Indian KPO's form consortium to tap large deals

by p b    Jul 05, 2011

July 5, 2011,
By Priyanka Bhattacharya

Around 22 Knowledge Process Outsourcing (KPO) companies in Bangalore, who are struggling to scale up their business and achieve high growth, have formed a consortium to jointly bid for large outsourcing projects from Western clients.

While India’s IT services and BackOffice companies see higher growth in business and are winning large deals from Western clients, the KPO companies, despite their knowledge intensive focus, are seeing business growing slower.

The consortium consisting of members from pure play KPOs and BPOs providing KPO services; is working on developing go-to market strategies, and business alliances to be able to focus on large sized contracts from big clients.

“In the last four months we realized that there is a wait and watch situation amongst clients who are scared to sign large KPO contracts, even though a KPO service has direct linkage to top and bottom line of a company,” said Sameer Dhanrajani, country head of Fidelity National Financial (FNF) India. “That is why we thought of working in collaboration, and leveraging each other’s strengths to target these companies and generate revenue”.

Dhanrajani heads the KPO Consortium in Bangalore in an independent capacity. Researcher and KPO service provider Evalueserve estimates India’s KPO industry to grow to $ 17 billion by 2014. But the slower growth witnessed following the global economic downturn could derail that.

“While it may seem counterintuitive, recessionary times actually meant slower overall growth for offshoring knowledge services, since many (client) firms were forced to shift their focus to survival mode. Most major offshoring initiatives were shelved or significantly stalled during the depths of the crisis.”said Dr Alok Aggarwal, chairman of Evalueserve.

“KPO services are more complex and still evolving. These services are customized, require deeper experience, skills and domain knowledge in particular sectors such as legal, technology or telecom,” he added.

The KPO consortium as a body to exchange ideas and best practices was formed in 2007, but the change in economic climate as well as the slower business growth has made the grouping join hands and bid for large projects.

In the past, Indian IT and BPO companies have formed consortiums to bid for large projects but could not sustain the initiatives as business grew rapidly. But the KPO consortium is confident of not repeating the mistakes. The KPO initiative will look at complementary skills of partners, with non-competitive agreements and revenue sharing models.

“We are working out the modules so that each entity gets a fair level of the revenue proportion. We are also making sure that there is no cartelization in the business. Even though they will go to the clients together, our model safeguards proprietary data and business modules of each entity,” said Dhanrajani, but declined to name other firms that are part of the grouping.

Rohitash Gupta, CFO of the KPO eClerx told CXOToday that while the company is aware of existence of the consortium, it is not a member.

“We would like to understand what value it will add before we take a call on the same. One more important thing would be the question of the peer group. The longevity of the effort will solely depend on the benefits that various parties concerned get and their ability to work together,” he said.

“But we guess it would require close co-ordination between various parties concerned to pull it off. There could be some benefits where a niche KPO could join hands with a firm that is able to bid for global projects. Also depends on the peer group as this could benefit only smaller KPOs in the group,” added Gupta.