• Leveraging Existing Client Relationships: The large BPOs have built strong relationships with big companies, including Fortune 500 companies. These buyers typically will also have the largest needs in terms of knowledge services. For instance, the largest banks and financial institutions are amongst the biggest consumers of research and analytics. Similarly, large corporations are the biggest spenders on legal services. Given that BPOs have invested significantly in these relationships and have earned the trust of their clients, it makes sense to provide additional services to the same clients.
• Scale, and more scale: The BPO business model is built around scale economies; in operations and marketing. Adding newer services provides more opportunities for growth.
• Specialization generates higher billing rates. Typically, knowledge services such as legal services, engineering design, equity research, market research, publishing and content development, command higher billing rates. Large BPOs are looking to provide an array of knowledge services in a bid to de-risk themselves from low-priced, commodity type businesses.
• Many large buyers are looking to reduce or minimize the number of vendors they deal with, and want their suppliers to provide end-to-end services. Given this, most of the BPOs are looking to position themselves as end-to-end service providers, and adopting a 'scale plus specialization' pitch. We expect most large players to offer every service possible to the customer.

There are a host of options offered in the KPO space. The table below lists some significant segments and key players.

However, not all vendors are currently capable of handling the more complex jobs - which tend to be of smaller value (per project). For large BPOs, such small jobs are often not worth their while, and most of them have focused on the lower-value, higher-volume jobs within knowledge services. At the same time, they need to add high-end capabilities to complete their portfolio of offerings as well as lure clients. In the race to acquire capabilities and satisfy clients, we believe this will trigger several inorganic growth moves by ambitious BPO vendors. We have already seen several such moves, and plenty more are likely in the future - as some of the specialized KPOs reach a scale that makes buying them attractive.

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