EVS White Paper:
“The Next Big Opportunity – Moving up the Value Chain From BPO to KPO”
KPO Related Press Releases:
KPO – The Opportunity and Associated Challenges
This section analyzes the opportunities presented by the KPO industry and also identifies
some of the challenges that this emerging industry might face in the near future.
BPO and KPO – Estimated Size of Opportunity
Evalueserve predicts that low-end outsourcing services will grow globally from USD
7.7 billion in FY3 2003 to USD 39.8 billion in FY 2010, which implies a Cumulative
Annual Growth Rate (CAGR) of 26 percent.
In contrast, the revenue from the global KPO market was USD 1.2 billion in FY 2003
and this is expected to grow to USD 17 billion by FY 2010, which implies a CAGR
of 46 percent (according to Evalueserve).
Following figure demonstrates the expected growth in the BPO and KPO markets over
the next seven years.
The following is a list of potential high-end services for the KPO sector.
1. Intellectual Property (IP) research
2. Equity, financial, and insurance research
3. Data search, integration, and management
4. Analytics (data analytics/risk analytics) and data mining services
5. Research and information services in human resources (HR)
6. Business and Market Research (including competitive intelligence)
7. Engineering and design services
8. Design, animation, and simulation services
9. Paralegal content and services
10. Medical content and services
11. Remote education and publishing
12. Pharmaceuticals and biotechnology
13. Research and Development (IT and non-IT areas)
14. Network management
15. Decision Support Systems (DSS)
High-end KPO Opportunities – Some Examples
The following are some examples of high-end KPO:
Intellectual Property Research (IPR)
• Drafting and filing of patent applications with the United States Patent
and Trademark Office (USPTO) is expensive; and a typical patent application may
cost between USD 10,000 and USD 15,000.
• An Intellectual Property (IP) specialist in an offshore location can produce
a preliminary draft of a patent application, which is then reviewed and modified
by a registered US patent attorney, before it is filed with the USPTO.
• Offshoring even a small portion of the patent-drafting process can save
up to 50 percent of the total cost (for the end client).
• IP asset management, IP landscaping of technology domains, IP licensing,
IP docketing, and IP commercialization services are some other services that can
be offshored in a similar manner. These services can be provided not only for patents
but also for trademarks, copyrights, and other Intellectual Property.
• Some law firms in the US have already set up their back-end centers in
India, and others are joining hands with Indian companies for this purpose.
Offshoring R&D in Pharmaceuticals and Biotechnology
• Contract research organizations are being widely used by pharmaceutical companies.
Other emerging areas within this sector include lead optimization and improvement
of manufacturing processes.
• The global contract research market is estimated to grow to USD 20 billion
• Destinations such as India offer significant cost advantages – often as
much as 40-60 percent – in the areas of contract research and clinical trials.
• Recently, companies such as AstraZeneca and Glaxo-Smith-Kline have set
up drug discovery centers at low-cost destinations thereby offshoring their R&D.
Analytics and Data Mining Services
• Companies can save significantly – as much as 60-70 percent – by offshoring
data mining, analytics, and inventory management work to low-wage countries.
• Demand and channel planning, manufacturing scheduling, and transport planning
are examples of some supply-chain management solutions that require the use of mathematical
programming, statistical analysis, and computer-aided simulations.
• Destinations such as Russia and India are ideal for these services because
they provide a large pool of engineers and even PhDs at substantially low costs.
The cost differential between a PhD in the Sciences and Engineering in the US and
in India (or between the US and Russia) can range between USD 60,000 and USD 80,000,
Challenges in KPO
KPO presents substantial opportunities for players in the outsourcing business.
However, there are some formidable challenges in the path of their development,
which include the following:
• Processes executed within the KPO domain require higher quality standards
because the stakes for the clients are high. Furthermore, the clients are likely
to be apprehensive about the quality of services delivered (especially in view of
the fact that these services are being provided by low-cost destinations) and these
may be difficult to alleviate.
• In some cases, investment in KPO infrastructure is expected to be higher
than that in traditional BPO. For example, a company involved in Simulation and
Finite Element Analysis will require high-end workstations, whereas one involved
in simple data collection, sorting, and analysis may require moderate capital. Similarly,
contract research organizations are likely to require higher amounts of capital.
• The lack of a good talent pool for the execution of projects may often
prove to be a hindrance in many countries.
• KPO projects require a higher level of control, confidentiality and enhanced
risk management. Laxity in any of these parameters will not only jeopardize the
KPO services being provided, but may also affect the entire business conducted by
• In comparison to traditional BPO services, scaling up of KPO operations
will be difficult, primarily owing to difficulty in finding highly trained professionals.
Problems in Sourcing, Retaining, and Nurturing Talent
KPO companies are faced with the challenge of hiring the best talent and imparting
continuous training to these professionals. It is advisable for offshoring companies
that venture into the KPO industry to focus on initial training and continuous development
Another key challenge in the management of KPO is the identification of ‘performance
criteria’. This involves setting the right expectations with the end client, as
well as its professionals; continuous assessment and monitoring, constructive feedback,
appropriate coaching and mentoring, and identification of the right career path
for the company’s professionals.