IT opportunity

I just have finished reading "The King of Torts" by John Grisham. It tells about how a lawyer got into the business of class action suits. You have probably seen John Travolta’s movie "Class Action." Litigation, it seems, is a way of life for some Americans, and Manila has its TROs.

Used properly, litigation is a very good deterrent for the bad behavior of corporations who dump hazardous wastes and chemicals in the environment or mistreat their employees. However, the flipside to this scenario is the number of nuisance suits and some ludicrous awards given to some plaintiffs.

I recently got one via e-mail. A lady from Oklahoma received an award of close to $2 million from Winnebago, an RV (recreational vehicle) manufacturer. It seems they did not put warning labels and did not mention it in the owners’ manual for the driver not to leave the steering wheel when the RV is put on cruise control. After getting it to 70 miles per hour (about 100 kph), she put the RV into cruise control to fix herself a sandwich in the back of the motor home. Guess what happened.

A tort attorney makes his money from getting a lot of complainants with similar issues together. Given the latest scandals of Enron and Worldcom, and now mutual funds, these lawyers are having a field day in filing suits. Millions of plaintiffs (complainants) need to be processed.

Litigation support is a perfect BPO (business process outsourcing) opportunity. My criteria for a business to be attractive are that the market be big and growing, the margins do not have to be big and competitors are fragmented so they do not have pricing power.

One, someone needs to mine the databases for complainants and recruit the plaintiffs and form them into a class. Our call centers can certainly do this.

Two, preparing the litigation involves enormous amounts of paperwork to sort and process millions of pages of evidence. Scanning and managing that data is easily doable in the Philippines.

Three, once the lawsuit is settled or decided there are still millions of complainants who need to be contacted and given their awards even if they did not file the original suit. Claims administration can be easily handled.

My Two Cents: This is just one opportunity of many. But in order for any business to succeed, you need a stable political environment, strong rule of law, peace and order and good infrastructure. Customers and investors don’t want their work done in countries where the Supreme Court can rescind their contracts, where their country executives can be kidnapped or shot. Is this why the brain drain has started up again after President Ramos left office?

The Mouse Is Under Attack

The House of Mickey Mouse (The Walt Disney Co.) just received an unsolicited hostile bid from Comcast. As of this writing, the Disney board rejected the offer as too low. It seems they are following the footsteps of convergence pioneered by Mr. Manny Pangilinan, my favorite corporate chess player.

(As you know, PLDT has been working on convergence in the last three to four years and has cable, Internet and telephone pieces on the board. No other Filipino company has this vision. It was close to buying GMA 7 for content when PLDT was itself attacked by another taipan.)

Comcast’s core business is serving the cable needs of its 20 million plus households. It owns a few cable channels but largely, Comcast is a distribution company.

Disney, on the other hand, has content. It produces movies and owns ESPN, the most valuable cable channel that can charge premium over regular cable channels. However, the company has not recovered its earnings momentum since it bought the ABC network.

The talking heads and backseat dealmakers are mixed on this transaction. Some think it makes a lot of sense for Comcast as it can pump more content into its distribution pipeline.

My Two Cents: Vertical integration strategies have been here since Mr. Ford gave the world the Model T (for us, as long as it was black). I just don’t think you need to make everything. You need to outsource what is not your core.

Managing cable guys is totally different from managing creative artists with big egos. If Comcast can hire good operating talent, then good. (Maybe FPJ can be successful in managing the national government. Politicians are also like movie artists; they need to be popular and creative and have a big sense of themselves.)

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Dickson Co is CFO (C is for Cheap) for Dfnn, Intelligent Wave Philippines and HatchAsia.com. For comments or suggestions, e-mail [email protected].