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KPO
Boom time for KPOs
According to industry estimates, three lakh jobs would be
created in the Knowledge Process Outsourcing space by 2010 and 70% of these
jobs are expected to come to India, writes Manjari Juneja
 Knowledge
Process Outsourcing (KPO) has been frequently referred to as higher-end BPO.
It provides value propositions to companies that are significantly different
in scope and delivery as compared to business process outsourcing which is based
on transactions.
In today’s global world, companies need to understand their customers,
suppliers and other stakeholders comprehensively. They can do this if they have
actionable insights based on facts, which have been obtained by using transparent
methodologies and with discipline and speed.
These insights can be gained by assessing the performance drivers, both inside
and outside a business, by subjecting data to a variety of quantitative techniques
in order to explain and identifying causal relationships between economic outcomes
and the drivers of these outcomes.
Arun Kharbanda, Business Unit Leader, WNS - Research & Analysis, said, “For
companies that want to compete with knowledge or research and analytics, KPO
represents one opportunity to do so. In KPO, a company uses outsourced resources
to obtain these insights rather than doing so in-house.”
A good KPO firm is likely to care more about the depth of knowledge and experience
and the judgment skills of its professionals rather than just its size. The
countries that will emerge as strong contenders in the KPO business are those
that have large numbers of engineers, medical doctors, science and technology
(including biotech and pharmaceuticals) graduates, MBAs, certified financial
analysts, accountants, statisticians, lawyers, etc. Low-wage countries that
seem to have these professionals in large numbers include India, China, Russia,
Poland, the Philippines, Hungary and many republics from the erstwhile Soviet
Union.
Ashish Gupta, COO and Country Head (India), Evalueserve, said, “KPOs are
doing really well in India and the prospects are bright. This is a consolidated
segment that is part of the IT/ITES industry getting the same benefits as IT/BPO.
India offers many advantages to the KPO industry such as a large talent pool
of highly qualified people like MBAs, Lawyers, Doctors, and PHDs etc.”
Characteristics of KPO
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 "For
companies that want to compete with knowledge or research and analytics,
KPO represents one opportunity to do so. In KPO, a company uses outsourced
resources to obtain these insights rather than doing so in-house"
- Arun Kharbanda
Business Unit Leader, WNS - Research & Analytics
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 "Our
current forecasts predict that the Knowledge Process Offshoring industry
in India will grow to $11.2 billion in revenue by 2010-2011 and will employ
approximately 255,000 professionals by March 2011"
- Ashish Gupta
COO and Country Head (India), Evalueserve
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KPO firms require substantially greater domain expertise (unlike
BPO firms, where the skills can usually be taught in a matter of days or weeks).
In fact, Knowledge Process Outsourcing and Offshoring is an area where professionals
continue to learn, just as doctors and lawyers undergo continuous training to
learn new treatments and procedures and newer interpretations of existing laws.
Hence, it is not surprising that training such professionals can take anywhere
from two months (in Market Research and Data Collection) to a year or more (in
Intellectual Property).
Most KPO projects are smaller by a factor of five to ten than the corresponding
BPO projects. Furthermore, the salespeople selling KPO services need to be well
versed in these services and to have the required domain expertise in order
to be credible. In this regard, a typical KPO firm lies somewhere between a
BPO firm on one hand and consulting firm on the other.
In the near future, Knowledge Process Outsourcing and Offshoring
is likely to be driven by factors such as breadth and depth of coverage, domain
expertise, location advantage (e.g., near-shoring and language capabilities),
sales and marketing capabilities, data compliance with respect to regulatory
standards (especially those defined by the United States, Canada and the European
Union) and the management of business risks. Hence, it is quite likely that
companies—both those with their own captive centers and those that use
third-party vendors—may use a ‘hub and spoke’ model, in which
a provider in India may constitute the ‘center’ and other units around
the world may provide the appropriate ‘spokes’.
The market for KPO
The KPO industry in India has gone through a ‘concept
selling’ phase in the last few years for a majority of clients who have
hitherto utilized BPO services. At the same time, some clients have been able
to create a competitive advantage for themselves through establishing Analytics
Centers of Excellence programs that have resulted in improved decision making
across multiple business groups, markets and geographies. Today, the right environment
exists for high-end, strategic, partnership-based KPO.
According to industry estimates, the size of the KPO industry would be worth
$17 billion globally by 2010, out of which India would account for close to
$12 bn. Nasscom and Evalueserve estimate that by 2010, 300,000 jobs would be
created in the KPO space and 70% of these jobs are expected to come to India.
The verticals driving the KPO industry in India are Banking, Securities and
Industry Research Services, Contract Research Organizations, Bio-Pharmaceutical
Services, Data Management, Mining, Searching and Analytics, Legal, Paralegal
and Intellectual Property Support Services.
Clients have started utilizing KPO services as an
integrated vertical-specialized service as against an earlier scenario of
engaging with discrete knowledge process work.
- In its first phase, clients try out the concept of KPO, testing providers'
capabilities by outsourcing lower-end, discrete knowledge processes.
Once satisfied with the performance, companies often move to the second
phase, testing the delivery of higher-end but still discrete processes,
now delivered in a series or as a part of a program rather than as one-off
projects.
- Once the success of the second phase is achieved, companies are now
comfortable leveraging a wider range of KPO provider capabilities. They
adopt an integrated approach to knowledge work asking providers to deliver
higher-end services such as developing customer lifetime value models
or fraud management models. This holistic approach gets close to the
end-game, the ‘Knowledge Center of Excellence’ where knowledge
created by a vertically-specialized provider is utilized throughout
the organization.
- However, the basic building blocks that create this knowledge are
essentially the same—finitely arrayed skill sets (statistical,
data manipulation, domain) and types of research and analytics (business
and financial research, market research, predictive analytics, etc.)
Companies that want an all-pervasive knowledge environment and understand
the power of concentrating resources with similar skill sets in one
location have created analytic hubs, or ‘Knowledge Centers of Excellence’—again,
essentially shared services environments for knowledge processes.
- Designated individuals within the organization can interact (e.g.,
request research) from this centralized resource through Web-based knowledge
portals, irrespective of where they may be located geographically. These
Web portals also serve as a repository for business challenges that
have been addressed in the past, helping analysts in different parts
of the organization learn from the efforts of their peers thousands
of miles away.
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Job opportunities galore
Given its rapid growth, there are clearly abundant career opportunities in the
Indian KPO industry for fresh university graduates or post-graduates as well
as experienced professionals.
The number of jobs in the Knowledge Process industry in high wage countries
that can be potentially offshored is currently more than 11.5 million and is
expected to be over 12 million by 2010-11. Hence, even if the KPO industry ends
up employing 350,000 professionals in 2010-11, it would represent less than
3% of the jobs that can be potentially offshored.
Adds Gupta, “Our current forecasts predict that the Knowledge Process Offshoring
industry in India will grow to $11.2 billion in revenue by 2010-2011 and will
employ approximately 255,000 professionals by March 2011. According to Evalueserve’s
research, although this industry had only 9,000 billable professionals in India
that generated total revenue of $260 million during 2000-01, this number had
already grown to 75,400 by 2006-07 and these billable professionals generated
$3.05 billion. This implies a cumulative annual growth rate of 51% in US Dollar
terms and 43% with respect to the increase in the number of billable professionals
during these six years. While the above macro trends are excellent in terms
of creating knowledge-based jobs, the KPO sector in India is experiencing substantial
employee turnover, which hurts this sector in particular because these employees
are unable to gain sufficient domain expertise and knowledge before they move
on to their next job.”
Moreover, if attrition is not controlled properly within the Indian KPO industry
then its growth may be stymied and it may be unable to generate over $9.9 billion
in revenue (or employ more than 225,000 professionals) during 2010-11.
Bottlenecks in growth
The KPO industry faces a dearth of skilled manpower with domain expertise. Moreover,
client conversion and development takes longer in this area. Sales cycles take
a long time to close.
“The biggest challenge that the KPO industry faces is
in convincing clients to extend the BPO model of shared service centers into
their knowledge processes. While there are some clients that are taking steps
to adopt the concept of Analytics Centers of Excellence, others have been slower.
So it is a mindset issue that the industry has to work on,” concludes Kharbanda.
manjari.juneja@expressindia.com
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