Large Potential of SME Clients

While KPO started initially in captive centers of large companies, moving to specialized vendors, who provide such services to large companies such as Investment Banks. This sector holds immense potential for the SMEs in the long-term. There are millions of SMEs, which can benefit from KPO; however, their average volumes are much lower than a few thousand US dollar projects up to 5-10 full-time employees). While large companies predominantly use KPO for gaining access to talent and cost reduction, SMEs can further benefit from buying KPO services from specialized vendors by being able to gain access to very large resource pools quickly at no up front costs.

Additionally, it allows them to vary their cost base in the face of short-term demand swings, which creates the possibility of new business models. With the advent of specialized and high-quality KPO vendors in India, customers will increasingly go the 'buy' route rather than setting up their captive offshore centers. Setting up a captive takes at least a year to stabilize quality, consumes a very large amount of senior management attention, and often ends up with higher operating costs and less management control than working with one or two vendors.

This effect is particularly strong in KPO, since most companies do not want to build in-house capabilities in such fields in India due to the lack of critical mass, which is currently likely to be around 200+ professionals and that too, with an increasing trend. (E.g. Business Research). US/UK biggest markets, but large potential of non-English speaking markets. The US and the UK account for the largest share of KPO due to English language, the widespread NRI community and their existing comfort levels with off shoring services to India and similar destinations.

European companies are still far behind in terms of off shoring even BPO processes, but are increasingly opening up to the idea of off shoring higher end work to countries like India. However, this trend is likely to pick up only if issues related to language proficiency and cultural context are handled properly. If addressed appropriately, the non-English segment could become an excellent growth opportunity for Indian companies. Customers want focus rather than breadth or size Buyers of off shoring services are increasingly looking for those KPO players, which have the necessary expertise, depth and experience in focused areas of KPO. KPO players need to focus on particular market segments, in terms of services provided, industry verticals, functional skills as well as the type of clients served. Typically, customers look for the skill rather than for the size of a vendor and prefer focused vendors over vendors offering large varieties of BPO, IT and KPO services. They want vendors who will totally customize their solutions and offer both project-based delivery models as well as dedicated centers.