As the KPO market is expected to rise and touch $17 billion by 2010, the transition of leading Business Process outsourcing (BPO) companies to knowledge process outsourcing is but obvious. NASSCOM predicts a 45 % per annum growth in the KPO industry till 2010 and lucrative areas include engineering, design, biotechnology, pharmaceuticals, basic data search and integration and management.
According to Boston Consulting Group, Indian outsourcing industry is facing a rupee rise that reduces rupee profit margins. Analysts advice that increasing the percentage of KPO inclusion along with BPO services is a effective way to improve the condition of the balance sheet. Moreover, the global economy is increasingly driving towards knowledge intensive processes and hence, the creation, protection and monetization of knowledge is becoming increasingly important. BPO services are process intensive while KPO services are more domain knowledge intensive.
It has been established within most leading Indian BPO companies that BPO services alone can keep the profits flowing. Though BPO services remains the support business of many KPO services offer a 15-20 % higher profit margin than pure and plain BPO work such as data entry, mortgage processing and customer support. Global markets are becoming more flexible and products more complex, creating a demand for higher level of analysis of trends based on technical data. Hence, growth is more or less parallel to delivery of high-end competency on demand.
Niche KPOs in areas such as decisions support services and financial data services are built on domain capabilities and will thus remain unaffected by any future advance in BPO services. It can be safely said that a business model based solely on the execution of outsourced non core tasks cannot sustain a company anymore as it is in BPO outsourcing. The money spinners are the knowledge based, domain expertise intensive processes. Which is why niche KPO companies are battling higher competition and attrition of clients to newbie KPOs.
KPO Services India 
January 27, 2008 at 8:54 am
Useful post, thanks
Along with KPO, as you have also briefly mentioned in your article, Engineering Services Outsourcing is considered to be the sunrise industry now in the outsourcing segment (one can also argue that Engineering Services Outsourcing is a part of KPO!)…and for good reason too, because India has millions of engineers, at least a % of whom are well-equipped and talented.
Whether India will be able to repeat its IT’s BPO success in ESO is something we need to wait and see, but given its past record and history, there is a good chance indeed that it can repeat it.
What will also be interesting is to see whether it will be the traditional outsourcing leaders who become leaders engineering services too or will it be the likes of Bajaj and Kirloskar who will becomes the leaders in this domain. Will be interesting to watch this space