KPO: The next level of outsourcing

Knowledge Process Outsourcing (KPO) is the latest outsourcing buzz to hit India after the success of Business Process Outsourcing (BPO). BPO industry gave many youths in India an employment with huge paychecks, which was beyond belief for a youth who had just graduated. The BPO companies which have grown tremendously are these days sprouting all over the country.
“With BPO revolution reaching its limits, its time for KPOs to be the next big thing in the outsourcing sector”, says Sameer Walia, Managing Director, The Smart Cube, one of the earliest Indian companies in the business. “The BPO sector has been always looked at by all as a quick-money area. Even educated people like IT graduates move to this sector just because of the monetary benefits”, he said while speaking to the media.
BPO deals with work which does not require high skilled workers; hence they mostly employ graduates, who join the industry as a fresher. It mainly deals with customer care and technical support through communication, transaction processing, telemarketing, etc KPO on the other hand, requires high-skilled staff, because the processes in KPO are highly valued and more complex than BPO.

BPO industry which has grown by leaps and bounds in India has given a lead for KPO industry in our country. KPO is basically the high-end activity of the BPO industry and it is estimated to grow significantly in the next few years.

The growth story

According to a report by business research firm GlobalSourcingNow, the Global Knowledge Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion would be outsourced to India. In addition Indian KPO sector is also expected to employ more than 250,000 KPO professionals, compared with the current figure of 25,000 employees.

A report by Evalueserve, a business research KPO firm, also predicts that India will capture more than 70 percent of the KPO outsourcing 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.

“This huge growth in the global KPO space would be driven by the vast pool of educated and experienced professionals in countries like India, China, Russia, Poland, the Philippines, Hungary and many republics from the erstwhile Soviet Union”, California-based Evalueserve's Chairman and Co-founder Alok Aggarwal said. Center
“It is quite likely that companies both with their own captives and those using third-party vendors may use a ‘hub and spoke’ model in which a provider in India may constitute the ‘center’ whereas other units in the world may provide appropriate ‘spokes’”, said Alok.
Advantage India

A study conducted by Kelly Services, the global provider of staffing services and solutions and Asset Management, an independent research company states that India is the most preferred destination for KPO. Thanks to its competitive salaries, proficiency in English, and large number of quality professionals.

Achal Khanna, Country General Manager, Kelly Services India, says, “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.”

Countries like India and the Philippines are front runners in providing KPO services, because there is availability of large numbers of skilled staff working for less payment compared to that of the developed world. KPO requires advanced analysis and communication, so only those who have specific higher education and language skills are recruited to join this industry. PhDs, MBAs, engineers, doctors, lawyers, writers, designers, web designers and other specialists tend to be required by this industry.
According to Sameer Walia, “There is a vast pool of people who work for us, including MBAs, chartered accountants, economists and engineers. In The Smart Cube, employees get to work on high-end research for leading clients. It is comparable to the work done at leading international consulting companies”.
“KPO is offshoring of knowledge intensive business processes that require specialised domain expertise. It involves high-end processes like valuation, research, investment researches, patent filing, legal and insurance claim, etc. For such tasks KPO requires people with a good educational background. The difference is that it is done out of India. Those with good education and analytical abilities can look forward to a fantastic career in KPOs”, Sameer said while speaking to the media.
Indian KPO industry has started focusing on fields which are very complex, some of these fields include intellectual property or patent research, content development, research and development in pharmaceuticals and biotechnology, market research, equity research, data research, database creation, analytical services, finance modeling, design and development in automotive and aerospace industries, animation and simulation, medical content and services, remote education and e-learning, publishing, clinical research, supply chain management and legal support.
According to Alok Aggarwal “There are already 12 investment banks of the world doing high-end analysis work in India.”
Challenges ahead

Though KPO is growing at a phenomenal rate, it faces many challenges on the way ahead in its growth trajectory. Because KPO involves processes which are more complicated and has more value than the BPO processes, it tends to face more challenges than BPO.

Alok Aggarwal points out some challenges faced by the KPO industry, “Lack of trained people and lack of willingness of companies to train their people, to invest in training. This is a fundamental difference between Information Technology companies and KPO companies. Organisations like Infosys and Wipro have training facilities on campuses.

The business of KPO is all about knowledge. It’s the responsibility of companies to train their people but young people should also take this upon themselves and not hop jobs. Young professionals job-hop, so they have not really learnt much. They drive themselves out of the market because they haven’t gained knowledge”, he said.

Achal Khanna says, “For India to maintain her advantage of a cost-effective and high quality human resource, there is a need for more professionals with relevant training to keep pace with the growth. In addition, our KPO study found that Indian salaries are experiencing the highest growth in the world, which will lead to a disadvantage for India as an attractive off-shoring destination, if not monitored."

Some of the other Challenges which the KPO industry face, will be maintaining higher quality standards that can adhere to the standards required for doing high-end work in complex fields. The infrastructure required by the KPO firms requires a lot of investment. Confidentiality of the data being processed is a major challenge especially after the incidents of BPO frauds; KPO needs to have strict guidelines in place to avoid leakage of sensitive data.