| Scripting Growth: Why the next two years are important for KPO industry? |
| Wednesday, 17 November 2010 | |||
 The outsourcing industry can attribute its meteoric rise to a heady mix of parameters, though the critical ones were cost and labor arbitrage. While the business process outsourcing (BPO) industry has had its share of upheavals and has now been accepted, the knowledge process outsourcing or KPO as it is commonly known, is creating waves as well. Some of the KPO segments that are being tapped into include market research and analytics, legal process outsourcing, publishing outsourcing, e-learning outsourcing, HR and recruitment outsourcing, etc.
The KPO segment that thrives on knowledge and domain skills has been
charting a steady albeit slow growth over the last five years. As
conversations with buyers need to move beyond cost and labor arbitrage
to value offered in terms of skills and innovation, most vendors have
found the progress a little slow. It is hardly a surprise as acceptance
of something as abstract as knowledge had to chart its own course.
The sound growth over the last five years has however made the KPO segment emerge stronger in terms of their value proposition. The knowledge service providers have utilized this time to strengthen their processes, infrastructure and capabilities. They understand the buyer market and their needs fairly well. Service providers have also been able to identify areas of improvement – both internal and external, and are better equipped to deal with them. They have explored areas of growth, are offering clients more options, and are in a good position to predict client needs. Many KPO providers have gradually increased their onshore presence, as they realized the importance that clients attach to dealing with physical presence.
As the buyer community started approaching leaner models the need was to
outsource to partners that could contribute by taking over the
investment intensive, critical, knowledge driven functions that
typically needed qualified and highly paid individuals. As business
plans were rethought and refurbished, the outsourcing strategy received
special attention. Chances are that the change will sustain and KPOs
need to make the most of this opportunity in the next two years.
What will aid this growth?
The early starters who have been using the KPO services and have benefited till date are large corporations. They have been experimenting without having gone public about their initiatives. However with some big announcements recently, the change can be noticed. Outsourcing seems to have lost the potential to win or lose elections, and Obama’s much hyped visit to India having drawn curtains on the political drama, the outlook seems to be changing. Large corporates apart from being more vocal are also extending their current outsourcing initiatives to include more services, as illustrated in the example earlier. They are demanding more services, further value-addition and faster move up the value chain from the service providers.
Confidence about skills of the service providers has increased and hiring onshore experts has given the entire movement a fillip. KPOs, in particular have been able to tap into a resource pool that is well qualified and has the necessary domain knowledge at much lower costs. These individuals are keen to learn and grow fast, and have brought a lot of value to the entire knowledge outsourcing phenomena. Another factor that will have a huge impact on outsourcing is the emergence of the new markets. As multi-nationals expand presence into newer markets, outsourcing makes more sense than ever. Cultural differences are being acknowledged and met with more sensitivity. One buyer mentioned how their employees look positively at the opportunity of handling an offshore team that comprises of trained and competent individuals. The clients’ future plans are more akin to developing service providers as partners that can contribute to overall business objectives. KPOs have also been able to avoid the attrition issues with their ability to offer employees a definite career growth. The teams working from offshore location are treated as extensions of the client teams. The fast growth will be fostered due to a combination of all of the above stated parameters in terms of readiness, awareness and acceptance.
More and more small and medium enterprises are also likely to tide over their initial reluctance, and explore outsourcing of knowledge services. This segment of the market that has largely remained untapped due to the difficulty in approaching will open up a huge growth segment especially for the niche KPO players.
Both companies and knowledge service providers are on a stronger footing as they gear up to meet the demands of the new world, and this is bound to reflect in their appetite to expand business and experiment. KPO need to stay focused to meet this opportunity head on and open to new suggestions and demands from clients to cater to this fast growing segment.
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