Kpo

KPO – The Next Big Opportunity
Challenges and Success Factors
Mohit Srivastava
NASSCOM Emerging Companies Forum 2005
September 16, 2005

Presentation Plan
 KPO - An Industry Overview
 Key Growth Drivers
 Captive vs. Third Party
 From BPO to KPO - Challenges and

Success Factors
Slide 2
© Evalueserve, 2004. All Rights Reserved - Privileged and Confidential
Presentation Plan

Success Factors
Slide 3
India, with its strong IT and BPO background, is well
positioned to leverage the KPO opportunity
Revenues (India) for 2003-04:

Knowledge Process
IT Outsourcing = USD 21.5 billion
Outsourcing
BPO = USD 3.9 billion
KPO = USD 0.72 billion This involves advanced
analytical and technical
skills as well as some
decision making
Business Process
Outsourcing
This involves offshoring of
low-end (contact center kind
of) work
IT Outsourcing
This involves offshoring of IT
Expected CAGR during 2003-2010:
services, offshore software IT Outsourcing = 27.5%
development and support BPO = 30.6%
KPO = 49.5%
1990’s 1998 2000

Source: Evalueserve Analysis
Slide 4
Global KPO market is expected to be USD 17 billion by
2010, with India having 71 % share
KPO market in India = USD 12 billion by 2010 By the year 2010, several new KPO services will
become prominent in the global offshoring
Global KPO market = USD 17 billion by 2010 space
100%
9%
29 8% 29%
44
75% 12%
50%
71 12%
18%
56 12%
25%
Data Search, Integration and M anagem ent
Biotech and Pharm a
0% Engineering and Design (incl. VLSI, Highway Design, etc.)
2003 2010 R&D (excl. Biotech, Pharm a & VLSI, etc.)
In d ia R e s t o f W o r ld Rem ote Education and Publishing

Anim ation and Sim ulation Service s (incl. Analytics)
Others
Indian KPO sector will increase its share in Out of the estimated opportunity of USD 17
the Global KPO sector to 71% by 2010 from billion in the KPO sector in 2010, the major
56 % in 2003 revenues will come from six prominent sectors
Source: Evalueserve Analysis
Slide 5
Several MNCs offshoring high-end work to India
Pharma/Biotech
Semiconductor
Telecom and IT
Financial Services
Multinational Companies
Slide 6
…to offer massive employment opportunity …
Indian non-IT off-shore services
USD 12 billion
KPO
250,000 Revenue generation (2010)
Employment opportunity (2010)
USD 18 billion
BPO
820,000
Slide 7
Presentation Plan

Success Factors
Slide 8
…several demand side and supply side factors fuelling the KPO
trend …
Demand-side Trends Supply-side Trends

 Shortage of knowledge  BPO and IT vendors
professionals in maturing
developed nations
 Players moving up the
 Cost pressure value chain
 Reduced time to market  Increasing domain
expertise
 Need for more flexibility
Slide 9
Demand-side drivers including shortage of labor, particularly
in high-knowledge industries...
Expected shortfall of labor by FY 2010
5.6 Majority of the

5 shortfall in high-
Professionals
4 knowledge industry
(Millions)
3
2
1 0.7
0
The US The UK
Slide 10
….and significant cost savings will make global off-shoring
an economic imperative for developed nations….
100
> 70
80
USD per hour
60 40 - 60
20 - 50 25 - 40
40 15 - 40
10 - 25
20
0
BPO KPO BPO KPO BPO KPO
On-shore Near-shore Off-shore
Slide 11
Supply-side drivers include maturing of BPO, and players
moving up the value chain …
High Embryonic Growth Mature Aging

IT
Outsourcing
Call Centers
Engineering
Maturity
Accounting
HR Admin
Insurance  Specialized players emerging
Claims  Complexity quickly increasing
 From captives to third-party
Tech Support
 “Double Sourcing”
Knowledge
Processes
Low
Time
Slide 12
..the industry will keep growing due to addition of newer processes
Individual BPO processes will witness The combined effect is equivalent to an

their respective lifecycles ever growing industry
Industry Size
Industry Size
Time
Time
The size of addressable market for BPO is high and it is expected to increase for many years. These
market show no signs of maturity in the foreseeable future.
Slide 13
Presentation Plan

Success Factors
Slide 14
‘Buy’ increasingly becoming preferred setup, esp. for SMEs…
15 - 25
BPO
Make
35 - 40
Advantages of
KPO
‘Buy’ vs. ‘Make’:
10 - 20 • Faster ramp up
BPO • Lower complexity
25 - 35 • Lower cost
Buy
KPO • Better control

0 10 20 30 40
USD per hour
Slide 15
But no ‘one model fit all’ approach possible…decision
guided by combination of factors…
Factors Third-Party Subsidiary
Initial investment and set-up costs Low High

Operational costs Low High
Initial set-up time Low High
Operations ramp-up time Low High
Management complexity Low High
Direct exposure to external/macroeconomic factors Low High
Direct control over organization culture and operations Low High
Direct control over intellectual capital base Low High
Data security Medium High
Direct control over internal processes Medium High
Third-party preferred Offshore subsidiary preferred
Slide 16
Presentation Plan

Success Factors
Slide 17
Operational challenge
People-related Process-related
• Produce academic skill pool • Security
• Recruiting of talent • Delivery processes
• People development • Quality
• Meritocracy • Productivity
• Performance management • Confidentiality
• Retention • Intellectual Property
Slide 18
Sales and management challenges
Local Sales Force Right Management Focus

• Language/cultural • Change in mindset from
sensitivity selling IT / BPO to KPO
services
• Understanding of local
business environment • Focus and specialization
• Experience of selling • Synergistic diversification
professional services • Partnerships and alliances
• Established network with
key decision makers
Slide 19
Thank you
Mohit Srivastava
Mohit.Srivastava@Evalueserve.com
www.evalueserve.com

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KPO – The Next Big Opportunity

Challenges and Success Factors

September 16, 2005

 KPO - An Industry Overview

 Key Growth Drivers

 Captive vs. Third Party

 From BPO to KPO - Challenges and

 KPO - An Industry Overview

 Key Growth Drivers

 Captive vs. Third Party

 From BPO to KPO - Challenges and

Revenues (India) for 2003-04:

1990’s 1998 2000

In d ia R e s t o f W o r ld Rem ote Education and Publishing

Indian non-IT off-shore services

Employment opportunity (2010)

 KPO - An Industry Overview

 Key Growth Drivers

 Captive vs. Third Party

 From BPO to KPO - Challenges and

Demand-side Trends Supply-side Trends

Expected shortfall of labor by FY 2010

5.6 Majority of the

High Embryonic Growth Mature Aging

Individual BPO processes will witness The combined effect is equivalent to an

 KPO - An Industry Overview

 Key Growth Drivers

 Captive vs. Third Party

 From BPO to KPO - Challenges and

KPO • Better control

Initial investment and set-up costs Low High

Third-party preferred Offshore subsidiary preferred

 KPO - An Industry Overview

 Key Growth Drivers

 Captive vs. Third Party

 From BPO to KPO - Challenges and

Local Sales Force Right Management Focus

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