NATIONAL CONFERENCE

ORGANISED BY

SHRI VAISHNAV INSTITUTEOF

MANAGEMENT, INDORE

ON

SATURDAY 28TH MARCH 2009

KNOWLEDGE PROCESS
OUTSOURCING:CHALLENGES
AND FUTURE

PRESENTED BY:
PROF. LOVELEEN CHAWLA
 KPO-Challenges & Future

“Knowledge process outsourcing may be the next Boom Business”

The firmament of outsourcing is studded with the variety of bright and shining stars such as
BPO, KPO, HRO, FPO, LPO, EPO etc. after the appearance of BPO; it is KPO which is
assuming the popularity like Venus the brightest star. From the time immemorial knowledge has
been considered as in all fields, be it spiritual, religious, learning, welfare, law, justice,
administration or economic.

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Since knowledge is considered as supreme power, power is a prime mover of all the activities.
Knowledge is a theoretical or practical understanding or a person’s range of administration, it is
evident, that the information is knowledge. Due to technological advancement knowledge is no
more a personal attribute it earn now be easily transformed and transmitted and can be should
and used by other commodities. It is now no more non-economic, non transferable and personal
property.

Introduction
Knowledge Process Outsourcing. Knowledge management is the hottest subject of the day. The
question is: what is this activity called knowledge management and why is it so important to
each and every one of us? The outsourcing industry is also termed as BPO industry which has
given birth to its improved from termed as knowledge process outsourcing (KPO). KPO is a
refined form and an extension of Business process outsourcing (BPO). KPO provides value to
the client through expertise rather than process expertise. The KPO which is an extension of
BPO is the high value; high growth that is independent of the co-existence of the BPO.
According to the reports of global sourcing now the KPO is expected to reach $ 17 billion by
2010 out of which Indian’s share would be $ 12 billion. Knowledge process outsourcing, or
KPO, is the latest wave to hit the outsourcing business in India. A booming sector with
tremendous potential, the KPO sector in India employs around 25,000 people currently. KPO is
knowledge process outsourcing. It involves outsourcing for high-end knowledge work. This
includes research and work on intellectual, equity finance, analytics, market research and data
management, et cetera. KPO industry is consisted of high skilled expertise that perform the work
on typical domain based process and yield high level result with maximum customer satisfaction.

Meaning:

KPO is knowledge Process Outsourcing. It involves outsourcing for high-end knowledge work.
This includes research and work on intellectual property, equity and finance, analytics, market
research and data management, et cetera.
It is being claimed that KPO is one step extension of Business processing Outsourcing (BPO)
because BPO Industry is shaping knowledge process outsourcing because of its favorable
advantageous and future scope. But, let us not treat 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 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 Process Outsourcing (APO). KPO business entities provide typical domain-based
processes, advanced analytical skills and business expertise, rather than just process expertise.
There is a high probability rate of the success of KPO in India as organizations have come to the
conclusion that it is more beneficial for them to outsource the non-core services and concentrate
on the core competency services only. These non-core services will provide a huge market for
the organization dealing in the outsourcing activities as a large number of companies have
invited applications and yet many other are in the lieu.
Scope 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 it reach USD 17 billion by 2010, of
which USD 12 billion would be outsourced to India.
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 percent, 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 percent, from $ 7.7billion 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. Hence, it is
likely to earn $30 billion in 2010 by providing these services.
According to Evaluesrve, the KPO industry in India had only 9,000 billable
Professionals in India, generating revenue of 260 million dollars during 2000-01. This number
has growth to 75,400 by 2006-07 with 3.05 billion dollars in revenue at annual growth rate of 51
percent.
The anticipated success in KPO comes after the success of Business process Outsourcing (BPO)
in the country, which accounts for revenues of 15.8 billion dollar in 2006-07, a jump from just
7.7 billion in 2003-04.
Another report predicts that India will capture more than 70 percent of the KPO sector by 2010.
A part from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are
also expected to join the KPO industry.
According to Achal Khanna (Country General Manager), Kelly services, “India still maintains
the competitive advantage for providing, the combination of the most cost-effective and high
quality manpower-this is the off-shoring business”.
According to s 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 would be
outsourced to India. In addition, the Indian KPO sector is also expected to employ more than
250,000 KPO professionals by 2010, compared with the current figure of 25,000 employees.

The Indian Proposition:

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.
This talent is soon being discovered and tapped by leading businesses across the globe resulting
in the outsourcing of high-end processes it low-wage destinations. Hence knowledge process
Outsourcing involves off shoring of knowledge intensive business processes that require
specialized domain expertise.
Indian is always taken as one of the biggest challenger in the world market for providing the
BPO services. These are many reasons for India to be strong contender in the world of
outsourcing service. Moving ahead in the path, KPO emerges as the specialized branch of BPO
where only a certain degree of specialized services will be provided and the high and services
will be considered to be served. India is again seen as one of the most preferred location due to
its competitive advantage over rest of the countries. Some of the reasons for India to be signified
as one of the most preferred location are:

• High rate of Expertise Pool.

• Cost Advantage (Compared to other countries).
• Accent clarity and English Proficiency.
• Flexible Time Horizons.
• High Computer Literacy rate.
• High rate of (selected) Domain Specialization.
• High rate of professional graduates (especially Science and Mathematics).
• Attractive Location.

A survey predicts that the Indian KPO market will grow about 49 percent by 2010(While the
BPO sector is slated to grow 30.6 percent). At present, around 25,000 professionals are
employed in the KPO industry. The figure is expected to shoot up to 2.5 lakh by 2010.
In 2003, the market share of Indian KPO sector in global KPO market was 56%. And it is
expected to reach 71% in 2010, which shows a decent growth of the sector in the coming years.
According to NASSCOM, KPO sector worldwide is expected to reach USD 17 billion by 2010.
out of this, India will account for USD 12 billion.
These are reasons with the youth of the country to shift from the traditional jobs to the new
sector KPO. KPO are not only providing the opportunity for growth but at the same time are also
satisfying the inner urge of the youth to serve something creative in their field and show their
talent to the world while earning a high rate of perks. Some of the reasons because of which
there is a swift shift from traditional jobs to the KPO’s are:

1. High rate of monetary.

2. Highly skilled expertise service requirement.
3. Space for Innovativeness.
4. High rate of freedom to perform the operations.
5. Highly recognized brands associations.
6. Flexibility in work completion.
7. More research and analytical work associated.
8. Non-traditional lines of procedural guidelines.
Companies actively participating in KPO based activities (In India):

In India, these are a large number of organizations who are dealing in KPO related activities.
These organizations are active KPO service providers in the market and are providing the high
end services with the help of the experienced expertise. Some of the organizations which are
dealing in the KPO sector (In India) are:

a) ICICI One source.

b) EXL Services.
c) Tech Books.
d) Genpact.
e) Evalueserve.
f) 24/7 Customer.
g) Copal Partners.

All these organizations are dealing the KPO related activities through which they are providing
high end service to the customers. These companies are generating a huge amount of revenue
from these services and are dealing with national and international clients.

KPO service in India:

The boom in the Business process Outsourcing (BPO) industry has been the key factor behind
the origin of knowledge process Outsourcing (KPO). Effective and accurate results from
offshore companies in the BPO sector have encouraged US, UK and other clients to outsource
responsible data analysis work. KPO is more advanced version of offshore outsourcing than
BPO. As its name says it all, KPO services is a processing of complex data i.e. knowledge, rather
than just the raw data. Knowledge processing outsourcing comprises of more advanced Data
Manipulation, data Analysis and Data Research.

Industry leaders are brought together to create knowledge from the information they have. This
information driven knowledge outsourcing as knowledge process outsourcing or KPO.
Knowledge management can be considered a private activity where company or employee’s
private data is manipulated or researched to improvise on performance. It makes it more
profitable for organization where employees’ knowledge research is linked to companies’
knowledge base. The temptation to outsource this high end processing is because of low wage
destinations like India, China and Philippines.

KPO service India is not just restricted to IT (Information Technology) or ITES (Information
Technology Enabled services), but it can be exploited for many other sectors like Business
Research, Business and Technical Analytics, Property related Services, Market Research, Legal
Research, Pharmaceutical and Biotechnology Research, Clinical Research, Learning Solutions,
Animation and Design, Writing and Content Development, Training and Consultancy services
and many more.

As KPO is a new buzz word in the offshore Industry, it has some challenges to face-As it
delivers high significance to the business or organization by providing domain-based practices
and business expertise, it requires advanced analytical, specialized and skilled knowledge
workers. Maintaining the quality standards of the results;
Infrastructure facilities and investment; and confidentiality and Security of personal Data are
some of the areas look upon.
 SWOT ANALYSIS:
Strength:
• 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 arte lower as compared to billing rates in other countries .

Weaknesses:
• Immoral and unethical practices related to handing 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.

High-end services that can be outsourced to India:

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

• Research & development

• Business and technical Analysis
• Learning solutions
• Animation & design
• Business Market Research
• Pharmaceuticals and Biotechnology
• Medical Services
• Writing & content Development
• Legal Services
• Intellectual Property (IP) Research
• Data Analytics
• Network Management
• Training & consultancy

Pro and cons of outsourcing :

Outsourcing has many advantages but at the vantages but at the same time it some disadvantages
that cannot be ignored. So let us look at some outsourcing pros and cons.

Pros of Outsourcing :

Outsourcing as a trend has come into major scrutiny by the workers and media alike in the
developed countries. But most economists are sure that this condition is just a temporary one and
will die down as conditions develop and people start taking a mature outlook towards outsourcing.
The outsourcing advantage lies in the fact that it helps companies cut costs and stay ahead in the
competition. Outsourcing also benefits the citizens in developed counties as it provides high
quality products at a cheaper rate also with beer customer service.

Advantages and Benefits of outsourcing :

 • Companies can save up on operational costs. In fact most companies can cut their
operating costs to half by outsourcing.
• Get access to cheaper and mire efficient labor
• Cut up on labor training cost
• Get access to better technologies at a cheaper cost
• Increase productivity
• Concentrate on core competencies

The short term benefits gained through outsourcing:

• Ability to focus resources and attention on core business processes.

• Reduced human resource management costs
• Access as needed to specialized resources
• Refinement of risk management, project management, and service delivery abilities.
• Implementation of demand management and service delivery disciplines.
• More accurate process management and support operations.

Typical long-term benefits include:

• More predictable results-based budgeting for the outsourced function over the period
of a certain outsourcing agreement.
• Joint and interactive problem solving and creativity.
• Superior management of the business and operations portfolio.
• Better management, contracting, and outsourcing integration skills.

Irrespective of certain failures are entering the race of outsourcing.

Cons of outsourcing:

Outsourcing is seen by companies in developed countries and workers in developing

countries as a boom. But is the situation really that green? Let us look at some disadvantage
of outsourcing.

Disadvantages of outsourcing :

• The company that outsourcers can get into serious trouble if the service provider
refuses to provide business due to bankruptcy , lack of funds, labor etc
• Outsourcing requires the control of the process being outsourced by transferred to the
service provider. Thus the company may loose control over its process
• The service provider in developing countries generally services many companies. So
there are many chances of partiality owing to more payment by other parties due to
outsourcing and of people in the company that outsourcing and may not work properly
 • The attitude of people in the developed countries against companies that outsource is
generally

These disadvantages are the reasons why companies should think twice before
outsourcing. Companies should adopt a planned approach to wards outsourcing taking
into account the interests of employees and customers alike and come up with a
balanced advance. Outsourcing services simply to beat competition or to follow your
competitors can lead to problems in the future.

Challenges faced by KPO Industry:

KPO attracts the eyes of the organizations but at the same it comprises of certain problems also.
KPO faces certain challenges which are a serious concern for the future period as they can distract
the normal pace functioning of organizations and hinder in providing the high end customer
services to the end customer. The challenges which are faced by the KPO industry are as follows:

a) Rise in the standards of quality:

With the emergence of KPO’ s there emerges requirement of high quality standards of work. BPO
are based on the systematic routine working which have set procedures to be done which is based
on experience, intellectual capacity and analytical skills with combination of technical knowledge.
All these factors together make the quality standard tough and difficult to be followed.

b) Lack of required talented employees:

KPO also faces the problem of having low rate of talented employee’s pool because of which the
services can nit be completed within the desired time and with expected efficiency. Unlike BPO,
where the jobs are routine in nature and average intelligence level is required,

c) Maintaining higher degree of confidentiality.

KPO maintains high degree of confidentiality as there work is much more sophisticated and
confidentiality in nature as compared to that of BPO’ s. KPO’ s. have to maintain the desired level
of confidentiality and is also expected to provide superior quality services as compared to their
counterparts.

d) Rise in the investment in KPO infrastructure:

With the evolution of KPO, the investment pattern has also risen up. KPO serves high
end services for which the infrastructure requirement differs as compared to the infrastructure
required for the BPO. Fore KPO, high level investment in infrastructure is required through which
the services can be provided on the base line of se standards.

Future of KPO:
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-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 is much more affordable. “ Law firms in the US charge an average, of $400-
450per hour, and we and we do the same work for $15to $100 an hour” says kamlani “ who is an
outsourcing provider the 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
station and MBA, 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 the –in excess of 50%is now project to be knowledge based. This
represent significant metamorphosis of centre sector business to completely different model.
Interestingly, Sunil Mehta, Nasscom vice--president research , distances himself from the
estimates.
The projection are based on a white paper released by Evaluserve. 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 of several challenges like higher quality standards, greater investment and
inadequate talent.
The study estimates that while the compounded grow rate of BPO till 2010 would be just 26%
KPO is expected to be grow at almost 46%.

Bottlenecks in Future Growth

A study on knowledge process outsourcing (KPO) sector shows a huge supply gap that threatens to
cripple its growth. Research, a UK- based research services company, has gathered evidence
suggesting that the KPO market may just about reach a size of $5 billion by 2010 manned by
100,000 people instead of projection of a $12 billion market supported by 250,000 employees.

This accentuates Nasscom’s projection of a shortfall of 500,000 workers in ITES and BPO sectors
by 2010.

Assuming an average revenue par person of $55.000 over the next four years, 100,000 Knowledge
workers point to a $5 billion market. This size though based on a CAGR of 32% is still 60% les
than the %12 Billion Potential projected by big KPOs, like Evalueserve, last year.
Research COO, Ashish Sinha says the sector is restricted by low employability despite high
graduate turnout, and competing demand from other sector as jobs grow faster than the workforce.

For example all the 2,000-odd IIM and top 10 B-School graduates are employable, while less than
half the 84,000 gradates from Tier-II B-Schools Would make the grade.

The study sees only 500,000 of the over 3 million Workers added to the labour pool in 2005 as
employable in global firms and of these, just 2 in every 100 are likely to opt for work in
knowledge space.
.

Conclusion

Since the phenomena of KPO began in a big way in developing nations, such as India, have
undoubtedly benefited from the boom the KPO industry has helped to change the image of India to
a potential economic super power the evening capacity of the wean rich employed in the It
ensconcing industry has increased, and a sense of well being has permeated urban India with
increased employment opportunities with in India. The fear of brain drain has been marginalized
Indian companies need to pull up their socks and tighten other
business process such as the security confess, so that they story a float-and-swim- in global
outsoaring market.
 Bibliography :

1. http/www.outsource2india.com
2. http/www.nasscom.com
3. http/www.payscale.com
4. India economic journal conf. vob-2005, Indian economic association
5. Mobilizing minds Creating Wealth From Talent, Mc Graw Hill Publishing
6. Mc Kinsey Quantity sumey 3rd jounary 2008, The Orgnization Challenges Of global
Trends A Mc Kinsey global survey,
7. Nonka I & T Nishi Guchi, Knowledge emergency sage publication 2001

PRESENTED BY:
PROF. LOVELEEN CHAWLA