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Can IT Services companies diversify into the KPO Business

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IT Industry in BPO

The era of 90’s saw a magnifying evolution of the IT industry. Customer satisfaction was one of the key areas of focus for the industry, which resulted in evolution of IT business diversifying into the BPO sector. BPO also known as Business Process Outsourcing offers back-services like answering phone calls, data entry, transcribing records, etc. The year 2002-03 saw tremendous growth for the sector and the outsourcing firms’ implemented complex transactions such as decision making, problem solving, customer service, insurance claim processing and many more.

As a result of the transition the year 2006-07 saw immense growth in what we call as Knowledge intensive industry which has been given the fancy term of KPO, also known as Knowledge Process Outsourcing. Ever since, KPO has become the third wave in the industry.

Read on GWI  Top Information Technology (IT),Hardware and Software Companies in India Categorized by Tiers.

 IT Industry in KPO

Most of the IT companies have ventured in KPO segment either organically or inorganically.

As far as the Indian IT industry is concerned the Dotcom burst in 2000 changed the face of the entire industry. A significant turnaround was seen in the sector with large and mid-size companies emerged strongly from the recession where as the smaller firms ceased to exist. This opportunity was utilized by many IT companies to diversify in BPO and leverage the cost advantages of cheap labor in densely populated country like ours.

The recent global recession saw nothing different and a similar transformational impact was seen which added more resilience to the off shoring model. The industry was undergoing structural changes and offered low cost high end knowledge services in the form of Knowledge Process Outsourcing.

A report on KPO stated its tremendous potential which employs over 250,000 personnel and have a revenue base of over $12 billion as of 2011 in India.

Strategies for Pure KPO players for entering the IT Market

1) People Strategies

KPO as an industry is marked by high turnover. Following strategies would be effective to recruit and retain talent:

i) People Development & Philosophy: KPO as is well known by now is a professional services knowledge intensive company unlike white-collar factories. Thus people development processes to foster knowledge and expertise is the root for the success of the industry. Employee care and meritocracy are some of the key ingredients for the industry.

ii) Training: KPO include high investment in developing skill set which includes managerial skills, functional skills, cross-cultural skills etc. across different functional domains. Thus proper training needs to be provided for success of the company.

iii) Competitive salary: As compared to the IT backed KPOs and other captives, pure KPO players need to attract and retain top talent by offering good salaries.

2) Quality Service and Expertise

High quality delivery should be the aim for the KPOs. It is important for the KPO players to quantify quality and take feedback for each project for continuous upgradation of their offerings.

3) Innovation and Differentiation

There is an urgent need to provide innovative solution so that the pure KPO players differentiate and novel services could be offered. Buyers of such innovative services will differentiate KPO players from other IT backed KPO players. Another necessary ingredient is to generate sufficient ‘pull’ in the market with proper branding.

4) Focus on SMEs

Small and medium enterprises (SMEs) benefit the most from jobs being outsourced. SMEs have small setups and have high overhead costs since they cannot take the advantage of the economies of scale. Off shoring to third party KPO can help in beneficial effect on the bottom line of a small enterprise by controlling costs. A mutually beneficial relationship between KPOs and SMEs can be set up. It would provide tremendous learning opportunity and expertise to the working professionals which matters in the long term goal of the organization and the individual.

Thus at last we can say KPO business is a diversified business altogether and pure KPO players have added advantage over the IT backed players, provided the pure players are quick enough to act and formulate the policy on time.


Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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