Market Survey
By: D. Muthamizh Vendan Murugavel
KPO INDUSTRY: BIG TIMES AHEAD
India is well positioned to capture 70 per cent of the $17-billion global KPO market, translating
to a market size of $12 billion.
K
nowledge process out-
sourcing (KPO) is one
step ahead of busi-
ness process outsourc-
ing (BPO). It started
emerging in India around the turn
of the century, when the global in-
dustries realised that apart from
software development and technical
support, knowledge work could also
be outsourced. It involves transfer of
business processes requiring special-
ised domain-specific knowledge and
business expertise of a higher level
(rather than just process expertise)
to other geographic locations.
KPO is basically a knowledge-re-
lated and information-related work
carried out by workers in a different
company or by a subsidiary of the
same organisation, which may be
in the same country or an offshore
location, to save cost. This typically
involves high-value work carried out
by highly skilled staff.
The requirement of KPO is not
limited to IT-enabled services sec-
tors, but it requires knowledge from
other fields too. A few examples are
legal processes, clinical research, Web
development application, intellectual
property and patent related services,
engineering services, CAD/CAM ap-
plications and business research and
analytics, legal research, publishing
and market research for KPO.
Attributes of KPO
1. KPO focuses on delivering
value-added services to the clients.
Its prime objective is to provide cli-
ents with useful insights that may
assist them in their strategic deci-
sion-making process.
2. KPO companies provide knowl-
edge-intensive work and engage
highly skilled professionals such as
CAs, CFAs, engineers, PhDs, doctors,
lawyers and MBAs.
3. Training is an essential com-
ponent of the KPO industry. As the
market is highly dynamic, one has to
keep abreast with the latest trends,
technologies and developments. KPO
professionals continuously hone their
skills through rigorous training plans.
4. Hourly charge rates for KPO
services are significantly higher.
The number of players in the KPO
domain is also less than in the BPO
industry. This results in less conges-
tion in the KPO market, which even-
tually translates into better profit
margins.
Benefits of KPO
Standardised technical education
is widely available to all in the devel-
oping countries, especially in India.
This skilled and trained manpower
is accessible at very low cost as well.
It, therefore, is always a wise deci-
sion and makes sense to utilise such
services. Outsourcing of activities to
KPO companies can provide the fol-
lowing benefits:
1. Valuable cost savings that can
be utilised elsewhere
2. Trained professionals at work
3. Operational efficiency
May 2010 • FACTS FOR YOU 
 Market Survey
Table I
Total Sales of Indian
KPO Industry
Year Total sales ($ billion)
2000-01 0.26
2001-02 0.41
2002-03 0.72
2003-04 1.08
2004-05 1.54
2005-06 2.18
2006-07 3.05
2007-08 4.40
2008-09 6.30
2009-10* 8.80
2010-11* 11.20
*Expected
Source: India’s KPO sector: Origin, Current State
and Future directions by Alok Aggarwal, Chairman,
Evalueserve
4. Increase in profits
5. Savings in time and manage-
ment energy for maintaining in-
house services
6. Option to recruit a larger
workforce without raising costs
KPO vs BPO
BPO and KPO sectors are close-
ly related to each other in terms of
outsourcing of processes. The ma-
jor difference is in the workforce
employed and the type of processes
being outsourced. In BPOs low-level
skills are required, whereas in KPOs
knowledge is the key point. KPO
companies are showing the world
that Indian companies can handle
complex work also. India has highly
qualified workers in many sectors
like engineering, pharmacy, research
& development, and biotechnology.
KPO jobs are more challenging than
BPO jobs because other than proc-
ess expertise, KPO provides domain
knowledge and business expertise,
which, in turn, require analytical
and highly specialised skills. This
makes India the hottest destination
for KPOs.
 FACTS FOR YOU • May 2010
Table II
Full-Time Employees in
Indian KPO Sector
Year Full-time employees
2000-01 9,000
2001-02 12,000
2002-03 21,000
2003-04 30,000
2004-05 42,000
2005-06 57,000
2006-07 75,000
2007-08 112,000
2008-09* 155,000
2009-10* 204,000
2010-11* 255,000
*Expected
Source: India’s KPO sector: Origin, Current State
and Future directions by Alok Aggarwal, Chairman,
Evalueserve
Classification of
KPO services
1. Animation and design
2. Advanced Web applications
3. Business and technical analysis
4. Business and market research
5. Data analytics and learning
solutions
6. Financial consultancy and
services
7. Intellectual property (IP) re-
search
8. Legal and medical services
9. Network management
10. Pharmaceuticals and biotech-
nology
11. Research & development and
training & consultancy
12. Writing and content develop-
ment
KPO in India: an outlook
For global corporations looking
to move their higher-end research
like market research and equity re-
search, analytical services, engineer-
ing design, IPR and legal services,
remote education and publishing,
India is currently the location of
choice. Many companies have start-
ed outsourcing their high-end proc-
esses to India after the success of
BPOs. These companies outsource
their processes to India for cost sav-
ings, operational efficiencies, access
to highly skilled workforce and im-
proved quality.
A KPO can provide quality work
and on-time delivery with uninter-
rupted services. KPOs are the next
big thing in the outsourcing sector.
Initially, KPOs focused on data col-
lection, updating financial models,
patent searches and basic data min-
ing. But now KPOs have also started
focusing on sector insights, equity
research, patent analytics, high-end
data mining, analysis and recommen-
dation. The companies in the KPO
sector are proving the statement
“Indian companies are good for BPO
only” wrong.
In 2003, $0.72-billion revenue
was generated by the Indian KPO
industry, contributing around 0.24
per cent to the Indian service sec-
tor. This figure is estimated to have
reached 1.78 per cent by 2010 with
$11.2 billion. A CAGR (compound
annual growth rate) of 49.5 per cent
was expected by the Indian KPO sec-
tor between 2003 and 2010.
More and more companies are
turning towards India to offshore
their work at comparatively cheaper
rates. For example, drafting and fil-
ing of patent applications is very ex-
pensive in the US. Growing demand
for KPO in India is particularly due
to the presence of a number of pres-
tigious technical universities and
IITs (Indian Institute of Technol-
ogy) that are amongst the best in
the world. Each year, India produces
over 75,000 IT graduates and more
than two million of English speaking
graduates.
In 2000-01, the KPO industry in
India had only 9000 billable profes-
sionals that generated revenue of
$260 million and this number grew
to 112,000 by 2007-08. These billable

Table III
Share of India in Global
KPO Market
Year Market share (per cent)
2003 56
2010* 71
*Expected; Source: NASSCOM
Table IV
Exports of Indian BPO
and KPO Sectors in 2010
(Estimated)
Sectors Exports ($ billion)
BPO 20
KPO 12
Source: www.naukrihub.com
professionals generated $4.4 billion.
In 2010, this figure is estimated to
reach 255,000 with $11.2 billion.
In 2003, market share of India
in the global KPO market was 56
per cent. And it is expected to reach
71 per cent in 2010, which shows a
decent growth of the sector in the
coming years. However, the govern-
ment and the IT/BPO sectors in In-
dia will have to work together in or-
der to increase the share of India in
the global KPO market. To do this,
the country will have to look beyond
USA and find new markets for its
KPO business.
As estimated, the BPO exports
will be $20 billion and KPO exports
will be $12 billion by 2010. As against
the BPO industry, which grew glo-
bally at a CAGR of 26 per cent, the
KPO industry is estimated to have
grown globally at a CAGR of 44.5 per
cent till 2010.
Few sub-sectors within the
KPO industry that are expected to
do well, are banking and finance,
securities and insurance research,
data mining and analytics, and
contract research and biotech serv-
ices. Some that are still in a nas-
cent stage, are legal and paralegal
support services, remote logistic
Market Survey
Table V hottest sectors in India and
has created substantial job op-
Services Offered by KPOs
portunities for professionals,
Country-wise
it is also facing the challenge
KPO segments Country of high attrition rates. This
Animation Philippines, India, China can be attributed to excessive
Engineering services Philippines, India job-hopping by young pro-
Content development India, Philippines fessionals who want to earn
money within a short span of
Financial services India, China
time. If attrition continues
Healthcare Russia, India
unabated, it will be the sole
R&D India, China, Russia factor responsible for a decline
Legal New Zealand, India in the revenues of the Indian
Pharma India, Russia KPO sector by 2010-11. Such
Source: www.ibef.org a scenario would ensure that
other competing countries
China, the Philippines, Poland
Table VI
and Russia get a larger share of
Top KPO Players in India the global KPO market.
Genpact ICICI OneSource
Evalueserve EXL Service Global KPO industry
Ugam solutions Copal Partners
WNS Pangea3 A Global Sourcing New report
estimates the global KPO industry
24/7 Customer TechBooks
to touch $17 billion by 2010. India
Source: www.chillibreeze.com is well positioned to capture 70 per
cent of this mar-
ket, translating to
Table VII
a market size of
Segment-wise KPO Sector Revenue in 2010 $12 billion. This
KPO sector Revenue contribution is possible as India
(per cent) has the potential
Data search integration and management 29 to provide cost-ef-
Bio-tech and pharma 18 fective and qual-
Engineering and design 12 ity workforce. The
number of Indian
Research and development 12
KPO profession-
Remote education and publishing 12
als is expected to
Animation and simulation 8 touch 250,000 in
Others 9 2010.
Source: India’s KPO sector: Origin, Current State and Future directions, by Alok The main rea-
Aggarwal, Chairman, Evalueserve son for this huge
growth in the KPO
services and procurement support sector is the vast pool of educated
services, and network optimisation and experienced professionals in
and analytics services. Almost two- countries like India, China, Russia,
thirds of professionals working in Poland, the Philippines, Hungary
the KPO industry worldwide will and many republics from the erst-
be based in India, especially be- while Soviet Union. Some of the hot
cause this industry requires sub- destinations for KPO other than In-
stantial domain expertise among dia are Russia, China, Czech Repub-
professionals. lic, Ireland and Israel.
Although KPO is one of the Out of the expected $17-billion
May 2010 • FACTS FOR YOU 
 Market Survey
SWOT Analysis of the Indian KPO Sector
Strengths (growth drivers) Weaknesses
1. Large talented pool 1. Poor data security; unethical practices related to handling of crucial
2. Proficiency in English data
3. Highly qualified and trained professionals in the fields of law, IT, en- 2. Rising wages
gineering, medical science, finance and architecture 3. The inability to uniformly develop and provide infrastructural re-
4. Indians are ready to outsource their knowledge at a very prohibi- quirements as real-estate prices rise in major cities
tive price 4. Inadequate intellectual property rights (IPR) protection regime in
5. Shortage of knowledge professionals in countries like USA and UK India
6. Well-established IT services and BPO sectors 5. Billing rates are higher as compared to billing rates in BPOs
7. Single vendor services 6. Low employability despite high graduate turnout, as KPO requires
8. Excellent project management skills high-level skills
9. Supporting government policies 7. Increase in job opportunities in other sectors is reducing the supply
10. Many new areas of specialisation are being covered, making KPO of skilled people to the KPO sector
sector spread its wings
11. Consideration to quality standards like ISO 900x and Six Sigma
12. Billing rates are lower than in other countries
13. Time zone advantages; organisations can run their business 24
hours a day due to time difference.

Opportunities Threats
1. Increasing domain expertise 1. High attrition rate
2. More areas of specialisations can be added to KPOs 2. Expected labour supply gap as jobs grow faster than the workforce
3. Ample opportunities for SMEs 3. High cost of training and tendency to lose the most experienced
4. Lack of workforce in the US and the UK employees to the clients
4. Ensuring the security and confidentiality of information, especially
when privacy laws vary from country to country
5. Appreciation of Indian rupee, especially when compared to the US
dollar, is gradually making Indian KPO companies less competitive
6. The lack of availability of highly educated professionals (e.g., MBAs,
chartered accountants, medical doctors and architects) in India and
other low-wage countries may affect growth of the KPO sector

global KPO industry by 2010, con-
tribution of six important sectors is
shown in Table VII. The major con-
tribution will be from data search in-
tegration and management and bio-
technology and pharmaceuticals.
Future is bright
Other than creating job opportu-
nities for talented engineers, MBAs,
doctors, lawyers and other profes-
sionals, the KPO sector is spreading
its wings into different directions,
which will finally lead to the devel-
opment of India. KPO salaries will
be 25-50 per cent higher than in
other fields. Billing rates for KPOs
are higher than for BPOs. But bill-
ing rates in India are much less than
in the UK or USA for KPOs. This
makes India save more money and
generate more revenue.
Continuous growth is expected in
the KPO sector in the future as new
areas are being added to the existing
list of areas of specialisation. India
will experience a higher growth rate
in KPOs than BPOs. KPO sector will
heavily contribute to the revenue
generation and job creation due to
its increasing size.
Word of caution, though
No doubt, among low-cost desti-
nations, India will become the hub
for providing research and analyt-
ics services. But India may start
to lose its low-cost advantage in
future. Low-end services may move
to even cheaper destinations. For
India to stay ahead in the global
outsourcing market, it will have to
develop its indigenous KPO indus-
try and maintain its leading edge
through operational and strategic
mechanisms. Right now, the overall
future of the KPO industry looks
good but this can happen only if
the shortcomings are properly ad-
dressed.

The author is a lecturer in PG & Research
Department of Commerce at Gobi Arts
& Science College, Gobichettipalayam,
Tamil Nadu

10 FACTS FOR YOU • May 2010