The New KPO Mogul : Architectural Designing Offshoring

The Indian Knowledge Process Outsourcing (KPO) industry is witnessing the growth of a whole new segment. Indian architectural KPOs are stepping up on infrastructure and technology and ramping up skilled manpower to cope with the influx. Architectural designing outsourcing to India is growing at an unprecedented pace and is showing no signs of slowing down. With the availability of talented manpower, lower costs and best of the best infrastructure architectural outsourcing to India has gathered commendable speed.

With the increase in offshore demands and wielding the latest software and technical skills, architectural designing outsourcing in India serves clients from UK, the US and the Middle East. A number of small-medium firms with 50+ employees have mushroomed across the country offering quality architectural designing outsourcing serves at a fraction of the cost. The growth in the industry has been so spectacular that the rupee crunch and fall in the number of skilled resources has not drastically affected most firms.

Industry estimates predict architectural design KPOs will form the second largest segment in the service industry of India. Offshore architectural designing poses enough benefits to the overseas markets, which is the reason behind a marked growth in the demand for these services in leading KPO industries such as in India. Accounting to $16.7 billion in revenue, India is expected to contribute to two-third of the global KPO by 2011.

Several architectural design outsourcing companies in India have bagged small scale design projects abroad, mainly from UK and the Middle East. A decrease in the number of skilled professional abroad along with the quality of services and the lower costs offered by offshore architectural design companies are driving this demand home. There is a disparity of one tenth of the cost between designing process in the US and in India.

Indian Cities Leading the Outsourcing Pack

A joint study by Cyber Media’s Global Services magazine and investment advisory firm Tholons listing the ‘Top 50 Emerging Outsourcing Cities´ has found India leading the pack listed with six cities while China is listed with five cities and Philippines with one. This is a clear reflection of the potential the IT skills and outsourcing prowess that India wields. Emerging at the top is Chennai followed by Hyderabad at second position and Pune at No.3, Kolkata at No.5 and Chandigarh at 9th position.

Developed infrastructure, highly skilled work force and lower costs and attritions are factors that worked to Chennai’s advantage. The report claims that Chennai is expected to house more than 73,000 workers of the top three Indian Information Technology services companies. Also, it has emerged as an established location for automotive engineering, productive development and healthcare BPO.

Indian cities are attracting outsourcing industry biggies due to various reasons such as infrastructure development which is attracting many foreign investors. Better planned roads and public facilities, cost of living, prominence of educational institutions, lowering operating costs and lower attrition rates are also leading factors for making India a leading outsourcing destination.

Among other cities, Bangalore, Mumbai, Chennai and Hyderabad have been ranked among the best for their application development and maintenance skills. Established destinations, according to the report in the field of business analytics, are Delhi NCR and Mumbai with Bangalore ranking as an emerging destination. For engineering services established leading cities include Bangalore, Chennai and Pune with Delhi NCR ranking as an emerging location.

The cities are ranked according to scale and quality of work force, the inclination towards identifying skill-sets and work force related metrics, and financial, infrastructure and risk environment.

Leading Destination for UK Outsourcing: India

According to a report, India is a front runner amongst leading outsourcing destinations with regards to cost and quality of services provided. Outsourcing in India is riding a high wave of revolution. EquaTerra, an advisory firm, surveyed senior company figures of outsourcing companies and published a report called the Outsourcing Service Provider Performance Study. The found that UK businesses choose at least one Indian outsourcing services provider for IT offshoring
 
In a survey of UK’s top 320 Biggest IT services spenders Indian outsourcing companies bagged four places out of the top five places for client satisfaction. There is a leap from 47 % to 57 % in the number of UK companies offshore outsourcing their work. And all these companies outsource to India all or part of their work. As more and more companies are getting attracted to the low costs and high quality output this number is set to increase over the next decade, predicted Phil Morris, managing director of EquaTerra for Europe.

Companies that are looking to outsource are seeking a sound education system with good communication skills and fluency in the English language, which India is prompt to offer. According to Morris, outsourcing in India has a growth potential over the next decade or so as India offers many areas where it can offer help, support and services over different locations and business structures. The service landscape of outsourcing services in India is experiencing a revolution which is driven by speed of technological advancements, processors and telecommunication.

Global outsourcing services providers will have to match up to the flexibility, quality and skills of Indian outsourcing companies. Though cost savings are the primary advantage companies look for when offshore outsourcing technical skills and domain knowledge, quality of output and flexibility are what are driving 54% of UK companies for IT outsourcing.

Only 5% of UK companies outsource to China, but a growth in the number of companies outsourcing to other countries in Asia, South America and Africa is also expected.

BPO to KPO: Profitable Transition

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.

India Inc to face retention issues in 2008

If talent hunt and keeping the flock together, have been the biggest challenges, India Inc will have to live with that in the New Year too. For all the growth that Indian economy is witnessing, some of its constituents will see the immediate impact in 2008.

Few sectors, more than others, will see a whole new meaning in retention with heightened hiring activities. Industry experts say, KPO, LPO, pharma and design outsourcing, financial services, retail, infrastructure, telecom see the highest attrition risk looming, in the coming year.

“With manufacturing leading them all, KPO, design outsourcing and retail will be the sectors which will see major activity, increased hiring, hence growing retention issues,” says Ganesh Shermon, partner & head, human capital advisory services, KPMG India.

Manufacturing would see a spurt of activity in the coming year with huge investments. All this will drive up hiring needs for companies such as Larsen & Toubro, Siemens and Crompton Greaves to name a few, which will try cornering a major share of the talent pool.

Take the case of Maruti. The auto major itself plans to revise its fresh to lateral hires ratio next year from 50:50 to 60:40. The number of freshers would go up from 180 in 2005-06 to 450 in 2008-09 while the number of laterals will fall from 365 to 250 in the same year, says S Y Siddiqui, head-HR, Maruti.

This will involve tapping sources like internal job posting, employee referral schemes, wider coverage of campuses, recruitment firms besides electronic job portals. “Retention will dominate the stage,” says Mr Siddiqui. “Focus on pay packages at the campuses and multiple choices, besides peer pressure will make it a challenging issue.”

The subset of IT services, KPOs, LPOs, PPOs (person-to-person outsourcing), would likewise face increasing attrition risk. Experts say, due to reforms sweeping financial services sector, banking, insurance and pensions will witness major activity.

With many private equity investors and non-banking financial services companies too upping the ante, this will be a major growth area for the Indian economy in 2008 and huge amount of hiring will follow. With reforms kicking in, public sector banks will look at retail services in a major way. It will result in a new wave of recruitment all together and hence, they will also device new and innovative strategies to keep the flock from leaving.

In terms of the degree of attractiveness of talent, 2008 will be dominated by financial services, private equity, insurance, PSUs, commodities broking, manufacturing for engineering and electronics, followed by KPO and design outsourcing, retail, infrastructure, telecom, says a KPMG analysis. The same pattern is followed in ranking them for degree of risk in retention.

Those companies which do not have proper processes in place will suffer. In the last ten years, the boss-subordinate interaction has gone down severely. In fact, the average reporting time span has reduced to one-fifth of what it used to be 10 years back, say experts.

Hence, the minimum time they have, has to be utilised in the best way possible. “Companies would run like knowledge centres and public sector units will also become active and will try innovation in people issues,” says Anil Sachdev, MD, Right Management India.

Retail is one sector that realises these problems and innovates to tackle it as well. In fact, retail major Pantaloon, will put in place something like a ‘Happiness Index’ in 2008 to figure out what excites its people, economic security, emotional well-being, job-satisfaction et al. This index will also help deciding career progression and people will be put in jobs that gives their kind of joy and happiness.

Source from: Time Of India 

The New Face of Outsourcing: Knowledge Process Outsourcing

Outsourcing entered the global business scene in the 1980s, and has changed the way it looks, feels and functions since then. Knowledge process outsourcing or KPO refers to the outsourcing of knowledge intensive tasks and functions to experts overseas or outside of your organization. In this age of competition, companies are increasingly turning to specialization for improving cost and time feasibility and increasing efficiency. They focus on core functionalities and outsource the rest. With knowledge intensive areas entering the fray, it allows organization the flexibility and provides the resources for the business growth of the organization.

Quite different from Business Process Outsourcing (BPO), KPO signifies high end value added tasks in which execution depends on skill, expertise, domain knowledge and experience of the experts handling the tasks. KPO usually includes a segment of Business Process Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). It deals with highly knowledge intensive tasks and activities and focus is on depth of knowledge, experience and judgment. On the other hand, a BPO deals with improving process efficiency and is focused on single processes, size volume and efficiency.

It can be said that the growth and maturity of the BPO industry led to the significant rise of the KPO industry. The success and substantial results achieved by many organizations in outsourcing operational tasks have led them to outsource high end knowledge and skill intensive tasks. Cost and time feasibility, sound infrastructure, skilled and knowledgeable workforce, and improved quality are some the factors that have worked to the advantage of KPO organizations the world over. KPOs in India benefit from the easy availability of skilled and trained specialists, technologically advanced infrastructure and advanced communications tools that the country wields.

Knowledge process outsourcing calls for the application of skill, knowledge and expertise pertinent to a high level area of specialization. These prerequisites are being discovered and tapped by leading businesses across the globe resulting in the outsourcing of high-end processes to low-wage destinations. Hence Knowledge Process Outsourcing involves offshoring of knowledge intensive business processes that require specialized domain expertise.

Design, accounting, manufacturing and engineering fields are opening up to the idea of overseas experts handling domain knowledge intensive projects. This talent is soon Favorable Destinations for Knowledge process outsourcing.

Due to the availability of highly skilled task force than is indigenously available, sound technical infrastructure and vast domain knowledge and expertise countries such as India and Philippines are leaders in the KPO industry. This type of work demands essential skills, vast domain knowledge and excellent communication skills (as most clients are overseas) hence, higher education degrees are most often prerequisite to getting employed with a KPO. The KPO industry in India, entails architectural KPO, engineering KPO, accounting KPO and has already expanded to KPO consultancy.

Scope of KPO

Architectural and engineering KPOs handle design, CAD and drafting related projects that require architects, technicians, dedicated infrastructure and technology. Architecture KPOs in India have earned their place due to the easy availability of highly qualified architects, designers and draftsmen, skilled technicians in the field of rendering, modeling and designing, dedicated technology, communication tools and advanced infrastructure.

The IT segment has also realized the potential of this avenue of outsourcing. Knowledge process outsourcing is believed to increase productivity and improve efficiency. Manufactures and construction companies are also finding it increasingly beneficial to outsource projects rather than invest in infrastructure, staffing, training and compensation for a skilled work force.

Knowledge Process Outsourcing deals with executing standardized processes ok high end skill level depending on analytical and advanced technical skills. Knowledge process outsourcing involves legal works carried out at law firms like patent document writing, global filing, search, trademark search, trademark registration, prior art searches, legal advise on infringements, invalidation search, freedom of use search, etc.

Areas with significant KPO indluence include:

• Pharmaceuticals
• Integration and management services
• Financial services
• Research and analytics
• Computer aided simulations
• Computer aided design (CAD)
• Engineering design and professional services

Benefits of KPO

The primary benefit of KPOs remains the same i.e cost savings, but it does not end there. KPOs allow the added advantage of leveraging the expertise and experience of seasoned professionals, experts and specialists in their specific areas. Outsourcing your knowledge intensive projects or parts of your projects allow you the time, flexibility and resources to take on more and more challenging projects. Hence knowledge process outsourcing provides you more than traditional cost feasibility.

Recent Trends in the KPO Industry

According to a report by GlobalSourcingNow, the Global Knowledge Process Outsourcing industry is expected to reach USD 17 billion by 2010. A report by Evalueserve predicts that India will capture more than 70 percent of the Knowledge Process Outsourcing sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are also expected to join the Knowledge Process Outsourcing industry.

The future of KPOs is not restricted to the ITES sector alone. It spans other sectors like legal research and documentation, business research and analytics, Clinical research, publishing, market research etc.

New Players Eye Architecture KPO Business

The growth story of knowledge process outsourcing industry in the state is witnessing a new sub-plot. Architectural designing outsourcing has seen new players entering into the segment in the state.

Domestic architectural designing units, on the other hand, are also upgrading their facilities and infrastructure and equipping themselves with the latest technology to participate in the process.

Armed with the latest software and growing offshore demands, architectural design KPOs are making their client-based in the US, UK and Middle East happy with their service. Rupee appreciation and crunch of skilled human resources notwithstanding, these firms have been holding up to the difficult times.

In the last two years, there have been a few additions in the number of such KPOs in the state, most of them being small-and-medium-enterprises with around 50-plus workforce.

What’s more, with the industry estimates predicting architectural design KPOs tipping BPOs to become the second largest segment in service industry in the country, they feel a good time is in store for them. The country on a whole, it is expected, will contribute two-third of global KPO by 2011, accounting to $16.7 billion revenue.

According to industry sources, there are already around 40 architecture design firms with 50-plus manpower in the state that are specifically focussing on architectural designing. Several of these companies were, until recently, catering to domestic requirements.

However, of late, they have begun to bag designing projects abroad, although on a small scale. Cost factor coupled with a decreasing pool of professionals abroad are driving force behind this growth, say industry sources. Designing process here costs about one-tenth of what will cost in the US.

Burthill Design, a recognised global architectural design unit, opened its India unit in Ahmedabad recently. Although basically an architectural firm, the Ahmedabad unit is the first design unit of the company that will outsource international projects. Most of the projects handled by the unit are from the US and West Asia.

“Ahmedabad was our first choice because of the skilled pool of architects here. Cost cutting on international projects is another incentive to our Indian venture. But we are not completely in outsourcing business. We also have our domestic designing operation,” said Nitin Narang, project Architect of Burthill in Ahmedabad.

Big design units are paying good packages and several incentives to the architects they hire. However, small firms are making extra efforts to retain skilled architectures as they are less in number and more in demand.

City-based London Infotech Ltd, which started operation two years ago in Ahmedabad specifically as an architectural design firm, has benefited from outsourcing architectural skills in architectural design segment, to which it caters exclusively. However, the company is facing the heat of shortfall in skilled pool of designers and are making extra effort to retain them.

“This field has a good future but the shrinking talent pool coupled with the recent rupee appreciation has upset us, like any other service sector. However, there is still no dearth of projects,” said London Infotech Inc director Gunjan Chag. While companies like London Infotech Inc might revert to cater to the domestic requirements, there are several small architectural firms that have sensed an increase in international demands and are turning to global market to increase profit margins.

Take, for example, Meghana Infotech, which started off as a domestic architectural designing unit in 1998. Now, the firm has at least 40% of its turnover of Rs 1.15 crore from offshore projects. “We recently begun outsourcing our business, encouraged by the growth story of the architectural design outsourcing market. We upgraded our services for the new client-base in the US and UK,” said Meghna Infotech CMD Udit Vivekia.

“Lack of talent pool is an issue. But we are also running a CAD training centre, which is also the first authorised training centre for Autodesk Inc.USA. This addresses our manpower requirement.”

Source from: Time Of India