The Scope of Indian KPO Industry domain in 2025 - When it started, how it is going and how it will be performing in the future.

1. Knowledge Process Outsourcing

2. Table of
Content
KPO Industry at a Glance
........................................................................ 4
Introduction
.................................................................................
........... 5
Major Segments of KPO Industry
............................................................ 6
Growth of Indian KPO industry
............................................................. . 7
Indian KPO Industry Outlook
................................................................. 9
Emerging Business Model
......................................................................... 10
Emerging Trends
..............................................................................
........ 11

3. Table of
Content
Indian KPO Industry Performance
............................................................ 15
Competitive Landscape
............................................................................
16
Challenges
.............................................................................
.................... 18
Recommendations................................................................
...................... 19

4. KPO Industry at a Glance
Knowledge Process Outsourcing (offshore outsourcing) revolves around high-end knowledge work.
KPO, also known as Knowledge Process Outsourcing, refers to any outsourcing service that cuts into the traditional
Core capabilities’ of many large organizations. Knowledge Process Outsourcing (KPO) suitably allows clients to unlock
their otherwise jammed top-line growth by outsourcing all their core work to ideal locations where the talent is skilled
and labor costs cheap.
Information Technology is a key driver of improving KPO service levels and reducing costs. Businesses
are looking to leverage an integrated solutions approach and process standardization with the help of an outsourcing
partner to deliver critical value to customers.

5. Introduction
“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.”
Outsourcing refers to a business restructuring or changes in current business practice that shifts operations or
processes previously performed within the company to an outside entity—an independent third party. One result
of outsourcing is that the locus of work shifts, and associated jobs migrate, outside the company. For both firms and the
Government, outsourcing or “contracting out” shifts jobs among employers, but does not necessarily reduce the number of jobs.
Knowledge Process Outsourcing (KPO) is a higher-end version of
outsourcing of business processes that require significant domain
expertise. With the evolution and maturity of companies’, businesses are
moving towards outsourcing high-end processes such as legal processes,
market research and analytics, engineering processes, design and product
development. Such off shoring of high-end knowledge intensive work is
termed as KPO.

6. Major Segments of KPO Industry
Engineering Design
Contract Research
& Biotech
Remote Education
& Publishing
Writing Content &
Publishing
Segmentation Data Management,
Search & Analytics
Animation &
Simulation Services
Market Research &
Competitive
Intelligence
Banking,Securities
& Insurance (Equity
Research Captive
Centre's)

7. Growth of Indian KPO industry
India has become one of the most sought after destination for the companies wanting to outsource
their business, knowledge, research, legal and related high-end processes. This not only boosts exports, increases
national income and creates greater employment avenues, but also increases tax revenues, caters to the growth
of other related industries like infrastructure, catering, etc. The companies involved in outsourcing activities tends to earn
huge profits out of this and thus, are in a position to offer their employees the good and competitive pay packages, along
with many attractive employee benefits. The Indian KPO services industry is estimated to be around USD5.7 billion
currently and grew by 15-17% in the recent past. The Indian KPO providers offer a range of solutions to diverse industry
segments such as FMCG, engineering, automobile, telecom, R&D, banking and financial services, insurance, etc.
In the coming years, the volume and complexity of work being outsourced to the Indian KPOs is expected to
increase tremendously, due to the competitive advantages mentioned. Analysts put cost advantage, as one of the most
significant drivers of KPO business. Another critical driver is the prevailing shortage of skilled human resources in
developed countries, like the USA and EU.
India KPO Industry Market Size and Number of FTEs (2006-2014)

8. Growth of Indian KPO industry Continues
KPO firms in India would employ approximately 205,000 professionals generating revenue of $ 10 billion by
2014 from current $ 5.95 billion and 135,000 professionals in 2011. Evalueserve predicted Global KPO market will reach
$17 billion revenue by 2011 in 2005. KPO market slowed down due to the Global financial crisis. With tough competition
form Latin American, Eastern European and some Asia Pacific countries, India KPO market is expected to grow by 20%
annually lower than KPO industry annual growth rate of 24%. But India is expected to retain its dominant position in near
future.
According to Nasscom-Crisil study, knowledge services outsourcing industry in India is expected to grow at a
CAGR of 22.2% over 2015 from $2 billion in 2010 and touch $5.6 billion. Globally, knowledge services landscape is
expected to grow from $2.9 billion in 2010 to $7.9 billion by fiscal 2015. Business research would continue to be the most
widely adopted service line with a 39.4% share, representing a $2.2 billion opportunity. Share of data analytics, on the
other hand, is expected to increase from 18.5% to 20.6% ($1.15 billion) over the same period. Legal Process Outsourcing
is also expected to record robust growth of $1.3 billion by FY15. In terms of verticals, financial services would continue to
be the largest contributor with a 32% market share ($1.4 billion), followed by healthcare at 19.5% and hi-tech and telecom
and retail at 13% each.

9. Indian KPO Industry Outlook
Indian Knowledge Process Outsourcing Industry expected to touch US$ 30billion by 2015 India’s KPO
market is expected to touch US$30 billion by 2015 from the FY2013 level of US$20 billion, which highlights the fact that
KPO industry in India, continues to grow at a CAGR of about 30% annually, according to ASSOCHAM. India dominates
the Global KPO industry as it controls the 70% market and industry is seeing good growth despite the economic
slowdown that impacted the outsourcing industry as a whole.
Growth in the Industry is fueled by demand for profession-based services in areas of research for capital
&financial markets, legal works, editing jobs for international publishing houses, analytics, etc. KPOs has also other
advantages like better work tools and processes, sophisticated client centricity, higher billing rates &more domain
focused organizations.
Currently the industry has more than 3.5 lakh professionals specialized in engineering, medicines,
management and professionals in the field of accountancy, company secretary and legal fraternity but there still is huge
demand for professionals as the industry still needs around 6-8 lakhs professionals by 2015.
India’s professionals are proficient in KPO software like SPSS, SAS and MS Excel and well trained in
advanced analytical, technical and interpretation skills. But industry is facing stiff competition from countries like
Philippines, Russia, China, Poland and Hungary as these are emerging strong contenders for KPO business in view of
qualified KPO professionals, low-cost advantages, domain expertise, location
advantage, sales and marketing capabilities and data compliance, according
to ASSOCHAM.

10. Indian KPO’s operate primarily through three business
models, i.e., captives, third party and virtual; and the
selection of a business model depends on various
parameters like work complexity, internal competency
levels, nature of the business (core or non-core), and
costs or stakes involved.
Captive Centers
Here, a company establishes its dedicated operations in
regions offering high talent availability at low operation
costs. Such an arrangement caters only to parent
company requirements. Since the capital investment is
large with higher payback period, these are generally
established by larger multinational companies
Examples include Goldman Sachs, JP Morgan, UBS,
Deutsche Bank, Morgan Stanley
Third-Party Service Providers
As the cost involved with captive centers is high,
especially if the volume of work is not large, third-party
service providers offer a viable option to companies. One
of the key benefits of third-party service vendors is that
operations can be ramped up as and when required. At
the same time, third-party vendors offer greater flexibility
and customization to clients. Some of the Indian
companies operating on this service model include
Evalueserve, Irevna, Aranca, etc.
Virtual Captives
Virtual Captive centre's have both the functionality of
captives and third party providers. It is a hybrid business
Model. There is no upfront investment undertaken by the
parent company in establishing the centre as in a captive
centre. This centre acts as an overseas resource centre
for a client in the third-party service provider setup. The
major advantage of virtual captive is that, it provides
higher quality of services involving higher transparency,
control and security. The clients are usually willing to pay
a premium for virtual captive services.
Emerging Business Model

11. Emerging Trends
Indian Companies Exploring Expansion Opportunities Overseas
A large number of Indian companies are looking towards expanding their operations by setting up delivery
centers across the globe. Indian players are targeting regions such as China, Latin America and Eastern Europe to set
up new offshore locations. Some of the prominent reasons for this trend include the following:
• Clients are increasingly demanding localized services. Thus, Indian KPO vendors are exploring offshore locations
where they can leverage the local talent and language capabilities.
• Operating in different geographies with varying time zones helps in offering 24*5 services, which acts as a
substantial differentiator for any KPO player.
Expanding Into Tier-II Cities
KPO players are facing concerns related to high attrition rates and real estate prices. Moreover, the
pressure to maintain profit margins is fuelled by an increased level of competition. To mitigate these challenges, KPO
players are now turning to Tier-II cities such as Jaipur, Chandigarh, Hyderabad, Pune, a trend that is expected to gain
momentum in the near future.

12. Emerging Trends Continues…
Need of Professionals Consolidation and fragmentation of outsourcing
fields in KPO
Boom in the knowledge process outsourcing
industry is an established fact now and as per estimates
of various studies the industry. Indian KPO industry
growth will necessarily mean a quantum increase in the
workforce engaged in providing KPO services.
Hiring of professionals such as chartered
accountants, doctors, lawyers and engineers will see
sharp rise.
Minimal entry requirements, low
infrastructure and set-up costs will encourage the smaller
technically strong companies to establish a KPO set-ups.
Unlike commodity services of BPO such as call centers,
CRM or large-scale back-end processing, the minimum
critical size for KPOs need not be very large. What is
more important is to have a high degree of specialization
which will allow even small firms to function profitably.
Further, since the knowledge process outsourcing
business is not necessarily scale driven, smaller business
entities having total strength of around 20 professional are
also gaining popularity along with concept of freelance
work. This style of functioning is driving the increasing
fragmentation of service providers.
The emergence of “KPO” will see a
proliferation and entry of new service providers in the
arena of the industry. “The emerging opportunities in
knowledge services are attracting a new breed of
entrepreneurs, absolutely professionals like lawyers,
chartered accountants, doctors, engineers, scientists, etc.
into the outsourcing business..

13. Emerging Trends Continues…
Small Towns –New areas joining the outsourcing
buzz
Expansion of offshore centres in India
India’s status as the No. 1 destination in the
offshore business is not in doubt. However, lf the growth
has been concentrated in a few cities, like NCR Delhi,
Mumbai, Hyderabad, Bangalore, Pune and Chennai. But
rising wage costs and rising attrition in the larger cities
coupled with attractive benefits being offered by many
state governments are driving the BPO move to the
hinterland.
Various state governments in association
and coordination with STPI India are developing
IT/software parks with complete infrastructure to
encourage companies to move to smaller cities.
States like Punjab, UT Chandigarh,
Rajasthan, Uttar Pradesh taking the cue from
Maharashtra, Andhra Pradesh and Karnataka, have
taken initiatives and have started
investing heavily in IT Parks.
As benefits of offshoring business are becoming
evident, large multinational corporations, are expediting the
process of spreading the offshore presence. The bulk of this
is towards fully owned captives, driven by two factors. i.e.
firstly, the increasing sensitivity towards data security , IPR,
and confidentiality; all of which make captives center to be
the most preferred choice. Added to this, many large
companies that have been testing the offshore waters are
looking to plunge into the water in a bigger way. In the recent
past several Fortune 500 and FTE 100 already have
established their captive centers in India. The trend is to
further accelerate keeping in mind the changing forces and
dynamics of the industry.”
However, after a certain size, the economics of
captive offshore centers becomes unfavorable as compared
to contracting and outsourcing to third-party vendors; and
many corporations will prefer this route as they expand in
India.

14. Emerging Trends Continues…
Acquisitions and Mergers to increase
Acquisition and merger activity has reached new heights and is expected to be much higher in the
coming years as a mode of expansion. However, along side mega deals, large number of small deals shall also
become fruitful. This will be driven by acquisitions in the knowledge services domain, where acquirers will find it
worthwhile to enter into small deals to acquire domain knowledge, new clients and position themselves in this small,
but fast growing segment.
Indian IT companies have been entering the both BPO and Knowledge Process Outsourcing (KPO)
industry in a big way, and Systems integrators and IT companies formed the maximum percentage of acquirers. The
acquisitions are found to be an easy way to acquire domain specific capabilities. Cognizant, KPIT and Patni were
among the larger IT companies are examples in the category of BPO.

15. Indian KPO Industry Performance
India's Knowledge Process Outsourcing (KPO) industry may touch $30 billion by 2015 from the existing $20
billion, on the back of growing demand for knowledge-based services, a study said. "The rising demand for professional-based
services is expected to drive the growth in the industry. It would be in areas of research for capital and financial
markets, legal and editing jobs for international publishing houses, among many others," according to an Assocham study.
The country would need about 6-8 lakh people in the industry. At present, the sector engages about 3.5 lakh
people, the study said. Considering the situation that there is no dearth of doctors, engineers, MBAs and lawyers in India,
the industry is banking on availability of this talented pool to fill up its seats, but now they are facing the supply crunch, it
said.
At present, domestic KPO industry is facing stiff competition from countries like China, Philippines, Russia,
Poland and Hungary as they offer services at low costs, have sales and marketing capabilities, domain expertise and
location advantage, he added.

16. Competitive Landscape
India will remain as the top knowledge process outsourcing (KPO) destination despite competition
from China, the Philippines and Sri Lanka, says a report released by independent technology research firm Ovum.
These countries will find it hard to challenge India’s dominant position in the market in the
foreseeable future, says the report. However, these regions emerged as new options for companies to pursue a
multi-shore strategy.
The report cited that the KPO industry is maturing and many services have been added in the space.
From its early beginnings in research and analytics, the definition of KPO now has many other services like legal
process outsourcing and clinical trial management, among others. The report also revealed that share of data
analytics was expected to increase from 18.5 percent to 20.6 percent ($1.15 billion) and legal process outsourcing
is expected to record robust growth to a $1.3 billion market by 2015.
The NASSCOM and Crisil study further said that financial services would continue to be the largest
contributor with a 32 percent share ($1.4 billion) of the market. That would be followed by healthcare at 19.5
percent and hi-tech/telecom and retail at 13 percent each. As per reports, the
knowledge services market is currently pegged at around $2 billion. Some of
the key Indian companies in the KPO space include eClerx, Evalueserve,
Genpact and ExlService Holdings.

17. Competitive Landscape
Indian KPOs have significant competitive advantages in terms of low-cost offerings, skilled
manpower with sales and marketing capabilities, domain expertise and knowledge of regulatory compliances.
Highly educated professionals in engineering, medicine, management, accountancy, company secretary, legal
fraternity are available in India. The Indian KPO providers offer a range of solutions to various industry segments
such as FMCG, engineering, automobile, telecom, R&D, BFSI, etc.
With tight SLAs and quality services, Indian KPO vendors deal with confidential data, including
financial data, treasury and cash management functions and investment portfolio decisions. Indian KPO Vendors
not only ensure safety of confidential client data but also have better work tools and processes, more sophisticated
client centricity, higher billing rates and more domain focused organizations.

18. Challenges
Risk
Management
High
Investment
Confidentiality
Emerging
Destinations
KPO demands professionals with advanced analytical and
specialized skills in specific domains. Confidentiality
and enhanced risk management, requirement of
higher level of control and high investment for
infrastructure are some of the challenges involved
in this sector. KPO also faces attrition, as it is difficult
for companies to retain talented and trained people.
With higher pay packages and perks, people
change jobs very frequently. Many people are
still reluctant to join as they feel it is an
unstable career. Another major challenge faced
by the industry is the emerging KPO
destinations.

19. Recommendations
• Establishing business focussed SLA’s
• Proactively Design tactics to appropriately mitigate outsourcing risks.
• Creating more opportunities for highly qualified workforce.
• Government needs to take measures towards liberalisation & deregulation of policies.
• Better infrastructure facilities.
• Maintaining highest degree of quality standards, to stay ahead in competition.
• Establishment of higher educational institutions, for deployment of skilled workforce.

20. THANKS
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