| KPO: Going the Indian way |
| Tuesday, 22 September 2009 | |
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Reports of the Switzerland-based bank UBS (NYSE: UBS) looking to exit its captive business and knowledge process outsourcing units in India are rife. Genpact (NYSE: GE) and Cognizant (NASDAQ: CTSH) are among the contenders. UBS has two centers in India and another one in Poland, and they are valued at about $100 million. Standard Chartered Bank will open another office for Scope International, its knowledge process outsourcing (KPO) network. The company already has its first office in Chennai. The company also plans to increase the number of its employees. The KPO sector in India has continued on its growth path even during the current economic crisis. Slated to cross $12 billion by 2010, this segment has treaded the path chalked out by the business process outsourcing industry – following the success route as it carefully avoids the pitfalls. The growth has been slightly slow, but that is owing to the high skill sets required. KPO emerged as natural progression for companies that had established their competence in BPO segment. They were able to leverage their experience and knowledge of customer requirements to move up the value chain. Development of skill sets, rapport with clients and offering end-to-end services has worked in favor of establishing India as the preferred destination. The ability to scale up has also been established leading to greater confidence among the buyers. Added to that is the growing confidence in the ability of Indian companies, and gradual transformation into global companies. Some of the other deals that are indicative of the trend are:
This growth has been noticed across verticals and indicates the overall scenario in the knowledge services. A number of IT companies such as Infosys, Wipro, HCL, and others that have already made a mark globally are now branching out into these knowledge intensive services, to be able to add more value to their offerings. Buyers also depend more and more on their vendors for many of these related service-extensions. A number of KPO providers also fall into the category of niche providers, where they develop expertise in a particular vertical. These niche providers are usually small in size and while scalability could be an issue, they are adept at providing services that require subject understanding. The nature of such relationships has undergone a change and though buyers and vendors do enter long term contracts, the degree of difficulty of services decides the billing rates. It may not always be the same billing rate for all tasks, and are usually negotiated as per projects. Experience in the vertical also allows a company to charge higher. Going forward India is slated to capture almost 70% of the offshored KPO services. Some of the other destinations that compete with India within the KPO segment are the Philippines, Hungary, Ireland, China and Poland. Among the challenges that India needs to overcome are lack of vertical specific experts, IP issues, high wages, and reaching out to the small and medium enterprises in the buyer markets. There are a number of small players in the market that are doing very well. The VC/PE interest in the segment is growing, and as the segment achieves more maturity, larger players will continue to acquire the niche providers. However given the scope of the services, the segment will continue to be dotted by the smaller domain experts, and their ability to sustain and succeed will depend upon the quality of the deliverables. ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing; This publication analyses events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities. No responsibility is accepted for errors of fact or opinion. Neither the analyst nor ValueNotes has a position in the stocks covered above, or has received any payment in any form for this report. ValueNotes does not own or trade in the stocks of companies under coverage. ValueNotes does not provide investment banking services or investor relations' services to preserve the independence of its research. Neither ValueNotes nor the analyst incurs any liability arising out of use of the above information/ report. Reproduction in whole or in part without written permission is prohibited. ValueNotes is an independent research firm based in India, and provides a range of custom research and business intelligence services, including India-based research outsourcing solutions. Through a constantly evolving range of products and services, the ValueNotes Outsourcing Practice (www.sourcingnotes.com ) provides service buyers, vendors, consultants and others in the outsourcing industry with access to in-depth analysis backed by reliable primary intelligence. Both ValueNotes and Investrend Research are members of the First Research Consortium, and participate in the organization's standards development panel for independent research providers located at http://www.firstresearchconsortium.com . For up-to-the-minute news, features and links click on http://www.financialwire.net FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp The FinancialWire NewsFeed is now available in multiple formats to your site or desktop, free. Click on: http://www.investrend.com/XmlFeeds?level=268 |
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