KEY POINTS:
Chennai - In an office in the southern port of Chennai, Indian analysts pore over stock market data for a London fund company, searching for investment opportunities.
Some 1900km away in Gurgaon, on the outskirts of Delhi, Indian lawyers have taken over research and patent filing for several
Western technology and healthcare companies.
These are examples of knowledge process outsourcing, or KPO, a new fad where Indian companies are trying to move up the value chain and away from call centres staffed by young people tutored in American accents.
As well as examining financial data and drafting patents, firms in India are managing payrolls and accounts for Western companies and doing market research and other high-value tasks.
The knowledge process market in India is worth US$2.5 billion ($3.4 billion) to US$3 billion a year, and is likely to grow to US$10 billion to US$12 billion by 2012, says Ashish Gupta, chief operating officer of Evalueserve, a knowledge process firm with 1500 employees in India, China and Chile.
Driving this boom are huge cost savings for Western companies and bigger fees for Indian companies than they can earn from call centres. Although salaries in India are rising, they are way below Western wages.
Patent research can be done in India at US$50 to US$80 an hour, compared with US$150 to US$350 in the United States, says R. Sivadas, chief executive of Scope e-Knowledge Centre in Chennai, which has clients in publishing, healthcare, and engineering.
Average billing rates in the knowledge process sector are 40 to 50 per cent higher than those in the call centres, says Sivadas, whose company employs 485 people, 95 per cent of them engineers and medical doctors.
"We have just touched the tip of the iceberg. In the next six to eight years, KPO is definitely going to be a growth story," says Sivadas, whose firm will increase staff to 680 by March 2008.
Another such firm is Sundaram Finance, which set up a back-office subsidiary six years ago to provide research services to local financial firms and now has 23 clients from Britain, Australia, Singapore and the Middle East who have outsourced jobs like market and data research.
In January, India's Hinduja TMT and British business consulting and outsourcing firm Centric Consulting entered into a joint venture with law firm Fox Mandal Little to provide legal outsourcing services.
Indian software majors Infosys Technologies and Wipro are also vying for a bigger share of the outsourcing business.
Infosys made US$147.52 million in profit from all business process outsourcing in its most recent fiscal year, 8 per cent of it from these high-value, knowledge tasks.
The growth in knowledge process outsourcing has come on the back of India's pool of English-speaking talent and its lower wages, but there is a looming shortage in graduates in business management, engineering, financial research, law, accounting and medicine.
"There are two issues in terms of manpower - in quantity, there is no problem, but in terms of quality there is definitely an issue," Sivadas says.
India produces about half a million technically trained graduates, 300,000 postgraduates and doctoral candidates and 20,000 lawyers every year, but many are unsuitable.
"A lot of time, money and effort are spent in finding right candidates," Sivadas says. "It's not as easy as the numbers make it out to be. You just can't pick people off the street."
- Reuters