kpo ppt

KPO – The Next Big OpportunityChallenges and Success Factors

Mohit Srivastava NASSCOM Emerging Companies Forum 2005

September 16, 2005

© Evalueserve, 2004. All Rights Reserved - Privileged and Confidential

Slide 2

Presentation Plan

KPO - An Industry Overview

Key Growth Drivers

Captive vs. Third Party

From BPO to KPO - Challenges and Success Factors


Slide 3

Presentation Plan


Key Growth Drivers




Slide 4

India, with its strong IT and BPO background, is well positioned to leverage the KPO opportunity

Source: Evalueserve Analysis

1990’s 1998 2000

IT Outsourcing

This involves offshoring of IT services, offshore software development and support

Business Process Outsourcing

This involves offshoring of low-end (contact center kind

of) work

Knowledge Process Outsourcing

This involves advanced analytical and technical skills as well as some

decision making

Revenues (India) for 2003-04:

IT Outsourcing = USD 21.5 billionBPO = USD 3.9 billionKPO = USD 0.72 billion

Revenues (India) for 2003-04:

IT Outsourcing = USD 21.5 billionBPO = USD 3.9 billionKPO = USD 0.72 billion

Expected CAGR during 2003-2010:

IT Outsourcing = 27.5%BPO = 30.6%KPO = 49.5%

Expected CAGR during 2003-2010:

IT Outsourcing = 27.5%BPO = 30.6%KPO = 49.5%


Slide 5

Global KPO market is expected to be USD 17 billion by 2010, with India having 71 % share

Source: Evalueserve Analysis

KPO market in India = USD 12 billion by 2010

Global KPO market = USD 17 billion by 2010

KPO market in India = USD 12 billion by 2010

Global KPO market = USD 17 billion by 2010

Indian KPO sector will increase its share in the Global KPO sector to 71% by 2010 from 56 % in 2003

Indian KPO sector will increase its share in the Global KPO sector to 71% by 2010 from 56 % in 2003

29%

18%12%

12%

12%

8%9%

Data Search, Integration and Management

Biotech and Pharma

Engineering and Design (incl. VLSI, Highway Design, etc.)

R&D (excl. Biotech, Pharma & VLSI, etc.)

Remote Education and Publishing

Animation and Simulation Services (incl. Analytics)

Others

By the year 2010, several new KPO services will become prominent in the global offshoring space

By the year 2010, several new KPO services will become prominent in the global offshoring space

Out of the estimated opportunity of USD 17 billion in the KPO sector in 2010, the major revenues will come from six prominent sectors

Out of the estimated opportunity of USD 17 billion in the KPO sector in 2010, the major revenues will come from six prominent sectors

5671

4429

0%

25%

50%

75%

100%

2003 2010

India Rest of World


Slide 6

Several MNCs offshoring high-end work to India

Financial Services

Telecom and IT

Semiconductor

Multinational Companies

Pharma/Biotech


Slide 7

…to offer massive employment opportunity …

820,000

250,000

BPO

KPORevenue generation (2010)

Employment opportunity (2010)

USD 18 billion

USD 12 billion

Indian non-IT off-shore servicesIndian non-IT off-shore services


Slide 8

Presentation Plan


Key Growth Drivers




Slide 9

…several demand side and supply side factors fuelling the KPO trend …

Shortage of knowledge professionals in developed nations

Cost pressure

Reduced time to market

Need for more flexibility

Demand-side Trends

BPO and IT vendors maturing

Players moving up the value chain

Increasing domain expertise

Supply-side Trends


Slide 10

Demand-side drivers including shortage of labor, particularly in high-knowledge industries...

Expected shortfall of labor by FY 2010Expected shortfall of labor by FY 2010

5.6

0.7

0

1

2

3

4

5

The US The UK

Pro

fess

ion

als

(Mill

ion

s)

Majority of the shortfall in high-knowledge industry


Slide 11

….and significant cost savings will make global off-shoring an economic imperative for developed nations….

0

20

40

60

80

100

BPO KPO BPO KPO BPO KPO

US

D p

er h

our

On-shore Near-shore Off-shore

20 - 50

> 70

15 - 40

40 - 60

10 - 25

25 - 40


Slide 12

Supply-side drivers include maturing of BPO, and players moving up the value chain …

GrowthEmbryonic Mature Aging

Time

Ma

turi

ty Engineering

High

Low

Specialized players emerging Complexity quickly increasing From captives to third-party “Double Sourcing”

AccountingHR Admin

Insurance Claims

Tech Support

KnowledgeProcesses

IT Outsourcing

Call Centers


Slide 13

..the industry will keep growing due to addition of newer processes

The size of addressable market for BPO is high and it is expected to increase for many years. These market show no signs of maturity in the foreseeable future.

Ind

us

try

Siz

e

Time

Individual BPO processes will witness their respective lifecycles

Ind

us

try

Siz

e

Time

The combined effect is equivalent to an ever growing industry


Slide 14

Presentation Plan


Key Growth Drivers




Slide 15

‘Buy’ increasingly becoming preferred setup, esp. for SMEs…

0 10 20 30 40

KPO

BPO

KPO

BPO

USD per hour

Mak

eB

uy

10 - 20

25 - 35

15 - 25

35 - 40Advantages of ‘Buy’ vs. ‘Make’:

• Faster ramp up• Lower complexity• Lower cost• Better control


Slide 16

But no ‘one model fit all’ approach possible…decision guided by combination of factors…

Factors Third-Party

Subsidiary

Initial investment and set-up costs Low High

Operational costs Low High

Initial set-up time Low High

Operations ramp-up time Low High

Management complexity Low High

Direct exposure to external/macroeconomic factors Low High

Direct control over organization culture and operations Low High

Direct control over intellectual capital base Low High

Data security Medium High

Direct control over internal processes Medium High

Third-party preferred Offshore subsidiary preferred


Slide 17

Presentation Plan


Key Growth Drivers




Slide 18

Operational challenge

• Produce academic skill pool

• Recruiting of talent

• People development

• Meritocracy

• Performance management

• Retention

• Security

• Delivery processes

• Quality

• Productivity

• Confidentiality

• Intellectual Property

People-related Process-related


Slide 19

Sales and management challenges

• Language/cultural sensitivity

• Understanding of local business environment

• Experience of selling professional services

• Established network with key decision makers

• Change in mindset from selling IT / BPO to KPO services

• Focus and specialization

• Synergistic diversification

• Partnerships and alliances

Local Sales Force Right Management Focus

Thank youMohit Srivastava

[email protected]

www.evalueserve.com

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