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Web Exclusive | KPO industry to grow globally to $17 bn in 2010

Web Exclusive | KPO industry to grow globally to $17 bn in 2010
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First Published: Thu, Mar 27 2008. 06 54 PM IST

Anil Kaul, founder & CEO, AbsolutData Research and Analytics
Anil Kaul, founder & CEO, AbsolutData Research and Analytics
Updated: Thu, Mar 27 2008. 06 54 PM IST
New Delhi: As India becomes a hub for multinationals to set up back-end offices, armed with a young, agile and cheap work force, job opportunities have soared in the IT sector, be it in the already established BPOs, (Business Process Outsourcing) fast emerging KPOs (Knowledge Process Outsourcing) or the niche RPOs (Research Process Outsourcing) and APOs (Analysis Process Outsourcing). Nishu Kakkar meets Anil Kaul, founder & CEO, AbsolutData Management, a company that provides consulting-oriented Advanced Analytics and Market Research services to organizations around the world. Excerpts from a free wheeling chat
Anil Kaul, founder & CEO, AbsolutData Research and Analytics
Q: The average person is still unsure of what a BPO is and now you have KPOs, RPOs and APOs joining the list. What are their distinguishing features?
A: Basically there are two big categories - BPO and KPO. Processes like RPO and APO falls under the KPO umbrella. Whilst the former is a straightforward process restricted to following instructions, the latter focuses on outsourcing of a particular project to maintain expertise.
In terms of complexity of hierarchy, at the bottom is the BPO which is the simplest. Following that is the KPO family where you deliver a service by applying knowledge relating to multiple levels above the support function.
KPO typically requires advanced skills, judgment, talent and hard-core analysis. It calls for awareness of statistical programming that helps break monotony of BPO processes, as each task here is different from the other. Processes like analytical research requires data, calling for analysis and presentation of the same in a cogent concise manner.
Q: Is it safe to deduce that it is the evolution and maturity of the BPO that has led to the birth of the KPO?
A: Indeed. KPO undoubtedly is a logical progression or an extension of a BPO. There have been numerous ways in which BPOs have helped KPOs grow. The former succeeded in generating a level of confidence about the capability of Indians to take up crucial projects. This made it easier for establishing India as an ideal destination for outsourcing work. It also laid the foundation by installing infrastructure required for delivering services out of India, which KPOs are today benefiting from. However, BPOs are considered as lower-end value adds whilst KPOs are perceived to be higher-end.
Q: Lower wages and overheads – are these chief reasons for India emerging as a foremost outsourcing destination?
A: Attributing India’s cost-effectiveness as the only reason that makes it eligible for being a mega outsourcing destination would not be fair. The significant ‘other dimension’ is that we have a rich pool of intellectual capital.
KPOs dip into that pool of talent since their tasks have a certain complexity. Another interesting aspect that empowers India to top the list is the presence of NRIs here. When you have a process or KPO-related work outsourced to India, two-things come in. US-based KPOs have seen Indians working and delivering unmatched results. This gives them confidence about India’s expertise. Also many of the companies that are outsourcing work to India are headed/ owned by Indians. In my estimation, the estimate of work that comes from this source to an Indian KPO could be as high as 70%.
Q: According to Nasscom, India generates 70% of world’s outsourcing business. Which countries make up for the remainder 30%? Also, should we be worried about China’s growing prowess in acquiring English and IT skills?
A: China, Russia, Eastern Europe make up the bulk of the balance 30%. We certainly need to watch China closely. Once they gain mastery over the Queen’s English, we could be in for competition. But since they are relative late starters, we can be smarter here and develop newer areas/ add ons that will help prospective clients to continue choosing us over our other competitors
Q: It is been said that only non-core activities should be outsourced and not core-competency areas. Why?
A: Anything that does not require face-t0-face contact can be outsourced to India. Processes that require market knowledge and are perceived as ‘non outsourcable’ have delivered results after outsourcing. Presently, processes falling in the KPO sector are focused only on analytics and data. We in India can deliver similar quality which the US claims to produce.
Dearth of specialized skills could be a reason for companies to hold back before choosing India as a destination to outsource to. We have clients who are looking for capital market analytics but there is not a single company that offers such skills. These are things that cannot be outsourced. In coming five years, there is a possibility that India might overcome this barrier but presently, this is a bias that we may have to live with.
KPO market is driven by projects that demand market analysis viz. understanding market situation, customer, brand, environment and we have delivered on all these scores.
Q: Tell us something about your client/s profile
A: Our agreements don’t allow us to disclose names and details of our clients. We have five verticals across which we service clients in the area of financial services, retail, FMCG, technology and consulting. All of them are part of Fortune 500. Financial services remain at the forefront of outsourcing as they generate large volumes of business. Even from a BPO perspective, these are the first to drive traffic.
Q: Nasscom is upbeat on growth of KPO industry, pegging it at an ambitious cumulative annual growth rate (CAGR) of 46%, up from $1.2 billion in 2003 to $17 billion in 2010. What are the factors that fuel this growth?
A: The quality of services offered by the KPO sector will drive its growth. Likewise, there is a lot of scope across FMCG and retail sectors but companies aren’t ready to take a chance. There are 40-50 companies in retail sector that are not outsourcing but gradually over time they will as they see benefits roll in. Also simultaneously one is seeing India honing existing talent. Once that specialized edge is acquired, it will be able to position itself with far greater confidence in the global market.
Infrastructure, training, specialized courses that cater to the needs of the KPO sector are in the pipeline. Also, geographical expansion will play a role. Presently, roots of KPO sector reside in the US but gradually companies are entering Europe, Southeast Asia and South-America. For them India is an ideal choice for outsourcing since their own countries lack the resources and skill-sets.
Q: How aggressive are KPOs in moving towards Tier-I and II cities as opposed to metros and what are the employment opportunities?
Certainty there is a lot of opportunity out there. KPO sector offers opportunities for a wide set of skills - analytics outsourcing, legal outsourcing, engineering outsourcing for economists, lawyers and engineers. It is specialized skills-driven people who will get absorbed here.
Also value delivered in KPO sector is much higher than BPO. We can easily generate $30 per hour because in US the cost for similar work would be $50-60. There are assignments for which we are ready to pay higher premium for getting work done, as there is shortage of experts on that front. This is one of the critical reasons that has led to a raise in billing rates per hour.
Q: Figures reveal law firms based in US charging an average of $400-450 per hour against $75 to 100 in India? Is this not exploitation under the guise of employment?
To an extent yes but not 100%. It is because people who charge $400 in US for a process, Indians deliver it at a difference of 20-30% (minus). It is this cost gap that is makes companies outsource work to India.
Q: The public perception is BPO is all about phone calling, which in the medium to long-term restricts career growth. Considering this, can one rely upon KPOs as being a healthy career option?
Unlike BPOs, KPOs provide a strong career path and are being rated at par with any other corporate group. Here, as you move up professionally, the skills you develop can be leveraged at various levels. Also these skill sets will come handy for any job switch that the person may wish to make.
Q: Why is there a high attrition rate in KPOs?
One reason is that the industry growth curve is moving northwards creating numerous job openings. In the last 3-4 years, many new companies have emerged posing a big question: Where to hire people from? Poaching is common. Then, people with 1-3 years of experience demonstrate higher movement than those who have worked for 3-5 years.
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First Published: Thu, Mar 27 2008. 06 54 PM IST
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