Bpo & Kpo Sector Marketing)

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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 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. CONTENTS  BPO Overview What is BPO BPO in India The growth of strategic outsourcing Contribution of BPO to national economy Expanding the domestic market India rules the BPO roost Threats to the BPO sector M&A in BPO sector BPO: SWOT Analysis Conclusion for BPO sector Dawn of BPO Graduating to KPO KPO: Triggering the next bull ride in Indian Economy What is KPO? Scope and future of KPO KPO: Overview Benefits of KPO KPO: Skills defined What KPO can deliver to you? KPO in India India: Preferred destination for KPO Classification of KPO by segment KPO: SWOT Analysis 26. 27. 28. 29 30. 31. High end Services outsourced to Indian KPO sector Challenges in KPO Extending the role of govt. as facilitator KPO vs BPO Difference between BPO &KPO 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-tomarket 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 $400450 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 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 estate prices 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 • KPO 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 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 predefined 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