Knowledge process outsourcing will be a growth story: experts

Published: Friday, 18 May, 2007, 01:17 PM Doha Time

CHENNAI: In an office in the southern port city of Chennai, analysts pore over stock market data for a London-based fund company, searching for investment opportunities.
Some 1,900km away in Gurgaon, on the outskirts of Delhi, lawyers have taken over research and patent filing for several Western technology and healthcare companies.
These are examples of knowledge process outsourcing (KPO), a new fad across India, where companies are trying to move up the value chain and away from call centres staffed by young people tutored in American accents.
As well as examining financial data and drafting patents, firms in India are managing payrolls and accounts for Western companies, carrying out market research and doing a host of other high-value tasks.
The knowledge process market in India is worth $2.5bn to $3bn a year, and is likely to grow to $10bn to $12bn by 2012, said Ashish Gupta, chief operating officer of Evalueserve, a knowledge process firm with about 1,500 employees in India, China and Chile.
Driving this boom are huge cost savings for Western companies and bigger fees for Indian companies than they can earn from running call centres. Although salaries in India are rising, they are way below Western wages.
Patent research can be done in India at $50 to $80 an hour, compared with $150 to $350 in the US, said R Sivadas, chief executive of Scope e-Knowledge Centre Pvt Ltd in Chennai, which has clients in publishing, healthcare, and engineering.
Average billing rates in the knowledge process sector are 40 to 50% higher than those in the call centres, said Sivadas, whose company employs 485 people, 95% of them engineers and medical doctors.
“We have just touched the tip of the iceberg. In the next six to eight years, KPO is definitely going to be a growth story,” said Sivadas, whose firm will raise staff to 680 by March 2008.
Another such firm is Sundaram Finance Ltd, which set up a back-office subsidiary six years ago to provide research services to local financial firms and now has 23 clients from Britain, Australia, Singapore and the Middle East who have outsourced jobs like market and data research.
In January, India’s Hinduja TMT Ltd and British-based business consulting and outsourcing firm Centric Consulting Ltd entered into a joint venture with law firm Fox Mandal Little to provide legal outsourcing service.
Indian software majors Infosys Technologies Ltd and Wipro Ltd are also vying for a bigger share of the KPO business.
Infosys made $147.52mn in profit from all business process outsourcing in its most recent fiscal year, 8% of it from these high-value, knowledge tasks.
“I expect knowledge services to continue to grow much faster,” said Amitabh Chaudhry, chief executive and managing director of Infosys’ business process unit. “That’s a very important area for us both from the opportunity perspective and from continuing to push the envelope to improve per capita productivity.”
Wipro’s business process outsourcing unit aims to double the revenue from knowledge services to 40% by 2009.
The growth in knowledge process outsourcing has come on the back of India’s pool of English-speaking talent and its lower wages, but there is a looming shortage in graduates in business management, engineering, financial research, law, accounting and medicine.
“There are two issues in terms of manpower — in quantity, there is no problem, but in terms of quality there is definitely an issue,” Sivadas said.
India produces about half a million technically trained graduates, 300,000 post-graduates and doctoral candidates and 20,000 lawyers every year, but many are unsuitable for direct employment in the industry.
“A lot of time, money and effort are spent in finding right candidates. It’s not as easy as the numbers make it out to be. In this business, you just can’t pick people off the street,” Sivadas said. – Reuters