With the Knowledge Process Outsourcing (KPO) industry expected to grow at a staggering rate, India seems all set to remain the number one KPO destination, at least in the short to medium term. According to the KPMG study on the ‘KPO Phenomenon’ released today, the industry is likely to be worth anywhere between $10 billion to $17 billion by 2010, with global banks and insurers expected to adopt KPO.A research by Evalueserve last year had pegged the revenue earned by the KPO industry worldwide at approximately $1.2 billion in 2003-04 and $4.4 billion in 2006-07; this implies an annual growth rate of 54 per cent.While the KPMG study released today predicts that India will remain the prime location for KPO activity in the near future, the study also speaks about a strong likelihood of geographical diversification propelled by several demand and supply side drivers. “KPO providers are not expected to just have delivery centres in a single country. To maintain business continuity, to meet linguistic needs or local regulatory constraints, KPO providers are expected to diversify globally,” states the study.One of the main demand side factors initiating global diversification is skill availability. India, which is currently a dominant KPO destination, is now facing a severe skill shortage. Given that this industry is knowledge driven, the demand-supply gap for qualified resources in India is likely to force KPO providers to spread to other countries with an adequate pool of skilled personnel. Further, service providers would want to diversify their risks and maintain business continuity by providing services from one single location or country. However, according to Pradeep Udhas, global partner-in-charge, sourcing advisory, KPMG, India is unlikely to lose out because of these factors in the long run. “For India, it is not a question of retaining KPOs because scale can only be achieved here. Other countries, like Australia, Singapore etc might be attractive in some specific niche areas. Thus, it is not a question of India losing out. In fact, instead of fighting this trend of geographical diversification of KPOs, India can leverage this trend by setting up its own KPOs in other emerging countries,” he says.Meanwhile, even KPO service providers are unwilling to see a bleak future for India in the long run, despite an impending skill shortage. “Yes, there is a severe skill shortage here. However, the trend of using more technology than people is likely to become dominant, thus covering this shortage,” says Udit Mathur, vice president and general manager (India) of FirstRain, provider of search-driven research applications for investment professionals and corporate executives.“Though of course, KPOs are likely to get hit by the poor quality of workforce. But more than this, it is the rising costs that pose an issue, which is what needs to be taken care of,” he adds.Meanwhile, Ashish Gupta, COO of Evalueserve believes that our education system has been unable to gear up to face the needs of the KPO industry. “Yes, India is facing a skill shortage but that is unlikely to be a show stopper. We are likely to sustain our advantage at least for another decade or so,” he says.
