As the world is coming to terms with the widespread impact of the financial crisis, every company across industries is playing cautious. With greater austerity measures, the cost advantage of outsourcing and offshoring is under greater scrutiny than ever.

Offshoring of knowledge services, that was being propped as the new bastion of the Indian outsourcing industry has also slowed down, given the changing global scenario. As some global financial institutions crumbled, some of the Knowledge Process Outsourcing (KPO) companies focused on that single vertical suffered. Currently, most KPOs across segments are under pressure — while in some cases volume of market has shrunk, in some other the volume of offshoring has come down. On the other hand, legal-services outsourcing is experiencing an increase in market volumes — thanks to higher litigation due to financial turmoil!

Indian revenues from the KPO were $7.5 billion for the calendar year 2008, and are expected to cross $10 billion by end 2010, according to ValueNotes. While the revenues are expected to grow at 30 percent till 2008, we expect it to taper off to 20 percent by 2010, primarily due to the slowdown in the global economy. Some of the upcoming trends in the KPO industry are outlined below:

KPOs to Move Toward a Consultative Approach
Though most KPOs already offer a range of high value and knowledge services, going forward, consulting led "transformation" and process re-engineering will become the key differentiator for large providers.

Already, across the spectrum, KPOs are emphasizing value addition and value creation rather than lower costs and labor arbitrage opportunities. The accent will shift from, "I can save you money because of cheaper labor" to "I can save money by doing it smarter and increasing productivity". This trend will take offshoring and outsourcing from the discrete provision of varied services at a lower cost to a more holistic delivery of integrated services that "create value" for the buyer.