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:: 48 India

India’s Knowledge Process Outsourcing
48 India    10/10/2008 1:27:44 PM

Origins of Knowledge Process Outsourcing (KPO)

During the late 1990s, the success of Information Technology and Business Process Outsourcing to low-wage countries and the resulting cost savings prompted several multinational companies to experiment with outsourcing higher-end knowledge-based work. For example:

  • In 1997, General Electric’s captive unit in Bangalore, India, started providing services related to risk analytics to GE Capital (worldwide).
  • During 1998-99, American Express’ wholly owned subsidiary in Delhi-Gurgaon, India, started performing risk and
    credit analytics for several of its credit card divisions worldwide.
  • McKinsey and Company started its own captive centre (called McKinsey Knowledge Centre) in 1998 in Delhi-Gurgaon, India, which started providing market research, business research and data analytics services to more than 6,000 of its consultants worldwide.

Although a few companies began providing higher-end, knowledge-based services as early as 1997, this trend did not gain much momentum until 2003, and it was Evalueserve’s Chief Operating Officer, Ashish Gupta, who coined the term Knowledge Process Outsourcing (KPO) in September 2003, in an effort to differentiate between his firm’s services and those of the established BPO firms. “KPO” has since come to refer to those outsourcing activities that require significant domain expertise (e.g., market research, business research, investment research, and data mining).

Shortly afterwards, in January 2004, I gave a seminar at Telcordia Laboratories in New Jersey titled, “Moving Up the Value Chain in Broad Based Outsourcing Services,” wherein I provided Evalueserve’s forecasts regarding the growth of the KPO industry from 2003-04 to 2010-11. The contents of this talk were later summarised in a July 2004 report, titled “The Next Big Opportunity – Moving Up the Value Chain – From BPO to KPO” which essentially stated that the entire KPO sector worldwide would increase from a revenue base of US $1.2 billion in 2003-04 to US $17 billion in 2010-11. Furthermore, within India, this sector would increase from a revenue base of US $1.08 billion in 2003-04 to US $12 billion in 2010-11, and employ approximately 250,000 professionals in 2010-11.

Since this seminal report in 2004, the acronym KPO has become part of the lexicon of the outsourcing industry worldwide. Indeed, more than fifteen independent articles have been written on this topic (including those from Deloitte Consulting, TPI, and PriceWaterhouseCoopers); at least twelve firms providing such services have KPO as part of their name; there are at least five annual conferences worldwide that are solely about KPO (and some even have “KPO” as part of their names); about 120 captive units of large multinational companies are providing KPO services to their offices in North America and Europe; the majority of the mid-sized and large IT and BPO companies in India have a KPO division; and there are at least 282 “niche” companies in India providing third-party KPO services.

In this article, we revisit our July 2004 report and analyse how this sector has changed during the last three years and how it is expected to grow during the next four. We also delve deeper into the sub-sectors within the KPO industry that are expected to do well (e.g., banking, finance, securities and insurance research; data mining and analytics; and contract research organisations and biotech services) versus those that are still at a nascent stage (e.g., legal and paralegal support services; remote logistic services and procurement support services; and network optimisation and analytics services.)


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