India set to ride the KPO wave: Report

Releasing the report "Knowledge Process Outsourcing (KPO): Unlocking top-line growth by outsourcing 'the core,'" during an outsourcing industry event organized by Nasscom in Mumbai, Edgidio Zarrella, global partner-in-charge, IT advisory, KPMG, said that KPO, which is seen as the third generation of the outsourcing process, is fast becoming a mainstream outsourcing option and has "come of age."

Unlike other outsourcing methods, KPO involves outsourcing more highly skilled processes and within the financial sector it is the most mature form of outsourcing, being used to take care of credit scores, loss protection calculations and fraud analytics.

According to Zarrella, in financial services sector alone, the market for KPO is expected to touch $5 billion in the next 2-3 years and this form of outsourcing will extend to other industries in the near future.

"KPO may still only represent a small percentage of the total outsourcing market but, with the financial sector demonstrating just what it can be used for, I think that all of these numbers are set to increase exponentially," Zarrella said.

According to the study, India currently leads the KPO sector globally, accounting for around 70 percent of revenues. However, many new locations like Estonia and Wales are springing up to create niches and attract work for themselves and other countries like Canada, China, Australia, Singapore, South Africa and parts of the UK are now competing for a piece of the action.

"Asian countries like India, Malaysia, Indonesia are natural destinations for these. They have the advantage of demographics on their side," Zarrella said.

Similarly, some countries in Eastern Europe and Latin America too could develop as important non-English speaking centers. And, countries offering attractive personal tax regimes, superior lifestyles and physical security are also well placed to attract professional and technical talent from less favorable locations.

However, "none of these countries are a threat to India because India has the numbers. If any company wants to scale up, they will have to do it from India," he added.

According to Zarrella, with 32 percent of India's population being below 15, it is only in this country that abundant manpower is available for this kind of an industry. None of the other places that are trying to build a KPO niche has such a huge young population, he said.