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KPO vs BPO

Is India slowly and gradually moving towards the KPO regime? Well this is the buzz which is slowly making
wave this New Year.

After achieving success in BPO, India has taken a step forward to widen its success towards the KPO regime.
KPO industry unlike BPO provides domain based processes and business expertise. KPO is more like a challenge
as it demands advanced and expertise skills on part of its employees. BPO on the other hand is more or less
like a commodity business which stretches more on information technology and its various sectors.

BPO significance

No matter KPO is a step ahead of BPO but this does not mean the end of BPO. The BPO Industry will continue
to be successful in India . BPO has its own way to solve a particular problem. The BPO market is long term in
nature as compared to the KPO market. With every passing day the BPO market base is expanding and so is
the various processes outsourced through it.

BPO undertakes

Data processing

Basic data entry

Setting up of a bank account

Department Outsourcing

Provides technical support

Provides email support to its customers

Even after the entry of KPO in the Indian market. BPO will continue to derive higher revenues as compared to
the KPO industry. The BPO exports will be as higher as $20 billion by the end of 2010. By a recent study done
by experts the BPO industry is expected to grow globally at a CAGR of over 26 percent by 2010.
KPO Significance

There is no doubt that KPO will be the next big thing after BPO. KPO unlike BPO is not just restricted to
information technology. It specializes in various other challenging sectors namely business research, Clinical
research, Intellectual property research etc.

The KPO exports are estimated to be around $12 billion at the end of 2010. The future of KPO appears to be
bright and is expected to achieve a high end of BPO at the end of 2010. The KPO regime looks all set and
poised to accept the new challenges of high training cost and a much higher attrition rates. The shorter term
contracts will demand high quality work and skills on part of its workers. KPO industry has accepted all these
challenges and is all set to leave a mark just like the BPO brigade.

Knowledge Process Outsourcing

The evolution and maturity of the Indian BPO sector has given birth to yet another wave in the global
outsourcing scene: KPO or Knowledge Process Outsourcing. The success in outsourcing business process
operations to India has encouraged many firms to start outsourcing their high-end knowledge work as well.
Cost savings, operational efficiencies, access to a highly talented workforce and improved quality are all
underlying expectations in offshoring high-end processes to India .

India's intellectual potential

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 to low-wage destinations. Hence Knowledge Process Outsourcing involves
offshoring of knowledge intensive business processes that require specialized domain expertise.

The future of KPO

According to a report by GlobalSourcingNow, 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. A report by Evalueserve predicts that India will capture more than
70 percent of the KPO sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic,
Ireland, and Israel are also expected to join the KPO industry.

Comparison of Opportunity in BPO and KPO markets


Low-end outsourcing services have an expected Cumulative Annual Growth Rate (CAGR) of 26% by 2010. In
contrast, the global KPO market is poised for an expected CAGR of 46% by 2010. The following figure
demonstrates the expected growth in the BPO and KPO markets over the next seven years.

What high-end services can be outsourced to the Indian KPO sector?

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
The challenges in KPO

KPO delivers high value to organizations by providing domain-based processes and business expertise rather
than just process expertise. These processes demand advanced analytical and specialized skill of knowledge
workers that have domain experience to their credit. Therefore outsourcing of knowledge processes face more
challenges than BPO (Business Process Outsourcing). Some of the challenges involved in KPO will be
maintaining higher quality standards, investment in KPO infrastructure, the lack of talent pool, requirement of
higher level of control, confidentiality and enhanced risk management.

Comparing these challenges with the Indian IT and ITES service providers, it is not surprising that India has
been ranked the most preferred KPO destination owing to the country's large talent pool, quality IT training,
friendly government policies and low labor costs.

India is well equipped to meet this emerging sector's challenges and all set to be the global KPO hub!

KPO refers to knowledge-intensive work that involves specialized domain expertise. High value processes that
fall into this realm: valuation; research; investment researches; patent filing; and legal and insurance claim
analysis. That would certainly include customer analytics and related processes

WHILE OUTSOURCING is present in numerous business functions, including manufacturing, legal, financial and
human resources, it is the term BPO (Business Process Outsourcing) that is largely in the news on a daily basis.
India's capabilities in this area have been moving towards enhancing the nature of the work done. From mere
data entry kind of work, the fosus has shifted to transaction processing. Now, there is a nascent move towards
knowledge process outsourcing (KPO).

Unlike in BPO where the focus is on executing standardised routine processes, KPO involves processes that
demand advanced information search, analytical, interpretation and technical skills as well as some judgment
and decision making. Examples of KPO functions are intellectual property or patent research, R&D in
pharmaceuticals and biotechnology, data mining, database creation, and a range of analytical services such as
equity research, competitive intelligence, industry reports and financial modelling. Many of these activities lend
themselves to remote execution from anywhere.

Typical users of KPO services include market research and consulting firms, investment banks and financial
services institutions, industry associations, media, publishing and database firms, and corporate planning
departments of large Fortune 500 companies. Several global players such as McKinsey, Goldman Sachs,
Reuters, IMS Health, Harris Interactive, Ipsos, Maritz, AC Nielsen, TN0S and the WPP group are already using
India as a remote base.

The KPO Value Chain

Typically, the extent of offshoring is a function of the degree of e-enablement possible and the quality of the
human capital required. Some activities such as paralegal and medical transcription require low quality human
capital as compared to activities such as data mining and analysis, engineering design and e-learning. The
latter are also highly amenable to IT enablement. Other services such as legal consulting, intellectual property
research and strategic consulting require the highest level of human capital and are the least amenable to IT
enablement.

A veritable gold mine


Companies in the KPO space thus need to make the transition from offering services that require low human
capital quality and low IT enablement to those that require a high degree of human capital and IT enablement.
The National Association of Software and Service Companies projects that the total global offshoring market
opportunity by 2008 will touch $141 billion. Of this, data search, integration and management will account for
$18 billion. Medical, legal content and associated services represent an opportunity of $2 billion. However,
Scope e-Knowledge Center estimates that only 45-50 per cent (about $65-70 billion) of the total off-shoring
opportunity is likely to be realised even by 2010. According to Scope, the global offshore BPO (non-IT) revenue
in fiscal 2003 was close to $9 billion and this is expected to grow by about 35 per cent a year through 2008.

BPO-

Business Process Outsourcing (BPO) is the leveraging of technology or specialist process vendors to provide
and manage an organisation's critical and/or non-critical enterprise processes and applications. The most
common examples of BPO are call centres, human resources, accounting and payroll outsourcing. Business
process outsourcing may involve the use of off-shore resources.

Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of
risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO
includes the software, the process management, and the people to operate the service, while a typical ASP
model includes only the provision of access to functionalities and features provided or 'served up' through the
use of software, usually via web browser to the customer

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