Source: Times of India

On a sunny day in an office in India’s southern port city of Chennai, Indian analysts are to be seen poring over stock market data for a London-based fund company, scouting for global investment opportunities.

Some 1,200-miles (1,900-km) away in Gurgaon, on the outskirts of Delhi, Indian lawyers have taken over research and patent filing for several Western technology and healthcare firms.

And, these are just a couple of examples of how knowledge process outsourcing (KPO) of which India is fast becoming a hub, has BPO firms scuttling up the value chain, away from call centres staffed by young school or college graduates tutored to answer calls from USA and elsewhere in American accents. From answering phonecalls, Indian BPO firms have now moved on to examining financial data and drafting patents, managing payrolls and accounts for Western firms, carrying out market research and doing a host of other high-value tasks.

According to Ashish Gupta, CEO – Evalueserve, a KPO firm, with a staff count of 1,500-employees in India, China and Chile, India’s KPO market that is currently worth $2.5-billion to $3-billion a year, is likely to grow to $10-billion to $12-billion by 2012.

Driving this boom are huge cost savings for Western companies and bigger fees for Indian firms, much more than they can earn from running call centres. While, salaries are rising in India, they are still way below Western pay packets. And, of course, one should take into the exchange value of the dollar to the rupee, which helps keep costs low.

Compared to the $150 to $350 per hour charges in USA, patent research can be done for $50 to $80 an hour in India, says R. Sivadas, Chief Executive of Scope e-Knowledge Centre in Chennai, which has clients in publishing, healthcare, and engineering.

Sivadas, whose firm employs 485-people, 95% of them engineers and medical doctors, says average billing rates in the knowledge process sector are 40 to 50% higher than in the call centres.

“We have just touched the tip of the iceberg. In the next 6 to 8 years, KPO is definitely going to be a growth story,” says Sivadas, whose firm is expected to increase its staff headcount to 680 by March 2008.

Sundaram Finance, who six years ago set up a back-office subsidiary for providing research services to local financial firms, now has 23-clients from Britain, Australia, Singapore and the Middle East, who have outsourced jobs like market and data research.

In January, Hinduja TMT, and Indian firm, together with Centric Consulting, a British-based business consulting and outsourcing firm, entered into a joint venture with Fox Mandal Little, a law firm to provide legal outsourcing services.

A most promising industry, it even has Indian software majors i.e. Infosys Technologies and Wipro also vying for a bigger share of the KPO business. In its recent fiscal year, Infosys made $147.52-million in profit from all business process outsourcing, 8% of which came from high-value, knowledge tasks.

“I expect knowledge services to continue to grow much faster,” says Amitabh Chaudhry, Chief Executive and Managing Director of Infosys’ business process unit, “That’s a very important area for us both from the opportunity perspective and continuing to push the envelope to improve per capita productivity.”

Wipro’s business process outsourcing unit, also aims to double revenue from knowledge services to 40% by 2009. The growth in knowledge process outsourcing comes on the back of India’s pool of English-speaking talent and lower wages, however, there is a looming shortage of employable graduates in business management, engineering, financial research, law, accounting and medicine.

“There are two issues in terms of manpower i.e. while, quantity is not a problem, in terms of quality, there is definitely an issue,” says Sivadas. India produces about half a million technically trained graduates, 300,000-post-graduates and doctoral candidates and 20,000-lawyers each year, but not many of them are suitable for direct employment in the industry.

“A lot of time, money and effort are spent in finding right candidates. It’s not as easy as the numbers make it out to be. In this business, you just can’t pick people off the street,” adds Sivadas.

Sivadas is right when he points out that while Indian colleges and universities churn out graduates and post-graduates, what they churn out cannot be employed directly. Most of them come from villages, small towns and cities, with little or no exposure to big city leave only cosmopolitan culture. Speaking limited or bad English, they lack the finer graces of interacting in a sophisticated and refined setting.

To off-set quantity against quality, firms such as, Infosys, Wipro etc. have set up finishing schools on their campuses, for new recruits to undergo a year’s training, before being absorbed into its workforce. It remains to be seen if this experiment in quantity improvement is successful!?