A blog on the Internet reads “KPO is about good money, better working hours compared to BPO and an opportunity to do research and technical consultancy.” Like religion, KPO (Knowledge Process Outsourcing) means many things to many people. In one of its focused avatars, KPO includes outsourced services that require an element of domain expertise, judgment, decision-making and analysis. Optimism about the KPO industry is forthcoming from all quarters, with the latest upbeat estimates pegging the market at $16-17 billion by 2010 and India’s share at more than two-thirds.
Would You Like More Process or Knowledge in Your KPO Pie?
Knowledge and process tango to make a KPO story work. However, pure rules-based (if-then-else) processing does not a success maketh. A knowledge service demands deeper understanding of client’s business with an attention to developing collaborative relationships and expertise. As the industry evolved, vendors have integrated an element of process into various tasks to enhance efficiency and quality control. Often, pure domain knowledge based intervention towers over the process element. Legal Process Outsourcing (LPO) vendors in India interact with accomplished legal professionals and handle transnational business issues. Hardly the premises that can be bound by standardization! And the lure of exercising brainpower and freethinking is what makes KPO attractive to India’s firepower of CAs, MBAs, lawyers, doctors, engineers, economists, and doctorates alike.
Can David and Goliath Live Happily Ever After?
Industry experts sometimes put process-based knowledge services in the “high-end BPO space”. In the time to come, these high-end BPOs will play by a different set of rules, targeting process-oriented services through scale. Of course, certain activities would lend themselves to scale while others would rely strongly on domain knowledge or judgment. The latter would be the domain of KPOs or “knowledge service providers”
KPOs, which focus on domain skills, will continue to co-exist with outsourcing bellwethers that bring BPO-reminiscent scale and size beyond the reach (and indeed, the objective) of other knowledge vendors. Firms with a focus on the process element will develop domain expertise only to the extent required to meet customer expectations, as these firms would not be able to charge a premium for that basket of (expertise based) services, amidst other process driven services.
It may not immediately be obvious but domain specializations run deep. EVS, Patent Matrix, IP Matrix and SciTech Patent Art Services provide specialized IP (Intellectual Property) management services such as search, document writing, global filing and legal advice. The Smart Cube, Copal Partners and Pipal Research have also opted to develop functional and industry knowledge for clients. MarketRx combines extensive pharmaceutical and biotechnology industry knowledge with market research to help clients improve effectiveness of their sales and marketing initiatives. We envision a market where vertical players will differentiate themselves through sharp focus on a domain, executed through global presence and local knowledge. They will have unique opportunities to develop custom tools and processes best suited to their narrow vertical specialization, to add value and/or reduce their cost of service delivery.
What could spoil the party?
Many factors have come together to bring this Cinderalla alive. But what when the clock strikes 12?
Managing cultural differences: The software industry may have done the necessary spadework in showcasing India’s abilities globally. However, clients buying into knowledge services are a very discerning type of buyer. The clincher, often, is the ability to understand diverse cultures and deliver intelligent knowledge solutions. It’s the whole “know the Japanese to work with the Japanese” game revisited. For example, US clients are driven by the brevity credo. They like visual presentation, crisp deductions and straight talk. KPO visionaries understand that this cultural difference exists, and are therefore able to align business practices and processes to best address this divide. In fact, it is no surprise that Indian KPO visionaries’ calling cards read like a reunion list. With their size, ability to attract top talent and a culture evangelistic about outsourcing, these corporations have spawned the knowledge outsourcing vanguard in India. Interestingly, a pioneer KPO company counts people of Indian, Chinese, East European and Asian origin amongst its clients. Obviously, with such a diverse nationality spread, cultural differences do not play a detracting role.
Perhaps one aspect, which is a “work culture” difference, is the obsession with quality that clients demonstrate, and which is sometimes not replicated at the Indian analyst level. Analysis that was being done by a staid, relatively less ambitious guy in the U.S. is now being outsourced to a young 20-something graduate. When such young, ambitious graduates do the analysis, they often get bored after six months and quality consciousness dips. Increasingly as senior managers become more and more hands-off in their approach, this kind of slackening in quality leads to client dissatisfaction.
Employability, employability, employability: Who would have thought that the shining star of India’s outsourcing fairy tale – its formidable resource base – would one day be the subject of uncomfortable questions about its most promising industry? Doomsday soothsayers say, and not without evidence, that a talent crunch could derail the growth trajectory of the KPO industry. A large proportion of India’s army of educated and English-speaking resources seem to be “unemployable” by companies setting out to serve the world’s finest companies. Of the three million educated workers added to the labor pool in 2005, only half a million could be considered employable in a world-class company.
Hundreds are interviewed at entry level, only a handful is qualified to join. Even within this elite group of “employable” resources, there are challenges towards making them productive. A typical U.K. graduate would have a relatively strong grasp of client problems and would become productive from month 2. Unfortunately, the same learning curve is absent for Indian graduates.
A few good men: What happens when all the firms chase the same talent pool? The Mckinsey patented “war for talent” breaks out. Salaries zoom, good people leave quicker than ever and companies bear the brunt. As trained and valuable people move out of a company, irrespective of the strongest knowledge transfer processes, knowledge and learning is lost.
It’s not BPO: It is interesting to see how the challenge of managing an offshore high-value business plays out. Many have flocked to the KPO space assuming it’s a “higher-end” BPO. A leading US technology solutions company experimented with setting up a captive knowledge service center within its larger practice in India. It soon realized that managing a ten-person research team was more complex than running a 5,000-engineer strong software practice monolith. The captive work is now being outsourced to a third-party in India. It’s the learning curve for clients and issues of managing and retaining the right employees, maintaining quality standards and assuring high service levels are almost a “special sauce” where few companies have the wherewithal to understand the high-velocity changes.
The bridesmaid syndrome: India is positioned to steal away a lion’s share of KPO services, leaving behind other hotspot destinations such as Russia and China. However, China and Russia are far from non-chalant spectators. Professionals such as engineers and doctors are a sizable number in born-again capitalist Russia. China jumping on the BPO gravy train with fast reflexes has already made waves. By extension, could KPO be far away, especially as Korean and Japanese conglomerates would find the similarity in cultures hard to dismiss? Playing bridesmaid to China and Russia may lead to a stunning anti-climax, if Indian KPO vendors do not continuously review their competitive skill offerings. Instead of viewing these regions as competition, Indian KPOs would rather expand into these areas. Most KPO processes are not large and it’s easy to have more people working in different geographies. All you need is a laptop, the software and the analyst’s thinking and you are ready to roll.
Another view is that Indian knowledge vendors have taken the battle into main markets such as America and Europe. As companies increasingly compete to add value to the client, and not purely for cost arbitrage, competition from China and other low cost locations would become irrelevant. Knowledge firms would then have to compete with local consulting firms. All evidence indicates that the industry has its ways of staying on top of the endless challenges.
Note: The author is the Managing Director of a KPO company The Smart Cube.
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