The current forecasts by Evalueserve for the KPO industry over the next four years
imply a cumulative annual growth rate of 38 percent in revenue and 36 percent in
the number of billable professionals
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The growth and future of Knowledge Process Offshoring industry - a study by Evalueserve
Saratoga, California, July 16, 2007: An Evalueserve report released today predicts
that the Knowledge Process Offshoring world-wide is expected to grow to US $ 16.7
billion in revenue by 2010-2011 implying an annual growth rate of 39 percent and
it will employ approximately 350,000 professionals by March 2011. Furthermore, the
Knowledge Process Offshoring industry in India is expected to grow to US $11.2 billion
in revenue by 2010-2011 and will employ approximately 255,000 professionals by March
2011.
The report titled “India’s Knowledge Process Outsourcing (KPO) Sector: Origin, Current
State, and Future Directions” by Alok Aggarwal, Chairman, Evalueserve is an updated
version of a similar report done by Evalueserve in July 2004, and analyzes the changes
the KPO sector has seen during the last three years and what it is likely to see
during the next four.
According to Dr. Aggarwal, “The main reasons for this huge growth in the KPO sector
is the vast pool of educated and experienced professionals in countries like India,
China, Russia, Poland, the Philippines, Hungary and many republics from the erstwhile
Soviet Union. Evalueserve sees these countries to eventually emerge as strong contenders
in the KPO business. In fact, in the near future, KPO is likely to be driven by
factors like breadth and depth of coverage, domain expertise, location advantage
(e.g., near-shoring and language capabilities), sales and marketing capabilities,
data compliance with respect to regulatory standards (especially those defined by
the United States, Canada and the European Union) and the management of business
risks. Therefore it is quite likely that companies – both with their own captives
and those using third party vendors –may use a “hub and spoke” model in which a
provider in India may constitute the “center” whereas other units in the world may
provide appropriate “spokes.”
According to Evalueserve’s research, the KPO industry in India had only 9,000 billable
professionals in India that generated revenue of US $ 260 million during 2000-01
and this number has already grown to 75,400 by 2006-07. These billable professionals
generated US $ 3.05 billion, thereby growing annually at 51 percent in US Dollars
and 43 percent in terms of billable professionals over the past six years; this
growth is pretty much in line with the predictions that Evalueserve had made in
July 2004.
The current forecasts by Evalueserve for the KPO industry for the next four years
(of $11.2 billion in revenue and employing an average of 255,000 professionals during
2010-11) imply a cumulative annual growth rate of 38 percent in revenue and 36 percent
in the number of billable professionals. However, some of the following assumptions
have been made while creating these forecasts; if these assumptions do not hold,
and in particular, if the attrition is not controlled properly then this growth
within the KPO industry may be stymied even further, which may be able to generate
no more than US $9.9 billion in revenue (and employ no more than 225, 00 professionals)
during 2010-11:
• The lack of availability of highly educated professionals (e.g., MBA’s,
Chartered Accountants, Medical Doctors and Architects) in India and other low-wage
countries may affect the growth of the KPO sector.
• Small and Medium Enterprises (SMEs) are likely to be the major growth drivers
for the KPO sector. According to Evalueserve, out of the 10 million SMEs in US and
Europe, about 10 percent (i.e., approximately 1 million) can benefit from KPO services
due to reduced complexity, ability to compete effectively with small and large competitors,
shorter time to market, higher flexibility, overall lower costs and potentially
higher quality for the same costs.
• The appreciation of Indian Rupee especially when compared to the US Dollar
is gradually making Indian KPO companies less competitive.
• Finally, because of attrition and rising costs in India, companies with
their captive centers in India are also beginning to outsource some of their work
with third party vendors that can provide complementary skills and also handle “spikes”
in the workload. During the next 4-5 years, this trend is likely to accelerate,
which would imply that these companies would move from a fixed cost model to a variable
cost model and hence start working with several vendors in several low-cost countries
and which would also imply that these companies will gradually move from having
their captive units to third party vendors providing them these services.
The Evalueserve report also delves deeper into a few sub-sectors within the KPO
industry that are expected to do well e.g., banking, finance, securities and insurance
research; data mining and analytics; and contract research organizations & biotech
services and some that are still in a nascent stage, e.g., legal and paralegal support
services; remote logistic services and procurement support services; and network
optimization & analytics services.
Evalueserve Overview
Evalueserve offers high-quality knowledge services in Investment Research, Business
Research, Intellectual Property, Market Research, and Data and Financial Analytics
to clients worldwide. Founded in 2000, it has more than 1,500 employees, with operations
centres in India, China and Chile, and a strong sales presence across all major
global locations. Evalueserve won several awards in 2006, including Red Herring
Asia Top 100, NASSCOM IT Innovation Award for Business Model Innovation and the
Deloitte Fast 500 APAC Award.
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