Dubai - 9th April 2008: Various sources of market research predict the KPO (Knowledge Process Outsourcing) industry to be worth anywhere between US$10 billion to US$17 billion by the year 2010. While the level of optimism on industry growth varies, few doubt the fact that the industry will grow at a staggering rate. The financial services sector accounts for a major proportion of the KPO industry. Assuming a conservative growth of the global KPO industry, KPMG expects the financial services KPO industry to be worth in excess of US$5 billion by the year 2010.

KPMG's view of the potential of the KPO industry was revealed today in a report released at a press briefing in Emirates Towers by Rajeev Lalwani, Partner Advisory, KPMG Lower Gulf.

The global financial services industry has been at the forefront of each of the three waves of outsourcing moving from ITO to BPO, and now to KPO. In effect, KPO represents the latest step, in a continuous multi-decade process of value creating strategies, with respect to a typical financial institution's back and middle offices. Within the financial sector, KPO has already been used to handle - amongst other things - credit scoring, loss protection calculations and fraud analytics.

In the words of Edge Zarrella, Global Partner-in-Charge, IT Advisory, KPMG, said: "Just a few years ago, talk of KPO seemed far-fetched, especially as businesses were still struggling to come to terms with what the earlier forms of outsourcing could do for them. 

Our study looks at the financial services KPO space which is driving the KPO evolution. Along the way we aim to show that KPO is a business phenomenon in its own right, not merely an elaboration of Business Process Outsourcing. KPO may still only represent a small percentage of the total outsourcing market but, with the financial sector demonstrating just what it can be used for, I think that all of these numbers are set to increase significantly." 

There are a number of factors driving the financial services' KPO phenomenon:

  • The existing capabilities of ITO and BPO captives and third-party vendors to handle outsourced work

  • The availability of high quality and often certified talent (as opposed to sheer numbers) in offshore locations

  • Moves to extend sourcing strategies beyond traditional comfort zones

  • Global recognition of standards, qualifications, skills and experience required to perform analytical functions

  • The continuing push towards global sourcing by many banking and insurance organizations, in the march for greater efficiency and improved economies of scale as well as access to capabilities

  • Improved remote project management capabilities, owing to an increased sophistication in telecommunications and other enabling technologies

KPMG opines that the KPO phenomenon will have far-reaching consequences for the global financial services' industry over the next three years.

There is likely to be a significant shift in the boundaries between "outsourceable" and "non-outsourceable" activities
Offshoring strategies are expected to embrace new locations
Most global banks and insurers are expected to adopt KPO strategies
Decisions about outsourcing may be accelerated to preserve and increase competitive advantage
"Boutique" providers should leverage KPO to create new services and offerings
More rigorous regulatory and compliance control will likely be demanded, as KPO providers deliver more complex services

KPO delivers high value to organisations by providing domain-based processes and business expertise rather than just process expertise. These processes demand advanced analytical and specialized skill of knowledge workers that have domain experience.  Some of the key challenges that can emerge in the KPO industry are:
Maintaining higher quality standards
Investment in KPO infrastructure
Lack of talent pool
Requirement of higher level of control
Confidentiality and enhanced risk management
A declining dollar
Compliance and regulatory pressures

The KPO industry has indeed come of age. Clients are recognizing that process complexities, higher billing rates and skilled resource requirements differentiate KPO from BPO. KPO demands a more specialized skills base than BPO. It leverages intellectual property and capacity rather than costs.

India is expected to remain a preferred location for KPO activity, but organizations are expected to look for alternative locations for additional delivery centers, both from a customer and service provider perspective. 

Key Pointers 

  • Most global banks and insurers are expected to adopt KPO

  • Global financial services industry at the forefront of each of the three waves of outsourcing moving from ITO to BPO, and now to KPO

  • Significant shift expected in the boundaries between "outsourceable" and "non-outsourceable" activities

  • India remains the number one KPO destination, in hot pursuit are countries like Vietnam, Malaysia, China & Mexico

-Ends-

About the Study
This study has been developed through interviews and inputs from some of the key captive and third-party KPO providers in the financial services industry. The study followed a three-stage methodology to analyze the five KPO themes forming the scope of the study.

Pre-evaluation - Initial primary research by circulating a KPO background questionnaire to qualified captive and third-party service providers.

Evaluation - A thorough domain-specific questionnaire was used as a background for in-depth discussions during field trips to qualified KPO service providers.

Analysis - The information assimilated in the first two phases was analyzed and the five themes identified in the executive summary were examined to identify emerging trends in the global financial services' KPO industry.

About KPMG
KPMG is a global network of professional firms providing Audit, Tax and Advisory services.  We operate in 144 countries and have more than 123,000 professionals working in member firms around the world. 

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative.   Each KPMG firm is legally distinct and separate entity, and describes itself as such.

For further information please contact:
Soumo Bhattacharjee
Manager - Infrastructure
Sales & Marketing
KPMG Lower Gulf
T + +971 (6) 517 0700
F +971 (6) 572 3773
Email: soumobhattacharjee@kpmg.com

Hayet Zenati
Buchanan Middle East
T + 971 4 369 572
F + 971 4 369 85 56
M + 971 50 71 51 936
E-Mail: hayet.zenati@buchananme.com

© Press Release 2008