Knowledge Process Outsourcing Modified (Ed Zarrella)

Slide 1: IT ADVISORY Knowledge Process Outsourcing NASSCOM Indian Leadership Forum 2008 Mumbai, India - 13 February 2008 ADVISORY

Slide 2: KPO – Industry Overview • KPO, also referred to as “Knowledge Services”. It cuts into the traditional “core competencies” of many organizations. • While cost reduction seems to have been the prime motivator of the ITO and BPO waves, “intellectual arbitrage” seems to be the key driver for KPO services. • Knowledge Process Outsourcing (KPO) enables clients to unlock their top-line growth by outsourcing their core work to locations that have a highly skilled and relatively cheap talent pool. • There is a good mix of both third-party and captive structures in the KPO industry at present. KPMG expects hybrid multi-sourcing models of KPO to emerge in the near future. They will likely consist of captive units managing relationships with third-party KPO providers. • Acquiring the necessary skill sets, attracting talent, protecting intellectual property and managing conflicts-of-interest will likely be the major challenges facing the KPO industry over the next three years. © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 2

Slide 3: KPO – Industry Overview • India is currently the leading country providing KPO services. However, other countries have the potential to capture significant KPO market share, by better leveraging the depth and maturity of existing skill sets, and in some cases, their non-English language capabilities. • Various sources of market research predict the KPO industry to be worth anywhere between US$10 billion to US$17 billion by the year 2010. • Examples of KPO services • Equity, Financial, Insurance Research • Market Research and Competitive Intelligence and General Business Research • Data Analytics, Integration and Management • Research and Information Services in HR • Intellectual Property, Paralegal Content and Services • Engineering and Design Services • Animation and Simulation Services • Medical Content and Services © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 3

Slide 4: KPO Services… KPO Business Research Investment Research Market Research Intellectual Property Data Analytics • Newsletters • Technical Analysis • New Product Testing • Data Mining • Patent Drafting • Gap Analysis • Fundamental Analysis • Customer Satisfaction • Mathematical • IP Landscaping & modeling • Competitive Analysis • Sector/Company • Brand Perception Asset Analysis Management • Customer • Innovation Search • Multi-lingual surveys Segmentation • Company Valuation • Market Assessment • Multi-variate Analysis • Basket Analysis studies • M & A Analysis • Churn Analysis • Value Chain Analysis • Portfolio Analysis • Innovation Search • Pitch Books © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 4

Slide 5: ITO – BPO – KPO ….The Roadmap © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 5

Slide 6: Challenges Faced Key challenges faced by Knowledge Services Outsourcing are: • Internal Challenge: Recruiting and Retaining the Right Talent • Customer Challenge: Demand for Quality, Data Security and Compliance • Competitor Challenge: Other Countries and Global KPOs Operating in India • Industry Challenge: Information Infrastructure and Branding © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 6

Slide 7: What Does The Customer Want A KPO that provides : • Necessary expertise and skills • Depth of knowledge and understanding • Experience in focused areas • Customized solutions for the client • Flexibility © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 7

Slide 8: KPO Vs. BPO © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 8

Slide 9: Rise of KPO… Key drivers behind the rise of KPO: • KPO significantly enhances the client service organization’s ability to generate top-line revenue. • Vendors have demonstrated their capabilities • A seemingly unstoppable push towards global sourcing strategies at most major banking and insurance organizations • Relatively standardized nature of analytics - A growing awareness of the increasing quality of education systems in favored offshore locations • Technology and telecommunication developments © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 9

Slide 10: Skill set Requirement © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 10

Slide 11: Geographical Footprint of the Financial Services KPO Industry © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 11

Slide 12: Location Attractiveness For A KPO Current Availability of Talent Pipeline Availability of Talent © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 12

Slide 13: Location Attractiveness For A KPO Salary Comparison For Inexperienced Resources © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 13

Slide 14: KPO Drivers © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 14

Slide 15: KPO Structure Comparison © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 15

Slide 16: Future Directions • A significant shift in the boundaries between “outsourceable” and “non- outsourceable” activities • Offshoring strategies are expected to embrace new locations • Large number of global banks and insurers are likely to adopt KPO strategies • “Boutique” providers are likely to leverage KPO to create new services and offerings • More rigorous regulatory and compliance control will likely be demanded, as KPO providers deliver more complex services © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 16

Slide 17: The future of KPO… • New areas of focus • Healthcare / Clinical Research • Animation • Remote Education • SOX Compliance related work • Growth Areas • Shift towards Value added work • Multi-lingual work • Mew markets ( Japan, China ) - for IP work • SME’s - a large potential-yet to be tapped • Challenges • Building credibility around expertise / knowledge • Delivering highest quality consistently • Heavy investment in training people, developing high talent and hence retaining them • Complying with standards and regulations • Sales and marketing effort-to keep the client interested © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 17

Slide 18: KPO – in 2010… • India to Account for a major chunk of Global KPO Revenues • The global KPO market is expected to grow in excess of 30 percent per annum, from USD 1.29 billion in FY 2003 to USD 17 billion • Increase in the number of jobs, from 25,000 in 2003 to approximately 250,000 • Revenues in the Indian service sector are expected to rise by 12 percent per annum • KPO in India will contribute around 1.8 percent to the Indian service sector Year No. Of KPO Professionals worldwide 2003 - 2004 34,000 2006 - 2007 106,000 2010 - 2011 350,000 © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 18

Slide 19: kpmg Thank You © 2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 19