A

PROJECT REPORT
ON
BPO & KPO SECTOR
IN
INDIA

SUBMITTED TO: - SUBMITTED BY:-

 ACKNOLEDGEMENT

In the preparation of this report, which is the part of the class presentations,
We have put in substantial effort and at the same time We found it pleasurable
doing the Case Study. We consider ourselves lucky enough to get the help of
many people during the project.

We take this opportunity to express my sincere gratitude to

professor for social marketing for providing us the opportunity and for his
constant help and guidance without which this project would have not reached
this stage.

Lastly, we would like to pay my thanks to all our colleagues and friends who
have contributed to this work. Their constant motivation and help is a great
source of inspiration.
 INDEX
Sr. No CONTENTS
1. BPO
2. Overview
3. What is BPO
4. BPO in India
5. The growth of strategic outsourcing
6. Contribution of BPO to national economy
7. Expanding the domestic market
8. India rules the BPO roost
9. Threats to the BPO sector
10. M&A in BPO sector
11. BPO: SWOT Analysis
12. Conclusion for BPO sector
13. Dawn of BPO
14. Graduating to KPO
15. KPO: Triggering the next bull ride in Indian Economy
16. What is KPO?
17. Scope and future of KPO
18. KPO: Overview
19. Benefits of KPO
20. KPO: Skills defined
21. What KPO can deliver to you?
22. KPO in India
23. India: Preferred destination for KPO
24. Classification of KPO by segment
25. KPO: SWOT Analysis
 26. High end Services outsourced to Indian KPO sector
27. Challenges in KPO
28. Extending the role of govt. as facilitator
29 KPO vs BPO
30. Difference between BPO &KPO
31. Conclusion: KPO vs BPO

BPO (BUSINESS PROCESS OUTSOURCING)

Business Process Outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a
third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a
company requires but does not depend upon to maintain its position in the marketplace. BPO is often
divided into two categories: back office outsourcing, which includes internal business functions such as
billing or purchasing, and front office outsourcing, which includes customer-related services such as
marketing or tech support.

BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO
that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and
BPO that is contracted within the company's own country is sometimes called offshore outsourcing.

The most common examples of BPO are call centers, human resources, accounting and payroll
outsourcing.

Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain
amount of risk is transferred to the company that is running the process elements on behalf of the
outsourcer. BPO includes the software, the process management, and the people to operate the service,
while a typical ASP model includes only the provision of access to functionalities and features provided
or 'served up' through the use of software, usually via web browser to the customer. BPO is a part of the
outsourcing industry. It is dependent on information technology, hence it is also referred to as
Information Technology Enabled Services or ITES. Knowledge process outsourcing and legal
process outsourcing are some of the subsets of business process outsourcing.

OVERVIEW

The Business Process Outsourcing (BPO)sector which includes back office companies and Customer
Contact Centers, holds enormous promise for the Indian economy. The future growth of the sector is
dependent on being globally competitive, as outsourcers are raising the bar on a continuous basis.

Uniquely positioned, India has the potential to become a world leader in the sector. QAI attempts to
facilitate this potential by providing consulting and training services for enabling Operational
excellence.

Today, technology is no longer the key differentiator. The ability to manage human resources and
maintain quality, with an ability to meet ever-increasing customer expectations are the expected growth
levers.

BPO organizations today have to focus on:-

• Managing service levels efficiently;

• Increasing quality of services delivered;
• Reducing costs of operations;
• And in the process ensure growth in revenues and profits.

WHAT IS BUSINESS PROCESS OUTSOURCING (BPO)?

BPO is the process of hiring another company to handle business activities for you.
BPO is distinct from information technology (IT) outsourcing, which focuses on hiring a third-party
company or service provider to do IT-related activities, such as application management and application
development, data center operations, or testing and quality assurance.

In the early days, BPO usually consisted of outsourcing processes such as payroll. Then it grew to
include employee benefits management. Now it encompasses a number of functions that are considered
"non-core" to the primary business strategy.

Now it is common for organizations to outsource financial and administration (F&A) processes, human
resources (HR) functions, call center and customer service activities and accounting and payroll.

These outsourcing deals frequently involve multi-year contracts that can run into hundreds of millions of
dollars. Often, the people performing the work internally for the client firm are transferred and become
employees for the service provider. Dominant outsourcing service providers in the BPO fields (some of
which also dominate the IT outsourcing business) include US companies IBM, Accenture, and Hewitt
Associates, as well as European and Asian companies Capgemini, Genpact, TCS, Wipro and Infosys.
Many of these BPO efforts involve offshoring -- hiring a company based in another country -- to do the
work. India is a popular location for BPO activities.
Frequently, BPO is also referred to as ITES -- information technology-enabled services. Since most
business processes include some form of automation, IT "enables" these services to be performed.
 BPO IN INDIA

Over the last few years, outsourcing of business processes has been gaining popularity driven by the fact
that US firms have been enjoying much success from adopting this business strategy. European
organizations have increasingly been focusing on what they identify as their core competencies and have
been looking to reduce costs while maintaining high levels of quality for non-core activities and
processes. To this end, two broad approaches had developed, one to centralise the non-core processes
into an in-house shared service functions to derive benefits of centralization through an in-house process
or through a wholly owned subsidiary and two, to identify an acceptable third party service provider
who will handle the processing work. The current economic climate has encouraged the latter trend as
the organizations continue to look for more innovative ways to improve efficiency and cut costs in order
to survive the turbulent marketplace.

THE GROWTH OF STRATEGIC OUTSOURCING

It emerged at the conclave that outsourcing would continue to increase over the next few years. A
special study conducted by consulting firm, KPMG, which was launched at the event, said that nearly 90
percent companies from 32 countries would either maintain or increase their existing outsourcing levels.

Speakers and industry CEOs participating in panel discussions at the event also raised the issue about
how outsourcing was evolving from a pure cost play to a strategic management tool and that Indian
BPOs needed to focus on specific industry verticals with specific processes and demonstrate expertise in
these areas. Not content with labor arbitrage cost savings, customers were asking the age old question,
“What Next.” And Indian companies had to take the specialization route to answer this query.

CONTRIBUTION OF BPO TO THE NATIONAL ECONOMY

As per the NASSCOM-McKinsey Report, 2002, the revenue from BPO will reach $24 billion by 2008
and the IT-enabled services (ITES) sector will contribute 37 per cent to the total IT software and
services export market. Thus, BPO is likely to contribute up to 3 per cent to India's gross domestic
product (GDP).
The BPO sector is expected to provide employment to 1.1 million people by 2008 as per a report by the
NASSCOM
 EXPANDING THE DOMESTIC MARKET

According to the PM, the Government could play a role in expanding the domestic market. Every sector
of India’s economy needed to be more e-enabled. There were huge opportunities for this waiting to be
tapped in almost all major sectors, including agriculture. “We are working to make our economy a more
knowledge based one. In government, we are taking steps to e-enable government systems. Several large
e-governance initiatives launched by the government under the National E-Governance Plan are
expected to provide sustained growth in domestic demand for IT services over the next few years. Many
government processes are being re-engineered and outsourced. This has expanded the domestic market
for IT and IT-enabled services,” he added.

INDIA RULES THE BPO ROOST

The late 90’s witnessed a surge in the services sector of the Indian economy with numerous BPO centers
for global conglomerates emerging in all the metros. From technical customer support to bill handling to
medical transcription services to banking back-end operations to insurance services, BPO put India on
the world map and identified that it was a force to reckon with in the post-globalization world. BPO
services in India initially started with email and voice only customer support services that later led to the
mushrooming of numerous call center hubs across the length and breadth of the country. While this
created employment opportunities for numerous graduates and part time job seekers, there was a
progressive transition of these call centers into more professional outsource service centers offering
specialized high end services to overseas clients. India was reckoned as the preferred outsourcing
location by global majors that evinced the fact that India had taken a definite lead over its counterparts
to make the most of this BPO boom. Though manufacturing is yet to evolve as India’s forte, the success
of the services sector more or less balanced the void created in the Indian economy by the lack of
adequate manufacturing activity.

The dawn of the new millennium signaled the expansion of the bandwagon of BPO services that were
outsourced to India by foreign companies. The Indian BPO industry saw an increased demand for
services including healthcare – medical billing and coding, claims processing; insurance and tax
processing; data entry and management services; software and engineering services and other similar
outsource-able functions. The Indian BPO industry was making waves and was amassing revenues to
the tune of $4 billion by 2004-05. This constituted a major chunk of the global pie of BPO revenues.

THREATS TO THE BPO SECTOR

Despite the boom and support that BPO sector has fetched, there are certain grass-root level setbacks
too. These setbacks are strongly propagated to be threats resulting into backlash to the BPO activity in
India. These are as under:-
# Lack of maturity in service line, increasing competition among e-logistics providers and management
resistance are the main deterrents to the outsourcing in the logistics sector.

# Discretionary cuts in budgets, low growth due to industry maturity and decentralized nature of
facilities management are the main deterrents to the outsourcing in the facility & operations
management sector.

# Privacy concerns and technical nature of subject matter are the main deterrents to the outsourcing of
legal services.

# If all above is not enough, the companies which are outsourcing non-core processes from third party
service providers are literally placing their fate in the hands of another company, which appears to be a
normal setback of BPO at the outset.

# Some companies which jumped BPO market in India are now looking to sell their assets being unable
to scale operations up to the required level. As per the NASSCOM report, recently there were about 200
Indian companies offering BPO and related services looking for buyers.

# Companies rush into BPO market without understanding the kind of operational and marketing issues
they would have to cope with, and the kind of gestation periods to be expected before profits can start
flowing in consistently. As a result, many facilities that were set up are lying vacant, and the failed
enterprises have to either close down or get acquired, as they have neither funds nor clients.

# The rapid growth of India's ITES-BPO industry, has not been taken too well in developed countries
from where jobs are coming to India. Recently, in the US, bills have been tabled in five states namely;
New Jersey, Maryland, Connecticut, Washington and Missouri that sought to ban the transfer of state
data processing contracts to developing nations. In the UK, three of the country's biggest trade unions
have come together to fight the loss of jobs to India.

MERGERS AND ACQUISITIONS IN THE BPO SECTOR

M&A in the BPO sector in India are not confined to Indian companies alone. BPO operations in India
that belong to multinationals are also changing hands. Last year British Airways PLC (BA) divested
about 70 percent of the equity in WNS to Warburg Pincus, a New York-based private equity investor.
WNS was set up in 1996 as a captive back-office for BA. WNS is now positioned as an independent
third-party services provider, but still gets about 35 percent of its revenues from BA.
In India, M&A in BPO sector are proceeding on two fronts. Even as some Indian BPO companies are
getting acquired, other Indian BPO companies are acquiring operations both in India and abroad. HCL
Technologies acquired over a year ago a 90 percent stake in the Apollo Contact Center in Belfast of BT
Group. The deal gave HCL a beachhead in the European market, and helped it bag business from the
London-based BT, including a $160 million order for setting up a BPO operation for BT in India.

Trans Works Information Services Pvt. Ltd., a Mumbai based BPO company, was acquired recently by
the Aditya Birla Group, a large Mumbai based business conglomerate.

Customer Asset, a Bangalore based BPO company, was acquired a year back by ICICI OneSource.
Customer Asset had about 750 employees and operated a 350 seat call center in Bangalore.

Key buyers of BPO companies in India are software services companies which want to position
themselves as vendors of a broad portfolio of services, including BPO, to their current customers. For
example Wipro, a Bangalore-based software and services company, acquired Spectramind eServices, a
CRM (customer relationship management) services company in Delhi a few months back.

SWOT Analysis for BPO Services In India

Comparing India with other BPO Destinations (Why India?)

The abundant skilled manpower has made India a target destination for multinationals to back end their
operations in India. India ranks high in areas such as qualifications, capabilities, quality of work,
linguistic capabilities and work ethics, and thus is ahead of competitors such as China, Philippines,
Ireland, Australia, Canada etc. Indian companies have unique capabilities and systems to set, measure
and monitor quality targets.

In specific BPO categories, Indian centers have achieved higher productivity levels-for example, the
number of transactions per hour for back office processing, than their Western counterparts. Also, India
is able to offer a 24x7 service and reduction in turnaround times by leveraging time zone differences.
India's unique geographic positioning makes this possible. Many state governments in India are offering
incentives and infrastructure to set up IT enabled services.

About 100,000 engineers graduate from India every year. Many of these engineers are employed with
call centers for troubleshooting and providing technical support at salaries that are dramatically lower
compared to the pay scales in the US. The average monthly salary in India is $400-700 compared to
$2,700-2,800 in the US.

STRENGTHS

1. Solid history in software development.

2. English proficiency
3.Government Support
4.Cost advantage
5.Strong tertiary education
6.Process quality focus
7.Skilled workforce
8.Expertise in new technologies
9.Entrepreneurship
10.Reasonable technical innovations
11.Reverse brain drain
12.Existing long term relationships
13.Creation of global brands
14.BPO & Call center offerings
15.Expansion of existing relationships
16.Chinese domestic & export market
17. Leverage relationships in West to access APAC/Middle East markets
18.Indian domestic-market growth

WEAKNESS

1.Positioning & Brand management

2.Infrastructure
3.Cultural differences
4.Sales & marketing
5.Leverage expertise for higher-value education
6.Business process experience
7.Distance from US
8.Fear/Uncertainty from Pakistan
9.Legal system
10.Poor globalization skills
11.Internal competition for resources
12.Over-promise / Under-deliver
13.Regional geopolitical uncertainty
14Rising labor costs
15.Competition from other countries
16.Sometime blinding nationalism
17.Government blocking reform/deals
18.Corruption/piracy/trust
19.Political & religious instability –war

OPPORTUNITY

1.

CONCLUSION

As per the estimates, India is poised to become a No. 1 BPO destination in the Asia-Pacific
overwhelming all the so called odds. Particularly, when it comes to ITES-BPO tier, with a current base
of 96,000 call centre seats, India is supposed to grow by 85 per cent to reach a capacity of 1,77,000 seats
over the next 12 months to become the biggest BPO hub in the region. Newspaper and magazine articles
and analysts' briefings throughout the globe are reporting the projected strong growth of the BPO market
in India. Thus, let us keep our fingures crossed and see that how does the BPO strategy instill perfection
into the Indian corporates to help them achieve efficiency in their core businesses and reduce costs
related to the non-core business activities, and further, how does it add new hue to various professions
involved in this paparazzi to make the BPO a fertile business strategy

DAWN OF BPO

The sustenance and success of any business is determined by its cost competitiveness and time-to-
market window. Companies across the world are constantly striving to devise business models that will
enhance the efficiency of these two critical parameters. The origin of the outsourcing business model is
a culmination to this effort. Companies identified outsourcing a part of their business functions to
cheaper locations overseas that have an abundance of skilled labor and necessary infrastructure, aided in
significantly reducing their operational expenses and in improving their return on investments. It also
resulted in a faster turn around time as the outsourcing arrangement resulted in a round-the-clock, 24/7
business model. India, China, Malaysia, The Philippines, Russia, Eastern European countries and a few
Latin American countries were identified as ideal targets for outsourcing locations by more developed
economies. India with its wealth of English speaking, skilled and talented unemployed youth became the
most sought after destination for business process outsourcing during the mid and late 90’s when the
outsourcing industry was gaining pace globally.
 GRADUATING TO KPO

While the BPO industry in India was flourishing, the dusk of 2005 saw the emergence of a new
spectrum of outsourcing services termed knowledge process outsourcing (KPO). Considered to be the
next tsunami of outsourcing services, countries across the globe were preparing themselves to ride the
KPO tide; India being no exception. Knowledge process outsourcing as the name indicates is the
outsourcing of specialized services that warrant the expertise of highly skilled persons. It includes
engineering, legal, medical, banking, market research and consulting services. Unlike BPOs that could
employ people with a basic education base and good English speaking skills, KPO requires the services
of employees with qualification and experience in that particular area.

KPO – TRIGGERING THE NEXT BULL RIDE IN THE INDIAN

ECONOMY!

Numerous studies on the global outsourcing industry indicate that while BPOs shall enjoy a cumulative
annual growth rate (CAGR) of around 25 percent in the next 4-5 years, KPOs, which are currently in a
nascent stage, are expected to grow at a CAGR of over 45 percent during the same period. Research also
indicates that the global KPO industry is expected to be worth over $15 billion by 2009, with India
expected to account for nearly 70 percent of this revenue. This shows the enormous potential the KPO
industry holds for the future of the Indian economy. The emergence of numerous R&D outsourced
centers, business research and consulting firms, firms offering legal services to overseas attorneys and
clients and data analytics centers all indicate the propitious growth of the KPO sector in India in the
ensuing years.
The immense growth estimated for the KPO industry in India indicates the large volumes of
employment opportunities that the educated mass of the country could foresee. It also portends the
growth in infrastructure and increase in FDI that the country will enjoy in the coming years. The
continuing boom in the Indian BPO sector is a promising bellwether to what lies ahead for the KPO
sector. It is not an exaggeration to believe that India will surely emerge among the global super powers
through the growth of its services sector in the next five to ten years. The next few years could well be
the golden period of the Indian economy, thanks to the outsourcing boost! Benefits of KPO
(Knowledge Process Outsourcing)

Why should your company invest in knowledge process outsourcing? The fundamentals of outsourcing
apply to knowledge based services as well. A shortage of trained professionals shoots up the cost of
maintaining such services in the host country when the same job can be done with similar precision and
quality and at less than half the cost abroad.

WHAT IS KPO?

It is being claimed that KPO is one step extension of Business Processing Outsourcing (BPO) because
BPO Industry is shaping into Knowledge Process Outsourcing because of its favorable advantageous
and future scope. But, let us not treat it only a 'B' replaced by a 'K'. In fact, Knowledge process can be
defined as high added value processes chain where the achievement of objectives is highly dependent on
the skills, domain knowledge and experience of the people carrying out the activity. And when this
activity gets outsourced a new business activity emerges, which is generally known as Knowledge
Process Outsourcing.

Knowledge Processing Outsourcing (popularly known as a KPO), calls for the application of specialized
domain pertinent knowledge of a high level. The KPO typically involves a component of Business
Processing Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing
(APO). KPO business entities provide typical domain-based processes, advanced analytical skills and
business expertise, rather than just process expertise. KPO Industry is handling more amount of high
skilled work other than the BPO Industry. While KPO derives its strength from the depth of knowledge,
experience and judgment factor; BPO in contrast is more about size, volume and efficiency.

In fact, it is the evolution and maturity of the Indian BPO sector that has given rise to yet another wave
in the global outsourcing scenario: KPO or Knowledge Process Outsourcing. The success achieved by
many overseas companies in outsourcing business process operations to India has encouraged many of
the said companies to start outsourcing their high-end knowledge work as well. Cost savings,
operational efficiencies, availability of and access to a highly skilled and talented workforce and
improved quality are all underlying expectations in outsourcing high-end processes to India

The future of KPO has a high potential as it is not restricted to only Information Technology (IT) or
Information Technology Enabled Services (ITES) sectors and includes other sectors like Legal
Processes, Intellectual Property and Patent related services, Engineering Services, Web Development
application, CAD/CAM Applications, Business Research and Analytics, Legal Research, Clinical
Research, Publishing, Market Research (Market research KPO ) etc.

In today's competitive environment, focus is to concentrate on core specialization and core-competency

areas and outsource the rest of the activities. Many companies and organizations have come to realize
that by outsourcing non core activities, not only cost are minimized and efficiencies improved but the
total business improves because the focus shifts to the key growth areas of the business activity.
 SCOPE AND FUTURE OF KPO

According to a report of National Association of Software and Services Companies (NASSCOM), the
Indian chamber of commerce that serves as an interface to the Indian Software industry, Knowledge
Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12
billion would be outsourced to India. Another report predicts that India will capture more than 70
percent of the KPO sector by 2010. Apart from India, countries such as Russia, China, the Czech
Republic, Ireland, and Israel are also expected to join the KPO industry.

According to a recent study by “Evalueserve, a Gurgaon based outsourcing company having service
chart for global world”, the global KPO market is expected to grow at a cumulative annual growth rate
(CAGR) of 46 per cent, from $1.2 billion in 2003 to $17 billion in 2010. Compare this with the
prediction for the low-end outsourcing services market. This is expected to have a CAGR of 26 per cent,
from $ 7.7 billion to $39.8 billion in the same period.

Evalueserve says India provided $3.5 billion of BPO and KPO (but non-IT) services in 2003 and is
expected to grow at a CAGR of 36 per cent during 2004 to 2010. Hence, it is likely to earn $30 billion in
2010 by providing these services.

Says country general manager, Kelly Services, Achal Khanna “India still maintains the competitive
advantage for providing, the combination of the most cost-effective and high quality manpower- this is
India's strength in the off-shoring business”.

In the future, it is envisaged that KPO has a high potential as it is not restricted only to Information
Technology (IT) or Information Technology Enabled Services (ITES) sectors, and includes other sectors
like Intellectual Property related services, Business Research and Analytics, Legal Research, Clinical
Research, Publishing, Market Research (Market research KPO), etc.

"Over the past year or two, the outsourcing industry has been throwing up jobs for Doctors, Engineers,
CAs, Architects," says Jacob William of the Bangalore-based Outsource2India, which employs 500
people and offers services in the big-buzz, big-bucks area of knowledge process outsourcing. "Unlike
the first wave which was more about entering data and answering phone calls, these jobs involve skill
and expertise."

Also, of course, the talent is much more affordable. "Law firms in the US charge an average of $400-
450 per hour, and we do the same work for $75 to $100 an hour" says Kamlani" who is an outsourcing
provider in the same area.

In the Indian context, KPO salaries could be 25-50 per cent higher than those offered to the same
domain experts such as Engineer, Doctor, CA, Lawyer, Architect, Biotechnologist, Economist,
Statistician and MBAs, it said.
In its annual publication Strategic Review 2005, Nasscom has said the high-end activity of the BPO
industry—the KPO or knowledge process outsourcing could be worth $15.5 billion by 2010.

According to earlier estimates, the BPO industry itself was expected to be about $20bn by 2008, hence a
very significant portion of the sector—in excess of 50% is now projected to be knowledge based. This
represents significant metamorphosis of call centre sector business to completely different model.
Interestingly, Sunil Mehta, Nasscom vice-president research, distances himself from the estimates.

The projections are based on a white paper released by Evalueserve. The paper cites reasons for a
possible KPO boom. It says higher savings by outsourcing knowledge based activities combined with
the scarcity of specialized talent in developed countries could lead to growth in the KPO sector.
Billing rates for KPO are higher at $30-45 per hour compared to just $10-14 in the BPO business.
However, the paper also warns of several challenges like higher quality standards, greater investments
and inadequate talent.

The study estimates that while the compounded growth rate of BPO till 2010 would be just 26% KPO is
expected to be grow at almost 46%.

OVERVIEW

Outsourcing – this is by large the most uttered word today, right from global corporates during their
business planning to being the butt of school and household jokes. The rapid proliferation of
globalization and liberalization has revolutionalized global business as it is conducted today. Regional
market boundaries have been erased, compelling all closed economies to open their markets for global
trade and business. This being viewed as a very healthy sign for the global economy has paved way for
the conception and implementation of new business models such as outsourcing. Knowledge Process
Outsourcing (KPO) is one step ahead of Business Process Outsourcing (BPO). It started emerging in
India around the turn of the century, when the global industries realized that apart from software
development and technical support, knowledge work could also be outsourced. It involves transfer of
business processes to other geographic locations; specialized domain specific knowledge and business
expertise of a higher level rather than just process expertise.

BENEFITS OF KPO

Standardized technical education is now widely available to all in the developing countries. This trained
manpower is also accessible at very low cost as well. It therefore makes sense to utilize their services.

Outsourcing to KPO firms can provide the following benefits:

• Valuable cost savings that can be utilized elsewhere.

• Standard operational efficiency.
• Trained professionals at work.
 • Savings in time and management energy for maintaining in house services.
• Increase in profits.
• Option to recruit a larger work force without raising costs.

KPO SKILLS DEFINED

The following skills form the basis of knowledge-based firms and their workforce.

• Analyzing data and information to produce meaningful documents.

• Researching information from various sources.
• Converting raw technical data into presentable documents.
• Use of high levels of conceptualization and theoretical knowledge.
• Proficiency with various advanced software and hardware devices.
• Maintaining workflow, meeting deadlines, and applying quality controls.

WHAT KPO CAN DELIVER TO YOU?

KPO’s work in close association with the client and provide services that are predefined in terms of
quality and standard of work. With a good firm you get the following:

• Good quality work.

• Lower costs.
• On time delivery of services.
• Uninterrupted services.

KPO IN INDIA

After the great success of Business Process Outsourcing (BPO) in India, it is now the KPO turn to make
its presence felt. BPO success in India is encouraging overseas companies eyeing Indian market for
outsourcing their high-tech knowledge based jobs. Operational cost saving, pool of talented workforce,
infrastructure improvement and favorable government policies are the major factors, which are
responsible for the Knowledge Process Outsourcing (KPO) in India.

According to a report by Global Sourcing Now, the Global Knowledge Process Outsourcing industry
(KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion (almost 70%) would be
outsourced to India alone. Indian KPO sector has already taken steps in employing highly educated and
talented people and number of KPO professionals is expected to cross more than 250,000 by 2010
compared to the current figure of 25,000 employees. The graph on the right suggests that Expected
Growth in Global BPO and KPO Markets (2003-2010).

WHAT MAKES INDIA A PREFFERED DESTINATION FOR KPO?

The Indian workforce is highly literate and they are well-versed with English language, thanks to Indian
educational system. Every year India is producing hundreds and thousands of English speaking, trained
professionals in the fields of IT, Engineering, Education, Law, Science, Finance, Architecture and other
competitive fields.

The Indian advantage primarily lies in the educational and technical qualifications of its workforce. A
survey conducted in 2002 by NASSCOM (National Association of Software and Service Companies)
showed that an Indian ITES-BPO center in banking and financial service sector, performs better than US
and UK based BPO centers in various categories like the total number of transaction, total number of
correct transactions, total customer satisfaction, number of transaction per hour and the average speed of
answers

The Indian advantage primarily lies in the educational and technical qualifications of its workforce. A
survey conducted in 2002 by NASSCOM (National Association of Software and Service Companies)
showed that an Indian ITES-BPO center in banking and financial service sector, performs better than US
and UK based BPO centers in various categories like the total number of transaction, total number of
correct transactions, total customer satisfaction, number of transaction per hour and the average speed of
answers
 CLASSIFICATION OF KPO (KNOWLEDGE PROCESS OUTSOURCING) BY
SEGMENTS

Legal Services: These include drafting contracts, reviewing transactional & litigation documents,
research memoranda & due diligence reports, negotiations, prosecuting patents, etc. Some of the KPOs
working in this area are Wipro, Pangea3, Atlas Legal, Manthan Services, etc.

Financial Services: These include financial data mining, insurance, risk assessment, equity research,
underwriting, fund management, actuarial analytics, debt collection and recovery, corporate & market
research, etc. Some of the KPOs working in this area are Smart Analyst, Office Tiger, The Smart Cube.

Engineering and R&D: These include finite analysis, 3D conversion and modeling, technical
specifications for tenders, value engineering, computational fluid dynamics analysis, etc. Some of the
areas and KPOs working in these areas are:

1.Telecom R&D: Qualcomm, Nokia, Lucent Technologies, Alcatel, Ericsson.

2.Software R&D: Phillips, Microsoft, Baan, Adobe, SAP Labs, BMC Software, IBM, Yahoo, HP, Sun
MicrosysteAuto/Engineeringms, Google.
3.Auto/Engineering: Neilsoft, Delphi, General Motors, DaimlerChrysler, Plexion, Quest, Whirlpool.

Market Research and Analytics: These include services like writing & editing, secondary & primary
research, formatting client reports, conversion of findings to knowledge, etc. Some of the KPOs working
in this area are marketRx, Pipal Research, Evalueserve, Inductis, OfficeTiger, Copal Partners, CRISIL,
etc.

Writing and Content Development: These include services like content delivery, digitization of
content, data enrichment & warehousing, pre-press work, proofreading, template designing, text
composition, etc.

Pharmaceutical and Biotech R&D: These include clinical research, research & development, drug
discovery, etc. Some of the KPOs working in this area are Bayer, GlaxoSmithKline, Biocon, Eli Lilly,
AstraZeneca, Dr. Path Labs, etc.

Healthcare Services: These include diagnostic, genetic profiling, oncology tests, HIV & allergy, etc.
Some of the KPOs working in this area are Clingene, Avesthagen, Ranbaxy.

Education and Training: These include private tutorials, curriculum design, K-12, teaching, content
development, etc.

SWOT ANALYSIS FOR KPO (KNOWLEDGE PROCESS

OUTSOURCING)

STRENGTHS

• Large talented pool

• Quality IT training
• Low labour costs
• Success of BPOs
• Good knowledge of project management skills
• Supportive government policies
• Many new areas of specialization are being covered making KPO sector spreading its wings
• Consideration to quality standards like ISO 900x and Six Sigma
• Billing rates are lower as compared to billing rates in other countries
WEAKNESS

• Immoral and unethical practices related to handling of crucial data

• Rising wages

• The inability to uniformly develop and provide infrastructural requirements as real estate prices
are rising in major cities.

• Inadequate Intellectual Property Rights (IPR) protection regime in India

• Billing rates are higher as compared to billing rates in BPOs

OPPORTUNITIES

• Increasing domain expertise

• More areas of specialization can be added to KPOs
• Ample opportunities for SMEs

THREATS

• Non retention of talent

• Expected labour supply gap as jobs grow faster than the workforce.

What high-end services can be outsourced to the Indian KPO sector?

Here are some KPO services that can be outsourced to India:-

1. Research & Development

2. Business and Technical Analysis

3. Learning Solutions

4. Animation & Design

5. Business & Market Research

6. Pharmaceuticals and Biotechnology

7. Medical Services

8. Writing & Content Development

9. Legal Services

10. Intellectual Property (IP) Research

11. Data Analytics

12. Network Management

13. Training & Consultancy

THE CHALLENGES IN KPO

KPO delivers high value to organizations by providing domain-based processes and business expertise
rather than just process expertise. These processes demand advanced analytical and specialized skill of
knowledge workers that have domain experience to their credit. Therefore outsourcing of knowledge
processes face more challenges than BPO (Business Process Outsourcing). Some of the challenges
involved in KPO will be maintaining higher quality standards, investment in KPO infrastructure, the
lack of talent pool, requirement of higher level of control, confidentiality and enhanced risk
management.

Comparing these challenges with the Indian IT and ITES service providers, it is not surprising that India
has been ranked the most preferred KPO destination owing to the country's large talent pool, quality IT
training, friendly government policies and low labor costs.

India is well equipped to meet this emerging sector's challenges and all set to be the global KPO hub

EXTENDING THE ROLE OF GOVERNMENT AS FACIITATOR

It was also felt that the Government had to step up its role in the IT-BPO industries, as a facilitator and a
catalyst, especially for growing the Indian domestic market. While the sectors had thrived until now in
an environment marked by little Government involvement, lack of regulatory constraints and openness,
going forward, a helping hand from the Union and State Governments would be beneficial.

The PM pointed out that the Government had already contributed in a positive way. India was among
the first few countries to put in place the legal infrastructure for electronic transactions and e-commerce.
It had already amended the Information Technology Act to keep pace with changes in technology.
Furthermore, the policy framework would continue to be supportive and enabling, rather than a barrier
to progress and innovation.
Recognizing the growing importance of the business process outsourcing, the Government of India has
introduced various policy concessions and initiatives to accelerate the growth of the IT-enabled
outsourcing market. Spearheaded by associations such as National Association of Software and Service
Companies (NASSCOM), the Indian software and services industry has also taken various steps to
ensure that India becomes the global hub for IT-enabled outsourcing in the future. Some of the steps
take by the Government and industry for the ITES/BPO sectors are as follows:
In May 2002, the Government of India has accepted the recommendations of NASSCOM and removed
certain procedural bottlenecks that were hampering the growth of the Indian call center industry.
The Government of India (Central Board of Direct Taxes - CBDT) has allowed total income tax
exemption on the export of IT enabled outsourcing services under Sections 10A/10B of the Income Tax
Act, 1961. These IT enabled products or services are:-

i. Back-office Operations
ii. Call Centres
iii. Content Development or Animation
iv. Data Processing
v. Engineering & Design services
vi. Geographic Information System Services
vii. Human Resource Services
viii. Insurance Claim Processing
ix. Legal Database
x. Medical Transcription
xi. Payroll
xii. Remote Maintenance
xiii. Revenue Accounting
xiv. Support Centres; and
xv. Web-site services

Foreign Direct Investment (FDI) for 100 percent of the equity has been permitted in BPO companies.

Permission of duty-free imports of capital goods (under the Export Promotion of Capital Goods scheme)
for BPO companies.

The Government has promoted several Software Technology Parks (STPs) which provide ready-to-plug
IT and telecom infrastructure. STPs also allow single-window clearance for all regulatory compliance
issues. Currently, several STPs have been established across India covering most of the major
towns/cities

COMPARISON OF OPPORTUNITY IN BPO AND KPPO MARKETS

Low-end outsourcing services have an expected Cumulative Annual Growth Rate (CAGR) of 26% by
2010. In contrast, the global KPO market is poised for an expected CAGR of 46% by 2010. The
following figure demonstrates the expected growth in the BPO and KPO markets over the next seven
years.
 POINT WISE DIFFERENCE BETWEEN BPO AND KPO

BPO
• It provides services like customer
care, technical support through
voice processes, tele-marketing,
sales, etc.
• Low end services
• Process expertise
• Pre-defined processes
• It employees not- so- qualified
workers as it focuses on
communication skills
KPO
• KPO provides in-depth knowledge,
expertise and analysis on complex
areas like Legal Services, Business
& Market Research, etc.
• High end services
• Knowledge expertise
• Requires application, understanding
of business and analytical bent of
mind
• It involves skill and expertise of
knowledge workers with excellent
educational background.

CONCLUSION ON KPO v/s BPO

The dividing line between KPO and BPO is still very faded; some experts say that KPO is not different
from BPO. It is only a kind of BPO. Says Karnik, "Broadly, KPO is a subset of BPO. It just occupies the
higher end of the BPO spectrum."
In fact, KPO owes its existence to BPO. It is its natural progression. After reaping the benefits of
outsourcing low-end processes to India, foreign companies are now trying their hands at outsourcing
high-end processes to the country.
"KPO is the next step in the outsourcing pyramid. For instance, in a financial service BPO, data entry of
invoices has been around for some time. But given the value-for-money Indian BPOs have shown,
international companies are thinking, why not broaden the scope to include financial analysis?"
As in the words of Pavan Bagai, vice president EXL Service –
"Imagine unsorted data going through a black box and coming out as useful information. In KPOs the
black box is your mind. There is no pre-defined process to reach a conclusion." In BPOs there is a pre-
defined way to solve a problem. BPOs will normally include transaction processing, setting up a bank
account, selling an insurance policy, technical support, voice and email-based support.
The myth that Indian companies can only provide "software coolies" is soon changing to the reality of
Indian companies being capable of almost anything, even rocket science!
India has a large pool of knowledge workers in various sectors ranging from Pharmacy, Medicine, Law,
Biotechnology, Education & Training, Engineering, Analytics, Design & Animation, Research &
Development, Paralegal Content and even Intelligence services that can be put to use in a KPO.

Low-end outsourcing services have an expected Cumulative Annual Growth Rate (CAGR) of 26% by
2010. In contrast, the global KPO market is poised for an expected CAGR of 46% by 2010. The
following figure demonstrates the expected growth in the BPO and KPO markets over the next seven
years.It’s very evident from the about discussion that the KPOs are the next big thing about to happen in
India.

But the way to becoming a strong KPO power is not very smooth As KPO delivers high value to
organizations by providing domain-based processes and business expertise rather than just process
expertise. These processes demand advanced analytical and specialized skill of knowledge workers that
have domain experience to their credit. Therefore outsourcing of knowledge processes face more
challenges than BPO (Business Process Outsourcing).

Some of the challenges involved in KPO will be maintaining higher quality standards, investment in
KPO infrastructure, the lack of talent pool, requirement of higher level of control, confidentiality and
enhanced risk management.

Comparing these challenges with the Indian IT and ITES service providers, it is not surprising that India
has been ranked the most preferred KPO destination owing to the country's large talent pool, quality IT
training, friendly government policies and low labor costs