Leading BPO firms such Infosys and Zensar are increasing their focus on the KPO (knowledge process outsourcing) services as they fetch significantly better margins compared to pure BPO work.
Industry experts say as KPO work is more complex, it also helps in bringing in better margins. Margins in the KPO business could be atleast 10% -15% higher as compared to pure BPO work. It is also been said that traditional voice-based BPO work is declining and will continue to decline more with gradual move towards self-service by customers, as the Internet penetration increases.
Hence, high-end services that need more domain skills are becoming the practice of the day. KPO services, according to the experts, bring margins, which are almost equivalent to that in the IT business. ?Voice-based BPO work is declining, and the focus is more on end-to-end processes, that needs tremendous domain skills. This kind of work gives a better margin as compared to traditional BPO work. In fact, it gives a margin, which is closer to IT margins,? commented Ganesh Natarajan, chairman Nasscom & CEO, Zensar Technologies. ?At Zensar, 65% of work is related to KPO and will keep increasing,? he added.
According to Nasscom estimates, the KPO sector is expected to be worth $17 billion by 2010, of which $12 billion would be outsourced to India. Nasscom also expects the KPO sector to grow around 30%-40%.
According to Mark McDonald, group vice president and head of research, Gartner executive programs, the analytics market is huge in India. This is one area, which will attract foreign players as they are looking at outsourcing more complex businesses, which need an analytical perspective.
According to Joydeep Mukherjee, head, knowledge services practice, Infosys BPO, the benefit of focusing on KPO work is that there is a greater net margin.