Dubai: India will continue to be the preferred location for the global knowledge process outsourcing (KPO) industry which is projected to be worth anywhere between $10 billion and $17 billion by the year 2010, a consultancy firm's new report has said.In hot pursuit of India are countries like Vietnam, Malaysia, China and Mexico as organizations will look for alternative locations for additional delivery centres, both from a customer and service provider perspective, consultancy agency KPMG said here Wednesday in its new report.
The financial services sector will account for a major proportion of the KPO industry and its worth will be in excess of $5 billion by 2010. "Just a few years ago, talk of KPO seemed far-fetched, especially as businesses were still struggling to come to terms with what the earlier forms of outsourcing could do for them," Edge Zarrella, KPMG's global partner-in-charge for IT advisory, KPMG, said in a statement. "Our study looks at the financial services KPO space which is driving the KPO evolution. Along the way we aim to show that KPO is a business phenomenon in its own right, not merely an elaboration of business process outsourcing," he said. According to the report, most global banks and insurers are expected to adopt KPO after the global financial services industry, being at the forefront of each of the three waves of outsourcing moving from information technology outsourcing (ITO) to business process outsourcing (BPO) and now to KPO.
It said a significant shift is expected in the boundaries between 'outsourceable' and 'non-outsourceable' activities.
"KPO may still only represent a small percentage of the total outsourcing market but, with the financial sector demonstrating just what it can be used for, I think that all of these numbers are set to increase significantly," Zarrella said.Within the financial sector, KPO has already been used to handle, among other things, credit scoring, loss protection calculations and fraud analytics. The report cited several factors for driving the financial services' KPO phenomenon.Among these are the existing capabilities of ITO and BPO captives and third-party vendors to handle outsourced work and the availability of high quality and often certified talent in offshore locations.
Other factors are the moves by organizations to extend sourcing strategies beyond traditional comfort zones and global recognition of standards, qualifications, skills and experience required to perform analytical functions.
The continuing push towards global sourcing by many banking and insurance organizations, in the march for greater efficiency and improved economies of scale as well as access to capabilities and improved remote project management capabilities, owing to an increased sophistication in telecommunications and other enabling technologies will also push the financial services to make increasing use of KPO, according to the KPMG report.Among the key challenges that can emerge in the KPO industry are: maintaining higher quality standards; investment in KPO infrastructure; lack of talent pool; requirement of higher level of control; confidentiality and enhanced risk management; a declining dollar; and compliance and regulatory pressures. However, the report stated that the KPO phenomenon would have far-reaching consequences for the global financial services' industry over the next three years. "Offshoring strategies are expected to embrace new locations... (and) most global banks and insurers are expected to adopt KPO strategies," the report said.
According to KPMG, 'boutique' providers should leverage KPO to create new services and offerings.
"More rigorous regulatory and compliance control will likely be demanded, as KPO providers deliver more complex services," it said.