After the great success of Business Process Outsourcing (BPO) in India, the overseas companies are now eyeing the Indian market for outsourcing their high-tech knowledge based jobs. In fact, it is the evolution and maturity of the Indian BPO sector that is driving India’s emergence as a strong contender in the global Knowledge Process Outsourcing scenario. The success achieved by many overseas companies in outsourcing business process operations to India has encouraged many of these companies to start outsourcing their high-end knowledge work as well. Cost savings, operational efficiencies, availability of and access to a highly skilled and talented workforce, improved infrastructure and favorable government policies are some of the influencing factors.

Knowledge Processing Outsourcing (popularly known as a KPO), calls for the application of specialized domain pertinent knowledge of a high level. The KPO typically involves a component of Business Processing Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). KPO business entities provide typical domain-based processes, advanced analytical skills and business expertise, rather than just process expertise.

Areas with significant potential for KPO, include pharmaceuticals, biotechnology, technology, legal services, intellectual property, research and design, and development of automotive and aerospace industries.

Why India
Some of the factors that make India an attractive as a KPO hub, vis-à-vis other countries, are:

Human Resources
India has many prestigious technical universities and the Indian Institute of Technology stands apart as one of the world's best. India produces over 75,000 IT graduates and 2 million English-speaking graduates annually. As a result the country has a vast pool of English speaking, trained professionals in the fields of IT, Engineering, Education, Law, Science, Finance, Architecture and other competitive fields.  

Indian KPO sector has already taken steps in employing highly educated and talented people and number of KPO professionals is expected to cross more than 250,000 by 2010 compared to the current figure of 25,000 employees.

A survey conducted in 2002 by NASSCOM showed that an Indian ITES-BPO center in banking and financial service sector, performs better than US and UK based BPO centers in various categories like the total number of correct transactions, customer satisfaction, number of transactions per hour and the average speed of answers.

It has also showed in the survey that 45% of Indian service providers have the highest quality certification like Six Sigma and other internationally accepted quality management standards such as ISO 9001 and the CMM / CMMI framework.

Having already emerged as the preferred destination for business process outsourcing (BPO), India has now set its sights on becoming a global hub for knowledge process outsourcing (KPO). As per a Confederation of Indian Industry (CII) paper, the country stands to gain from its inherent strengths in the healthcare sector, pharmaceuticals and biotech sector and ICT sector which offer significant growth potential for KPO, has said. The healthcare sector could account for 7-8 per cent of GDP by 2012 and provide direct and indirect employment to around 9 million people. At present, the country spends $22.7 billion on healthcare and the sector is the largest service industry in terms of revenue and the second largest after education in terms of employment.

Manpower Costs
As per a study by Kelly Services, India offers competitive salaries, which are almost 60% less than what is offered in USA. A recent study by researchers at the University of California at Berkeley, also confirms that legal assistants and paralegals working in India on behalf of U.S. law firms earn between $6 and $8 per hour, which is about one-third of what their counterparts in the United States are paid.

Similarly, drafting and filing of patent applications in the US costs about $10,000 to $15,000, and companies can save up to 50% of the cost by offshoring the work to India.

However the salaries in India have been rising sharply in the recent years, eroding the cost advantage to some extent. The Indian ITES sector also faces the highest attrition rate of 28% (as per Retention and Attrition study conducted by Hewitt in 2006), as a result of increasing investments and competition in the sector.

Government Policies
Outsourcing is so imbibed in the fabric in the country and the Indian government has a national minister specifically for IT. The government favors IT foreign ownership and imposes no export taxes.

Infrastructure
Several states in India have established special IT parks, which offer excellent telecom and utility infrastructure. While cities like Bangalore, Chennai, Hyderabad, Gurgaon, Pune have already emerged as the preferred locations for BPO and KPO companies, other state governments are also going out of their way to create similar hubs to attract new investments.

Leading companies already in India
In the financial services sector, Citigroup, ABN-Amro (through wholly owned subsidiary ACES in India -Chennai) GE Capital and American Express already have a very large presence and have set up their own centers in India. Even for R&D in software and chip design, major telecom and IT companies opt for India. Motorola, Intel, IBM, Cisco, Texas Instruments, Nokia and Philips have set up offshore design centres in India.