to start IBM’s research operations there, growing it about 30 PhDs and 30 Masters. Interestingly, it was the quest for talent, not cost savings, that motivated this. At that time, IBM began losing researchers to start-ups as the dot-com boom ramped up and so turned to India to deal with the “brain drain” in the US.

At IBM in India, Alok’s researchers were busy inventing. He learned that it was “cheaper to invent in India than to patent in US.” In late 1980s and early 1990s, seeing the out-of-whack costs, IBM trained some engineers in its US-based offices in US Patent and Trademark Office procedures. These engineers began drafting patent applications for review by IBM’s US lawyers.

Around this time, Alok met his co-founder Marc Vollenweider, who was then a partner at McKinsey. Marc originally worked in Switzerland but had moved to McKinsey’s knowledge center in India. McKinsey Knowledge Center was already hiring MBAs in India who were providing business research and information services to the 6,000 McKinsey consultants worldwide. Between this McKinsey experience and Alok’s observation that Indian engineers can be trained to drafted patent applications for the US and the European Patent Offices, they had the kernel for a new business.

Now, some 4 years after its founding, EVS employs over 660 people, all in India except for a couple dozen sales-client-project managers in the US and Europe. Split among four offices in a Delhi-suburb, Gurgaon, because downtown Delhi is too expensive and congested, 550 out these 660 are professionals, with about 50% being MBAs, 25% engineers, and 25% a mix of doctors, accountants, biotech experts, organic chemists, and lawyers.

These professionals offer a range of in-depth research and analytic services. About 85 professionals work in the IP department and mainly focus on patents: searching, writing, categorizing, valuing patents, and evaluating patent portfolios. Only three are lawyers, the rest are engineers or scientists.

To date, EVS has written over 400 patent applications. Initially the pace was slow because of the training requirements; now, however, EVS can crank out 40 patents per month. Achieving and this volume and success in delivering these IP services to US companies required substantial investment. All of the Indian professionals have received long and exacting training in US law and patent procedures and practice. In many cases, the training has taken up to two years. One reason the training takes so long is that the work is “as much art as science.” Unlike call centers or manufacturing, the work is not subject to rigid or easily applied rules. Alok likens the creation of the EVS process to inventing a new way of working, similar to Henry Ford’s invention of the assembly line.

Today, EVS patent expertise works on behalf of some 80 start-ups in Silicon Valley, along Boston’s Route 128, and in other centers of innovation. But it’s not just start-ups — EVS also has five Fortune 1000 companies actively using its services and a dozen more evaluating them. Some clients at the bigger companies are law departments. For the services EVS provides, its customers pay on average $40/hour versus $200-500/hour for US lawyers or $150-300 for US engineers.

It’s one thing to provide patent services to companies, another to law firms. Until 2004, Alok says that “any time I talked to a law firm to say we can help with costs and quality, I would be thrown out.” Utter disbelief combined with a fear of lost profit kept the door locked. Slowly though, US law firms are beginning to understand that EVS and similar services in India do not replace patent lawyers. Rather, they mainly provide good engineers and scientists. At least in some instances, this lets US lawyers move from mere document drafters to strategic and business planners and valued advisors.

But surely this must threaten if not outright eliminate the work of US scientists of engineers. Alok thinks not. He argues that the demand for patents is quite price elastic, meaning that the lower price will stimulate much greater demand. He cites market research that shows many small companies simply won’t pay for patents if they cost too much.

Whether or not some jobs are threatened, the availability of this low cost service can be a boon for smaller IP law firms. These firms cannot easily afford US engineering and scientific expertise. Alok believes his service will allow them to compete with much larger ones. He also hopes that even big firms will consider EVS services, arguing that if the large firms want to expand their business to more price sensitive clients, they will have to outsource. Furthermore, he notes that patent prosecution is often a loss leader and firms should be eager to reduce the cost. Whether dealing with a small firm or large, EVS insists that the ultimate client always knows that work is being outsourced.

Can the EVS model expand beyond support of lawyers to take over legal work itself? Alok thinks that large US companies will head in this direction. As general counsels gain the benefit of lower-cost patent applications, they may ultimately push to offshore other work. Already, some EVS clients have asked the company to provide some limited legal document review services. Alok plans to proceed in this direction slowly and carefully. He recognizes that training is paramount and will take time. It may require posting Indian employees at US law departments for months so they can really learn the processes. Or companies may send their in-house lawyers to India to help train EVS staff. Alok sees good growth potential but recognizes it will take time and, in any event, is still mainly focused on patents.

In the 1980s, many experts and citizens worried that Japan would crush the US economy. That did not come to pass. Today, many worry that the US will lose many jobs to lower cost offshore locations. Jobs may indeed move but if Alok’s analysis is right, high end, knowledge-intensive work would move offshore slowly at best.