Knowledge Process Offshoring (KPO) Opportunity to be Worth USD 17 by 2010
According to business research firm Evalueserve, the revenue for the global KPO market was USD 1.29 bn in FY 2003 and this is expected to grow to USD 17 bn by FY 2010, a cumulative annual growth rate of 46%. In contrast, the revenue from plain vanilla BPO services will grow from USD 7.7 bn in FY 2003 to USD 39.8 bn in FY 2010, a cumulative annual growth rate of 26%.
Gurgaon, India (PRWEB) July 17, 2004 -- KPO involves business processes that require domain expertise and high-end talent such as MBA's, engineers, doctors, lawyers, accountants and other highly skilled professionals. "KPO requires moving away from simply executing standardized processes to carrying out processes that demand advanced analytical and technical skills as well as some decision making," says Alok Aggarwal of Evalueserve. Some of the destinations from where KPO services are being provided are India, China, Russia, Canada, Israel and the Philippines.
Typical users of KPO services are market research and consulting firms, investment banks and financial services institutions, and corporate planning departments of large Fortune 500 companies. These services can also be easily used by small and medium sized enterprises due to project-based nature of the work.
Some examples of services in the KPO domain are intellectual property research, R&D in pharmaceuticals and biotechnology, data mining, and a range of analytical services such as equity research and financial modeling.
Writing patent applications in the US is expensive and a typical application costs between USD 10,000 to USD 15,000 for drafting and filing with United States Patent and Trademark Office (USPTO). In an offshore mode, an intellectual property specialist in an offshore location can produce a preliminary draft of a patent application, which is then reviewed and modified by a registered US patent attorney, who ultimately files it with the USPTO. This can result in cost savings of up to 50%.
In the R&D area, contract research organizations are being widely used by pharmaceutical companies. Destinations such as India offer significant cost advantages - often as much as 40% to 60%. Recently, companies such as AstraZeneca and Glaxo-Smith-Kline have set up drug discovery centers at low-cost destinations to offshore R&D.
In the area of data mining and analytics, destinations such as Russia and India are ideal because they provide a large pool of engineers and PhDs at substantially lower costs. The cost differential between a PhD in Sciences and Engineering in the US and India (or between US and Russia) can range between USD 60,000 and USD 80,000. "Demand and channel planning, manufacturing scheduling, and transport planning are examples of some supply-chain management solutions that require the use of mathematical programming, statistical analysis and computer-aided simulations" says Alok Aggarwal, who holds a PhD in mathematics and computing.
Given the large number of engineers, doctors, lawyers, chartered accountants, statisticians and scientists in India, Evalueserve believes that India can provide KPO services worth USD 12 bn by FY 2010 instead of USD 720 mn that it provided in FY 2003. This would represent a cumulative annual growth rate of approximately 50% and 250,000 such professionals would be hired by Indian KPO providers by FY 2010, which would therefore provide direct employment worth 300,000 people.
Benefits go beyond just cost savings. KPO users typically save on time and also have a greater access to various skills. In many cases, providers also offer multi-lingual research capabilities.
However, executing KPO projects is not easy and requires a professional services culture rather than a BPO culture. Processes executed within the KPO domain require higher quality standards because the stakes for the clients are high. Furthermore, the clients are likely to have apprehension about the quality of the services delivered (especially by low-cost destinations) and these may be difficult to alleviate. To manage these perceptions and ensure smooth delivery, vendors work in a "80-20" mode which involves providing leverage to senior professionals.
"Another key challenge in the management of a KPO is the identification of performance criteria -- setting the right expectations with the end-client as well as its professionals, continuous assessment and monitoring, constructive feedback, appropriate coaching and mentoring and identification of right career paths for its professionals", says Marc Vollenweider of Evalueserve, a former partner with McKinsey.
However, these factors will not impede the growth of the KPO industry. In fact, the protectionist lobby and their anti-BPO drive in the USA and the UK have helped global offshoring and, in particular, global KPO by providing free publicity. Evalueserve estimates show that between June 1, 2002 and May 31, 2004, India Inc. alone received more than USD 89 million in free publicity from more than 1,980 distinct articles in newspapers and magazines and over 210,000 distinct references and "threads" in the U.S.A and U.K. Hence, many Americans and the British companies now feel that Indian companies can do almost anything, even Rocket Science!
About Evalueserve (www.evalueserve.com)
Evalueserve is a global knowledge services firm that provides high value-added research services to leading edge clients worldwide. Our clients include global consulting and market research firms, investment banks, Fortune 500 corporations, as well as SMEs in financial services, telecom and technology, pharmaceuticals and biotech, and various other sectors such as automotive, oil and gas, etc.
Evalueserve's client executives are located in the U.S, U.K, France, Germany, Switzerland, Austria, Sweden, Benelux and Singapore. The client executives are supported by its multi-lingual research team, based in Gurgaon, India, comprising experienced professionals with advanced degrees in business and technology.
Contact Information:
Mamta Tyagi
91 124 512 0000
mamta.tyagi@evalueserve.com
EVALUESERVE
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