As more and more service providers are seeking to transform to a full-service business, KPMG predicts the knowledge process outsourcing (KPO) business to cross $10 billion by 2010, of which financial services KPO industry alone would reach $5 billion.
In their latest report, which was launched during the Nasscom 2008 India Leadership Forum, the audit firm detailed their forecasts for the KPO industry. Though India continues to retain its market leader position in KPO segment as well, the report suggests that there are other small countries, which have shown the required knowledge and potential to become future leaders in the financial services sector.
“KPOs, especially financial services, are all about wisdom and intellect. They have nothing to do with volume games. And that is why smaller countries like Ireland, Singapore, Australia, which can not compete with India in terms of scale, are posing a threat to it in the KPO business,” commented Egidio Zarrella, Global Partner-in-charge, IT Advisory, KPMG.
“Customers are ready to pay twice and thrice the amount they pay to Indian KPOs, to people in Singapore because of their specialized skills and intellect.” Singapore has a literacy rate, which is as high as 95.4 percent, whereas India’s is only 65.3 percent.
The low literacy rate in the country is taking the luster away from India. According to the report, the KPO industry requires skilled staff with industry recognized certifications such as Chartered Financial Analyst (CFA), Chartered Accountant (CA), Actuarial Studies, Master in Statistics, Engineering and Master of Business Administration (MBA), which is not available in India in the required numbers.
“The work that is carried out in KPOs is very complex and requires high maturity level. The Tier I and II MBAs, CAs, CFAs and Post Graduates in Finance and Accounting are apt to work in a KPO, but this industry is facing a severe skills shortage. And this is demonstrated by both churn rates and salary inflation,” said Pradeep Udhas, Global Partner-in-charge, Sourcing Advisory, KPMG.
Apart from regulatory and compliance issues, the other barrier that makes India less favorable as a financial KPO destination is the political risk factor. The country has a history of big political turmoil, eg. the serial blasts in the financial capital (Mumbai) of India in 1993, serial blasts in Hyderabad in 2007, riots etc, making customers skeptical while sending their work here.
