India has been encountering steady outsourcing for many years now as it poses to be the go-to destination for setting up IT support centers. The last decade has been all about the advent and growth of Knowledge Process Outsourcing (KPO). From offering a unique combination of attractive attributes to dominating the outsourcing industry, India has been thriving with remarkable KPO trends that continue to evolve.
This leads us to the obvious question – why do businesses outsource to India? The answer lies is how KPO companies employ highly trained professionals such as engineers, lawyers, CAs, and MBAs to provide knowledge-intensive support services to global organizations. With a huge pool of skilled professionals, India covers over 70% of the KPO industry worldwide and provides a plethora of services including legal processing, advanced research, analytics and clinical trial management.
Given the brisk pace at which the KPO sector is predicted to grow in India, the following are the key trends that will possibly shape its future.
1. Setting up Offshore Delivery Centers
Several Indian KPO companies are targeting places such as China, Eastern Europe, and Latin America, to establish offshore locations and expand their operations.
The hot topic of deliberation among companies is no longer “why to offshore” but “how to expand via offshore”.
The trend is driven by two primary factors. First, the clients of these KPO companies are seeking localized services. To meet this demand, the companies are making the most of local talent with knowledge of respective local languages. Second, the varying time zone in different geographical locations is enabling round-the-clock services.
2. Tier- II Cities Acquire Center Stage
As per the usual trend, Tier-I cities have been the torchbearer of India’s IT growth because they offered better infrastructure, connectivity, and talent. However, KPO companies in India, despite witnessing an amazing growth rate, face pressing issues concerning burgeoning prices of real estate and high rates of attrition.
These issues have put additional pressure on companies to sustain profit margins which are already carved around the tough competition.
To mitigate these roadblocks, KPO companies are proactively expanding their operations to tier-II cities. Pune, Chandigarh, and Jaipur have come up as favorable destinations for resolving the said challenges. This emerging trend of companies opting for Tier-II cities as alternative destinations is likely to gain more ground with time.
3. Mergers and Acquisitions
The exponential growth rate of the KPO sector is expected to result into a number of mergers and acquisitions. This trend is primarily fuelled by the need to acquire new clients, domain knowledge, and to enter a highly-competitive market.
BPO companies eyeing a plunge into the world of KPO will benefit highly from this strategy as it will add white-collar services to their portfolios. Be it a monumental deal or a small one, the results are predicted to be fruitful for the Indian KPO industry.
4. Gradual Termination of Captive Centers
Global corporations had set up captive centers in India during the emergence of the outsourcing wave. However, market dynamics today are different. Captive centers are facing stiff competition from local vendors who are often pulling ahead of the former, especially in product development and services.
The captive centers are struggling due to growing costs and attrition, lack of management support, and low flexibility. Also, security issues are being far better managed by local vendors. Therefore, phasing out of captive centers is a key emerging trend in the KPO sector in India.
5. Promotion to Strategic Partners from Service Providers
When you need to brainstorm a fund-raising game plan or layout the key terms of an M&A deal, the KPO industry is well equipped to do both. Be it an equity research boutique, a private equity fund, or a corporate finance consultancy, a KPO player can serve them all. With this trend, the line between the work considered for outsourcing and the work mandatorily performed in-house has blurred significantly.
Owing to India’s tremendous knowledge pool, the country will continue to be the preferred location for KPO players. The KPO industry is dynamic and ever-evolving with high-complexity tasks. The sector will continue to see consolidation and establishment of offshore delivery centers by big entities. The 5 key emerging trends will shape the future of the KPO industry in India.
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