Kpo Market Analysis In India

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India has built strong international credibility in the BPO market and this has paved the way for many international firms to explore other outsourcing opportunities. The KPO or Knowledge Process Outsourcing goes beyond outsourcing standard routine business processes to those involving high end value added tasks in which execution depends on skill, expertise, domain knowledge and experience of the experts handling the tasks.

This presentation briefly summarizes how India is poised to take on this next wave of outsourcing i.e the KPO business.

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Kpo Market Analysis In India

  1. 1. KPO Market Analysis in India Preeti Anand
  2. 2. Executive Summary Executive Summary The evolution and maturity of the Indian IT/BPO outsourcing sector has given birth to yet another wave in global outsourcing - KPO or Knowledge Process Outsourcing. In contrast to BPOs that focus on executing routine standard jobs requiring less intensive skills, KPOs outsource high-end knowledge based work. The key drivers for off shoring high-end processes can be viewed both on a strategic as well as tactical level. Cost savings, operational efficiencies, access to a global talent pool and improved quality are all underlying expectations in off shoring high-end processes. These help in the realization of a firm’s strategic objectives in the need for flexibility, significant reduction in time to “go to the market”, increased competition in the global market and cost pressure. As in the BPO market, India is well poised to be a global leader in the KPO business. India’s existing dominance in the offshore business makes it a trusted ally. In addition, India’s advantages lie in favourable government policies and cost arbitrage. However, what would be a true differentiator for India in the global KPO market, is its rich and diversified talent pool. India produces a large pool of knowledge workers in various sectors ranging from Pharmacy, Medicine, Law, Biotechnology, Education & Training, Engineering, Research & Development etc, and this talent is being discovered and tapped by leading businesses across the globe. The diversity of talent has resulted in a variety of high-end services being off shored by a multitude of players in the market. Government backed initiatives will further fuel the development of talented workforce in India. While there are reasons to believe that India is set to dominate the KPO market, a host of issues can seriously impact or even derail the projected growth. Potential concerns include macro-environment issues such as terrorism, bureaucracy, rising public opinion against outsourcing etc., in addition to industry related concerns pertaining to employee turnover, management control and data confidentiality. In summary, even though India is well equipped to meet this emerging sector's challenges and is all set to be the global KPO hub, potential issues may impact the country’s intended growth in this market. Global businesses looking to utilize KPO services should be cognizant of this and be equipped with suitable risk mitigation strategies. Preeti Anand 2
  3. 3. Agenda Executive Summary Executive Summary Agenda Overview of KPO Industry India as a leading KPO destination Analyzing KPO Market in India Current & Future Challenges Conclusion
  4. 4. KPO in the next big step in the outsourcing value chain Evolution in Global Outsourcing Key Drivers of KPO industry Strategic • Significant reduction in time to market • Increased flexibility in responding to rapidly • Execute dynamic business driven process changing business environment • Highly advanced skill requirement ( • high Faster Innovation cycle Analytical & Technical skills, Judgment & Decision Making, etc) • Participation in business decision Value Chain • Primarily driven by value consideration Tactical • Execute standard routine process • Cost Saving & Operational Efficiencies • Low skill requirement • Access to global talent workforce low • Usually work on non-core business activity • Improved Quality • Primarily driven by cost considerations • Flexibility in resource management Complexity Enterprise 7 • Leverage time zone differences low high Preeti Anand 4
  5. 5. Agenda Executive Summary Executive Summary Agenda Overview of KPO Industry India as a leading KPO destination Analyzing KPO Market in India Current & Future Challenges Conclusion
  6. 6. India has a booming off-shoring market and is an established leader Global outsourcing Market Indian IT off-shoring Market Growth (estimates in $ billion) 60 India 39-40 Rest of 45% the World 23.6 55% 12.8 2004 2006 2008 2010 Source: XMG Global, 2009 year end forecast Source: NASSCOM • Solid brand equity as a result of being a preferred outsourcing destination • Estimated that 400 of the Fortune 500 companies have their own branches in India or are outsourcing to India utilizing Indian technology companies • Ability to offer 24×7 services and reduction in turnaround times by leveraging time zone differences with respect to the US and other developed markets. Preeti Anand 6
  7. 7. India has a strong value proposition : Encouraging policies and cost advantages Favourable Government Policies Lower Cost • Host of economic incentives and tax holidays for firms • According to ICRA report in 2004, global outsourcing involved in IT/ITES and for exports industry saves as much as 75-80 per cent by setting up operations in India • Encouraging investment through setting up of SEZs and Industrial parks • Indian KPOs offer reduction ratios of around 1:4th to 1:5th of what they cost in developed world • Initiatives in education • Labour costs have crept upward over the years but have • Proposal to allocate INR 3 trillion for education as part of its been offset by falling telecom rates. Eleventh Year Plan (2007-2012) • Includes setting up 30 new universities, 8 new IITs, 7 new IIMs, 20 new IIITs, 5 new Indian Institutes of Science, 2 Schools of Planning and Architecture, 10 NITs, 373 new degree colleges and 1000 new polytechnics will also be set up • Focus on Infrastructure development • Telecom: Huge surge in private Telecom players; significant drop in rates and also better services • Development of roads and highways infrastructure; Golden Quadrilateral; development of Airports, sea ports etc. • Power sector: reforms in the power sector to improve power supply to IT/ITES companies Source: KPO Experts Preeti Anand 7
  8. 8. India has a strong value proposition: Large Talent Pool The rich and diversified talent allows more complex business task to be out sourced • Large, skilled workforce: According to a report by NASSCOM, India has the largest English speaking IT talent pool in the world Employment figure : IT/ITES Sector 2,010,000 • English speaking workforce : India is the 2nd largest nation to 1,630,000 have the most number of English speaking citizens 1,293,000 1,058,000 • World renowned educational institutions: Institutes like the IIMs, IITs, AIIMS, National Law School etc. have created a global brand • Number of PhDs: According to National Knowledge Commission report, India has seen a growth of 20% in the number of doctorates in 2009 2005 2006 2007 2008 Source: NASSCOM • Young talent pool: India has 550 million below the age of 25 with the potential to constitute one-fourth of the global workforce by 2020 • Reverse brain drain: Rapid rise of the software industry in the country has helped create rewarding employment opportunities within the country for highly skilled NRIs • Large and impressive Diaspora: The Diaspora has helped create valuable knowledge linkages and networks while also driving investments to the nation Preeti Anand 8
  9. 9. Agenda Executive Summary Executive Summary Agenda Overview of KPO Industry India as a leading KPO destination Analyzing KPO Market in India Current & Future Challenges Conclusion
  10. 10. The KPO market in India is undergoing an accelerated growth path India’s estimated share in the Estimated growth global KPO business by 2010 CAGR 20 46% $17 B 15 10 5 $1.2 B 0 2003 2010 Source: Evalueserve Source: Evalueserve According to some estimates, there are about 100,000 people working in the Indian KPO industry Preeti Anand 10
  11. 11. India is a leading KPO destination Services Market Players Source: Evalueserve Preeti Anand 11
  12. 12. Agenda Executive Summary Executive Summary Agenda Overview of KPO Industry India as a leading KPO destination Analyzing KPO Market in India Current & Future Challenges Conclusion
  13. 13. Attrition is a challenge Demand for KPO Jobs will outgrow Supply in 2010 Stiff competition for Talent • Competing demand from other sectors (non-KPO) Resource as jobs grow faster than the workforce Gap 250 (‘000) • Growing competition within the KPO industry 100 Supply Demand Source: Rocsearch However, due to the global recession, it is expected that • The Rocsearch study reveals that just 2 in every overall attrition levels are likely to go down as job markets 100 of those employable in global firms are likely to tighten up and not many new deals happen. opt for work in knowledge space Preeti Anand 13
  14. 14. Bureaucracy and Safety are concerns Bureaucracy Safety Preeti Anand 14
  15. 15. Management, legal and national issues Management issues Legal issues • Quality of personnel and work cannot be guaranteed • Possibility of compromising confidential company data, or • Can introduce massive delays as the work is in the Intellectual Property hands of the outsource service provider • Privacy laws vary from one country to another • The cost of negotiating, managing, and overseeing a detailed contract can also be great • Idealized expectations regarding the return on Four former employees of Mphasis, an Indian call center outfit, investment and the time it will take. Many firms were arrested for stealing more than $426,000 from the accounts envision drastic cost savings of up to 80%. of U.S.-based customers of Citibank British tabloid, The Sun, reported that it was able to purchase confidential data on more than 1,000 Britons from an employee of National issues an outsourcing company based in the New Delhi suburbs •A public opinion poll in the US in 2006 revealed that 26 per cent of respondents are worried about global economic competition and the outsourcing of An employee of HSBC's call center in Bangalore was accused of American jobs selling customers' credit card details to people in Britain, who then skimmed thousands of pounds from the customers' accounts. •President Barack Obama's proposal disallows tax deduction for company's outsourcing their business UK‘s Channel 4 TV station conducted a sting operation exposing middlemen trading the financial data of 200,000 UK citizens •EU issues Transfer of Undertakings (Protection of Employment) Regulations 2006, protecting employees whose business is being transferred to another business Preeti Anand 15
  16. 16. Agenda Executive Summary Executive Summary Agenda Overview of KPO Industry India as a leading KPO destination Analyzing KPO Market in India Current & Future Challenges Conclusion
  17. 17. “India's transition from a BPO destination to a KPO destination is imminent ” - Confederation of Indian Industries Even so outsourcing is not without its share of risks, and hence a comprehensive risk analysis and mitigation plan should be part of a firm’s outsourcing strategic plan ….But is not a country of low hanging fruits •Employee Turnover India is an powerhouse with •Frequent social & political tremendous growth potential in instability KPO •Data Thefts •Huge talent pool •Low cost location •Favorable Governmental policies •Established brand in outsourcing Preeti Anand 17

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