kpo industry
TRANSCRIPT
INTRODUCTION TO KNOWLEDGE PROCESS OUTSOURCING (KPO)
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
India’s Service Sector
India’s service sector has grown at 8.1% per annum between 1993 and 2003 against 6.7 % per annum between 1983 -1993
The share of service sector in GDP has increased from 28% in the 1950s to almost 55% in 2006
IT software and Outsourcing are the chief contributors of the booming service sector
India’s service sector accounted for 55% of the GDP in 2006 which is one of the highest in the world
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1950 2000 2003 2006 2009E
Period
Service Sector Revenue (USD Billion)
Revenue
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% o
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DP
US UK
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Service Sector as a % of GDP
2003
2009E
History of Outsourcing (1/2)
IT Services, System Analysis Network Design Software
Implementation System
Integration R&D Report Network
Management
IT/ITES BPO KPO
Transaction processing
Selling Insurance policy
Technical Support Voice and Email
Support
Business Research
Investment Research
IP Research Legal Process
Outsourcing Data Analytics
and Financial Analytics
History of Outsourcing (2/2)
IT/ITES BPO KPO
Market Size – 2003(USD Billion)
21.5 2.78 0.72
CAGR (2003 – 2010) (%)
27.5 30.6 49.5
Share in Indian Service Sector (%) (2006)
7.03 0.91 0.24
Started in 1990s 1998 2000
Difference Between IT & KPO
KPO is run as a professional services firm and not a ‘White Collar Factory’
Critical mass of KPO is 2-3 times smaller than IT/BPO companies
Scalability is a big challenge in the KPO sector due to complexity of work
Sales force commissions are higher in KPO sector as compared to IT/BPO
The size of IT industry is 10 times that of KPO sector and the number of professionals working in this industry is 15 times that of KPO industry
KPO Sector – Present and Future
India’s share in the Global KPO sector would increase from 56% in 2003 to 71% in 2010
KPO services would form 2% of the Indian Services sector by 2010
KPO services would be a USD 12 billion opportunity by 2010
01020304050607080
2003 2010
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Market Share %
India
Others
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2003 2004 2005 2006 2007 2010
Year
KPO Revenues - USD Billion
KPO Revenue
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Who is Outsourcing?
Asset Mgmt Firms
Research Firms
Start-up Law Firms
Industries
Consultants
Banks
KPO Services
KPO Sector - Exports
Some of the factors resulting in high export of BPO/KPO services are
A growing and highly educated English workforce
Huge Cost Advantage Competent Management
of Data Security Risk World Class Telecom
Infrastructure Government Support
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BPO KPO
Sector
Exports in BPO and KPO Sector in 2010 - Billion USD
Exports
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%
Con
trib
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Indi
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KP
OUS UK& Canada Europe and
SEA
Destination
Export Destinations - KPO
Export Destination
Segments in KPO Industry and Potential
29%
18%
12%
12%
12%
9%
8%
Data Search, Integration and Management
Biotech and Pharma
Engineering and Design
R&D
Remote Education and Publishing
Others
Animation and Simulation
Data Search, Integration and Management would include Business, Market, Investment Research, etc.
It is the largest segment growing at a CAGR of >50% YOY Biotech and Pharma segment would include contract research outsourcing and clinical trial research
which is cheaper in India Engineering & Design activities are specifically for manufacturing firms, e.g. Auto companies are
outsourcing their idea generation and implementation activities to players in India Development of animation games are being outsourced to players in India A new wave – PEOPLE TO PEOPLE OUTSOURCING
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Location Attractiveness
Location Attractiveness
India & China – Battling Giants India has low wages, pool of skilled talent, favourable tax structure. English language skills is a big
advantage China trails India in BPO experience and advantage. It has cost advantage and large educated
population. Outsourcing from Japan and Korea is picking up.Both China and India score low on political and economic risk and weak infrastructure
Malaysia and Philippines – Emerging Asian Contenders Malaysia has attractive business environment, low cost of infrastructure and high level of global
integration Philippines has cultural affinity to US, English talent pool
The Czech Republic, Poland and Hungary : The Emerging Europeans Excellent outsourcing destination for European countries due to cost options, cultural similarities, good
language skills, technical capabilities and minimum regulatory issues for European firms The Czech Republic scores fourth on the scale due to competitive infrastructure cost, a stable business
environment and strong education system.
Brazil and Chile : The Latin Leaders Cost Advantage and experience in BPO sector are in Brazil’s favour Chile offers the best business environment and infrastructure in the region
.
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Value Chain in KPO (1/2) Consulting Value Chain
Data Search Data Integration
and Analysis Recommendation
KPO Players can executethis portion of the value chain, e.g. Go to Market Strategy
This value chain can benefit:
•Consulting Companies•Research Firms•PR Firms•Companies in various sectors like
•Telecom•Retail•Media•Energy
Value Chain in KPO (2/2) Financial Services Value Chain
Deal Identification Due Diligence Deal Execution
KPO Players can executethis portion of the value chain, e.g. Target Acquisition by a Bank or Private Equity Player
This value chain can benefit:
•Investment Banks•Merchant Banks•Private Equity •Hedge funds•Mutual Funds•HNI
KPO – Value Proposition
KPO Services help clients in following manner
Reduce Design to market lead time
Provide research on markets, competition and products
Enhance organization effectiveness in business administration
Help in dealing with rapidly evolving business scenarios
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32
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Before Outsourcing After Outsourcing
Value Creation
Profit
Variable Cost
Fixed Cost
KPO – Value Creation for Clients
Cost Saving Average annual salary of an MBA in US is USD 85000 whereas in India it
is USD 12000 Availability of skilled knowledge workers
Indian universities churn out about 2 million graduates every year. Every year about 0.3 million engineers are added to the existing labour pool
Peak Load Absorption Provides flexibility and agility to organisations Organisations are not required to invest in infrastructure or resources
Complexity Reduction Organisations are not required to manage huge amount of knowledge
and resources SME Solutions
SMEs usually have small set up and overhead costs are very high for them
SMEs can avoid the initial set up costs and associated fixed costs simply by outsourcing some of their activities
Enhancement of service quality KPO sector comprises of graduates with excellent English speaking and
analytical skills
KPO – Value Creation for Employees and Vendors
Job Creation KPO industry would grow at a CAGR of 49.5% till
2010. Number of jobs in KPO industry would increase from
existing 75,000 to 250,000 Salary Increase
The revenue per unit is more in KPO than in BPO Hence KPOs have higher average salary than BPO
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
KPO Business Models
Captive Model Companies set up their KPO KPO would have only one client Examples – JP Morgan, Mckinsey
Knowledge Centre
Third Party Model Companies outsource their work to a
Third Party organisation The third party company would have
several clients Examples – Evalueserve, Copal
Partners, EXL
Hybrid Model Companies outsource their work to
Third party as well as their own KPO This model is usually used to test
effectiveness of a company’s KPO
OutsourcingOrganisation
KPO –Outsourcing Organisation
Outsourcing
Organisation Third Party
KPO
Make or Buy? – Developments Similar to IT Outsourcing
2015 KPO vendors surpass captives and address SME Market
2010 Globalization and Specialization of Vendors
Indian vendors surpass captives
2005 Rise of KPO Vendors
Expansion of Indian Vendors
2000Early KPO Captive set up
Rise of Indian Vendors in IT
1995
1990
1985 Arrival of IT western captives
Phase I Phase II Phase III Phase IV
Make or Buy
Shift has been observed towards vendor model due to following reasons:
Faster initial set-up Faster and easier initial staffing Better long term employee retention More Flexibility Better Control IT & Compliance
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Drivers for KPO
Shortage of talent in developed countries Tighter emigration laws make offshoring of these
services a viable solution In order to remain competitive companies need
to: Cut cost Reduce time to market for their services and products
Economies of scope generated by entry of many IT players in KPO domain
BPO companies moving up the value chain Availability of all types of services through a
single vendor
Inhibitors for KPO
Talent Crunch Though 3 million students graduate from
Indian Universities every year, only a fraction are employable
Cost Increase Average wages have been increasing at a
fast pace which may affect India’s competitiveness vis-à-vis other low-cost locations
Key Trends in KPO
Spinning off captives Genpact spun off from GE in 2004 Plans of Citibank Global Services being spun off
Moving from Captive only to Dual-Sourcing Peak Load Absorption Complementary Services Global Support
Not setting up Captives anymore Estimates show that the share of companies working with
vendors instead of setting up captives would be 75-80% Shift to vendor model and SME customer would
drive long term growth
Presentation Plan Introduction to KPO Business
History of Outsourcing Who and What is Outsourced
Location Attractiveness for KPO Value Chain & Value Creation in KPO KPO Business Models Drivers, Inhibitors and Trends in KPO
Industry Key KPO Players
Key Players in KPO SectorKPO Captives Focused KPO Vendors ‘BPO adding KPO’ vendors
Goldman Sachs Evalueserve Pregeon
Morgan Stanley Amba Research Genpact
JP Morgan Irevna WNS
UBS (2006) Copal Partners Office Tiger
Credit Suisse Inductis Wipro
Deutsche Bank Aranca Accenture
SAP (Product Development) Manthan Integreon
GE (Technology Research) Market Rx Mphasis
Microsoft (Product Development)
Netscribes Nipuna
IBM (Technology Research) RocSearch EXL
Delphi (Automotive) Scope e-Knowledge
GM (Automotive) Pangea3
Key Players in KPO SectorCompany Employees Centres in India Services
Evalueserve 1900+ Gurgaon Business, Market, Investment Research, Data & Financial Analytics, IP, LPO
Genpact 14000 Gurgaon, Hyderabad, Jaipur, Bangalore, Kolkata
Finance & Accounting, Sales & Marketing Analytics, Supply Chain & Procurement, Information Technology Services, Customer Service
Inductis It is part of EXL Services
Gurgaon Management Consulting and Analytics Services
Irevna It is part of CRISIL Chennai Equity Research, Quantitative Research, Credit Research
Copal Partners NA Gurgaon Investment Research, Business Research
Pipal Research It is part of First Source
Gurgaon Business Research, Investment Research
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