Tuesday, November 15, 2011

India KPO Industry 2011 - Growth Forecast till 2015

KPO refers to process of outsourcing knowledge intensive tasks and functions and India is a dominant player in this market with 70% market share. Indian KPO players offer market research, data analytics, legal services, content and publishing services, pharma data processing etc. Evalueserve estimates Global KPO industry to grow to $ 17 billion by 2014, from current $9 billion in 2011 and is expected to grow at an annual rate of approximately 24% for the next four years (2010-14).

Chart: 1 Global KPO Industry Market Size and Number of FTEs (2006-2014)

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.

Chart: 2 India KPO Industry Market Size and Number of FTEs (2006-2014)

NASSCOM estimates on KPO Market
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.

ASSOCHAM estimates on KPO Market

The Associated Chambers of Commerce and Industry of India has projected KPO industry’s size growing to US$ 8 billion in 2011 and 10 billion mark by 2012 with a growth rate between 25-27%. Currently, the KPO size is estimated to be around US$ 5.7 billion and the sector has grown at around 15-17% in last few years. According to ASSOCHAM, domestic KPO industry is facing stiff competition from countries like Philippines, Russia, China, Poland and Hungary as these are emerging strong contenders.
Advantage India in KPO

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. Specialized professionals with specific domain knowledge, problem solving and analytical skills and experience are required who demand 15-20% higher salaries that BPO professionals.

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.

India KPO Industry - Future Concerns

The KPO industry was affected by Global financial crisis that caused significant slow down in revenues and presently KPO industry is maturing. The range of services has expanded from initial research and analytics. And as the market has developed, variety of offerings such as legal process outsourcing and clinical trial management are included. KPO industry is also facing the challenge of adequate talent availability and high attrition rate among young professionals. Skills shortages particularly relating to pharma clinical trials etc are major concern in India KPO. Wage inflation is another cause as India is loosing out on the lower cost advantage.

Investments are to be made in developing the infrastructure, buying tools and technologies, develop risk management and to protect confidential client data. The KPO market is expected to grow significantly in coming five years and so is competition from other countries, In Asia Pacific, China, Philippines and Sri Lanka are becoming viable destinations particularly for Pharma, healthcare and Accounting related KPO respectively. Russia and Eastern European countries like Poland, Hungary are also emerging as attractive KPO destinations for engineering and design related KPO. Near shoring is advantageous for Latin American countries as they are near to US and Canada.

Current European debt crisis and US Economic slowdown are causing concern for India KPO industry. Global Financial crisis in 2008 had a drastic affect on the industry where clients cut down spend and KPO industry slowed down and missed its revenue targets. India KPO vendors are gearing up to such a scenario with reducing prices, improving the skill sets, investing in new technologies and looking for high end work that is going to help the clients to overcome slowdown and crisis. Particularly there is focus on improving and acquiring the Pharma, healthcare and life sciences related skills and professionals as significant investments are announced by US and other governments.

India KPO Vendors understand the challenges that exist and they are developing the necessary strategies and acquiring the relevant skills to overcome short term challenges and significantly grow revenues in long term. 


anna dosan said...

KPO services to deliver a unique model to business processes experts.
Outsource in India

Josoft Technologies Pvt Ltd said...

Nice Info!

Knowledge Process Outsourcing (KPO) can help them on this front by improving their time-to-market, give them an access to special skills, and enhance organizational effectiveness.