Final Project On Outsourcing In India 6r6y5e

CHAPTER NO.1 AN OUTSOURCING 1.1Introduction to an Outsourcing Outsourcing can be defined as an allocation of specific business processes to a specialist external service provider. Most of the times an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks. Once the task is assigned to the service provider, he will take the responsibility of carrying out the tasks and maintaining the organization’s assets. Organizations outsource their business process due to: Lack of expert-labor in some portions of the business process  Availability of cheaper labor, whilst not comprising on the quality of output  Ability and feasibility to concentrate on the other crucial business process  Expertise in communication capabilities  For technical expertise Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective outsourcing. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees, facilities, equipment, and complete responsibility for a product or function to an outside vendor. In contrast, selective outsourcing may target a single, time-consuming task within a department, such as preparing the payroll or manufacturing a minor component, that can be handled more efficiently by an outside specialist. However prior to outsourcing any component of business to a third-party vendor, it is essential to understand the advantages and disadvantages of outsourcing. Although outsourcing presents a variety of benefits to your organization, it could also pose difficulties if not outsourced to the right service provider. Some common examples of outsourcing include manufacturing of components, computer programming services, tax compliance and other ing functions, training istration, customer service, transportation of products, benefits and compensation planning, payroll, and other human resource functions. A relatively new trend in outsourcing is employee leasing, in which specialized vendors

recruit, hire, train, and pay their clients' employees, as well as arrange health care coverage and other benefits. Outsourcing is a phenomenon which has many names. In business some call it 'off shoring'; some call it 'BPO' and some call it 'global sourcing' which means delocalization in laymen’s language. Regardless of how you call it, it is common to all the MNE's as it is major mart of their business to get the work done cheaply and quickly and spread their business across the world. Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider. Outsourcing involves transferring or giving a significant amount of management control to the supplier. Buying products from supplier is not outsourcing, buying services from provider is not necessarily outsourcing. Outsourcing involves considerable degree of two way information exchanges coordination and trust. For instance if you buy a product from a vendor it is not outsourcing updating your requirements to him and having direct with the worker who is manufacturing the product and getting you product is known as outsourcing. The idea of outsourcing has its roots in the 'competitive advantage' theory propagated by Adam Smith in his book 'The Wealth of Nations' which was published in 1776.over the years the meaning of outsourcing has undergone significant changes. These changes started the movement of manufacturing units to the countries which provide cheap labour during the period of industrial revolution which is the context of the present scenario. Over the past few years IT has the backbone for the world economy this boosted the companies to outsource more rapidly. Outsourcing is the processes of a company hand over a part of its work to other company where it can be done cheaply and quickly. The work transfer to other company is constantly monitored and processed according to the requirements and specifications of the outsourcing company. This process id beneficial to both the outsourcing company and the service provider, as it enables the outsourcer to reduce costs and increase quality and provide service to a lot of customers at a time. The service provider also benefits by providing employment to the staff and expand its business. In a nutshell, outsourcing is an accepted management tool for restructuring and refocusing the way an organization does business. Globalization of economies over the past years have reduced international trade barriers and have resulted in an increasingly interlinked global economy and intense global

competition, putting pressure on business managers across the world to cut costs of operations. At the same time a paradigm shift in the possibilities of communication that the Internet and the telecommunications revolution has bought about has opened up a plethora of opportunities in outsourcing business processes across continents. Traditionally starting with just sub-contracting in manufacturing, now a holistic definition of outsourcing involves transferring any value contributing activities, processes and/or services to the premises of one’s own or an agent primarily to save cost and/or to increasingly focus on its area of core competence. Today, every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. In this context, it makes sense to focus only on the organization’s core competencies and outsource non-critical business activities. Therefore, routine istrative work, although important, can be outsourced to third party vendors. Here is the general process in which outsourcing is done. 1. Deciding to outsource 2. Supplier proposals 3. Supplier competition 4. Negotiations 5. Contract finalization 6. Transition 7. Transformation 8. Ongoing service delivery 9. Termination or renewal Here are the main reasons why a company will look to outsource: 1. Cost savings 2. Cost restructuring 3. Improve quality 4. Knowledge 5. Contract 6. Operational expertise 7. Staffing issues 8. Capacity management

9. Catalyst for change 10.Reduce time to market 11.Commoditisation 12.Risk management 13.Time Zone 14.Customer Pressure The most commonly outsourced streams of business include.  Content Development  Web Design and Maintenance  Recruitment  IT Maintenance  Logistics  Manufacturing  Technical/Customer . Vendors providing outsourcing services are generally grouped into two models: Business Process Outsourcing (BPO) and Application Service Provider (ASP). In the BPO model, major resources and assets are transferred from the company to the vendor. Under the ASP model, on the other hand, vendors concentrate on providing selected services for multiple clients .Nowadays there is also a wide range of pricing models and options available i.e. there is a seemingly endless combination of service, pricing, and delivery, providing a solution for most situations. Main outsourcing destinations Top outsourcing countries includes Brazil, Bulgaria ,Chile , China, India, Indonesia, Malaysia, Mexico, Philippines ,Singapore ,Thailand ,Vietnam , Pakistan , South Africa ,etc. Global Outsourcing Market According to McKinsey, the global "addressable" Business Procurement Outsourcing or BPO market is worth US$122 - US$154 billion, of which: 35-40 retail banking, 25-35 insurance, 10-12 travel/hospitality, 10-12 auto, 8-10 telecoms, 8 pharma, 10-15 others and 20-25 is finance, ing and HR.

1.2 Advantages of Outsourcing:

Following are the advantages of outsourcing:Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent. This is one of the prime advantages of offshore outsourcing. Risk-sharing: One of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating factors better. Concentrating on core process rather than the ing ones: Outsourcing the ing processes gives the organization more time to strengthen their core business process. Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. The outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the outsourcing organization. Effectively the tasks can be completed faster and with better quality output. Lower personnel costs: Some businesses choose to take their outsourcing one step further by choosing a vendor, located in another part of the world. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. By outsourcing job duties to non-employees, a business does not have to pay consistent wages or offer additional employee benefits. The company may pay lower taxes because independent contractors, the people who complete the outsourced projects, pay their own withholding, social security, and other taxes. This can add up to substantial savings. Outsourcing speeds up production time. Since the third-party vendor will only be concentrating on one specific task, instead of numerous office duties, actual production time can be greatly increased. Outsourcing gives a business the flexibility to change third-party vendors whenever necessary. This process is not as time-consuming as the normal employee hiring process, because they are not screening individuals, they are considering established companies with proven track records.

1.3 The Disadvantages of Outsourcing:Some of the major disadvantages to outsourcing include poor quality control, decreased company loyalty, a lengthy bid process, and a loss of strategic alignment ,etc .Following are the important disadvantages of outsourcing : Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party. Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in g a contract while g a contract across international boundaries may pose a serious threat. Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time. In such situations vendors may lack complete focus on your organization’s tasks. Synchronizing the deliverables: In case you do not choose a right partner for outsourcing, some of the common problem areas include stretched delivery timeframes, sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner. Undesirable results:One of the biggest disadvantages of outsourcing is undesirable results. This is especially true when a company hires a third-party vendor to mass produce a product. In the event that the finished products do not meet quality standards, the manufacturing process must be repeated by a different vendor. Not only is this a waste of time and materials, it can also be very costly for the company who outsourced the project. They are essentially paying twice for the same job. In addition there is always the possibility that the company may lose sales, during this same period because of the lack of available product. Unemployment:

Another disadvantage of outsourcing is a loss of jobs. Many times work is outsourced simply as a means to save money. Outsourcing to a foreign country typically saves a company a great deal in wages. So, the choice is made to reduce their local workforce, at the expense of the laid-off employees. In turn, it can cause community uproar and even a decrease in business and profits. This happens when local consumers make the decision to shop elsewhere, as a way to voice their disdain.

1.4 Outsourcing Trends "Outsourcing is nothing less than a full-blown mega-trend all around the world" Outsourcing, going to be more and more of a mainstream phenomenon, is now a business essential. The next wave in globalization is focused on the transplantation of entire IT departments offshore. Recent trends suggest that the outsourcing market will continue to grow. Contracts are awarded incessantly and study indicates that companies are expanding the range of IT services they outsource. Recent Trends  Offshore outsourcing is increasingly being accomplished as global sourcing or global delivery.  Cannibalization of work: Earlier work was outsourced to a supplier who stayed at home, but today outsourcing is more prevalent.  The growth of the captives, organizations owned and operated in a foreign country by a parent firm. Here the offshore workforces are employees of the parent company, not an outsourcing supplier.  Outsourced e-commerce: Sending e-commerce out of house is an increasingly popular choice for businesses.

Outsourcing Cost Dynamics The Global Market: To improve business performance outsourcing of business processes and functional activities is one of the options available. Companies that employ outsourcing are more financially stable than are those that do not.  35-55 percent savings in relevant costs for some global companies.  23 percent of IT services will be delivered from offshore centers by 2007, compared with only 5 percent this year.  According to International Data Corporation (IDC), global IT-enabled services market will for revenues of $1.2 trillion by 2006. Globalization and de-regulation has changed the entire face of business and the companies are about to receive the new business model, ‘outsourcing'. The new atmosphere speeds up business processes, eliminating istration costs and improving efficiency.  Cost saving by 40-50%  Reduce investment risk  Get access to specialized skills  Faster development and start up  Overcome human resource crunch  Ability to concentrate on core functions.

Global Outsourcing  Creates and expands new markets  Effectively and efficiently promotes global citizenship  Recognizes the benefits of a global economy  Enhances technological creativity and diversity  Makes good social, financial, and economic sense Trend setting factors  Conservative companies to experiment with going offshore to withstand competition.  Broadening of the IT services offered by the experienced vendors.  The launching of captive offshore centers by companies for business process outsourcing (BPO).  Onshore IT technology and services vendors setting up shop in locations like India and China to widen their services. The main three facets; o Availability of aptly skilled resources o Lower costs of manpower o Ability to create better quality of work, more efficiently

CHAPTER NO.2 TYPES OF OUTSOURCING 1.1 Introduction:Outsourcing can be defined as an allocation of specific business processes to a specialist external service provider. Most of the times an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks. Once the task is assigned to the service provider, he will take the responsibility of carrying out the tasks and maintaining the organization’s assets. “Contracting with a vendor to provide a service rather than providing it yourself” Outsourcing, in literal , means sourcing from outside. It is the contracting out of a company's non-core, non-revenue producing activities to specialists. Principle types Traditional outsourcing: Here the routine jobs or tasks that the staff of the organization does not perform are identified and the service provider usually hires staff for this job. Greenfield outsourcing: Without hiring the service provider the organization can directly hire an imminent company that can execute their business that was not done in the organization internally.

1.2 Common Types Outsourcing in India

 Information Technology (IT) Outsourcing a. Web site development b. Software development c. Network backbone services d. IT remote  Business Process Outsourcing (BPO)  Call centres  Payroll  Finance functions and activities  E-publishing  Book keeping services  ing  Human resources  CAD services

1.3 Need of Outsourcing in India  Lack of time or urgency  Lack of expertise  Deplorable cost to perform services  Shift to new technologies and/or existing technologies  Add to existing staffing levels hastily

 Focus on operational, functional, or technical limitations  Return the focus of staff to core capabilities  Hasten benefits by rapidly employing services or projects  Trim down costs in an explicit functional area  Increase service levels  Reduce capital costs Every Organization looks for  Expertise in latest technology o Tools & techniques o More structured methodology, procedures and documentation  Rapid deployment o Proficient and skilled man power  Lowered costs o Reduced capital investment o Reduced in-house inventory

Major Types of Outsourcing in India

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Payroll Outsourcing ss e Process Process Legal Outsourcing Outsourcing Process Payroll Outsourcing OutBusiness Process Outsourcing sourcing

CHAPTER NO.3 BUSINESS PROCESS OUTSOURCING (BPO) 1.1 Introduction Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a thirdparty service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. [1] In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing in-house services with labor from an outside firm. BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and ing, and front office outsourcing which includes customer-related services such as centre services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near shore outsourcing. Often the business processes are information technology-based, and are referred to as ITESBPO, where ITES stands for Information Technology Enabled Service. 1.2 BPO Industry size in India India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year, other locations like Philippines, and South Africa have emerged to take a share of the market. China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune, Patna and New Delhi. The top five Indian BPO exporters for 2009-2010 according to NASSCOM are  Genpact,

 TCS BPO,  WNS Global Services,  Wipro BPO, and  Aegis Ltd. 1.3 Benefits and limitations of BPO An advantage of BPO is the way in which it helps to increase a company’s flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways. Most services provided by BPO vendors are offered on a fee-for-service basis . This can help a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints. Key employees are herewith released from performing non-core or istrative processes and can invest more time and energy in building the firm’s core businesses. The key lies in knowing which of the main value drivers to focus on – customer intimacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge. A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company. Finally, flexibility is seen as a stage in the organizational life cycle: A company can maintain growth goals while avoiding standard business bottlenecks. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order

to become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation. A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time. Although the above-mentioned arguments favor the view that BPO increases the flexibility of organizations, management needs to be careful with the implementation of it as there are issues, which work against these advantages. Among problems, which arise in practice are: A failure to meet service levels, unclear contractual issues, changing requirements and unforeseen charges, and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to be considered before a company decides to engage in business process outsourcing. A further issue is that in many cases there is little that differentiates the BPO providers other than size. They often provide similar services, have similar geographic footprints, leverage similar technology stacks, and have similar Quality Improvement approaches. 1.4 Threats or Risk in BPO Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing leads to a different relationship between an organization and its contractor. Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a Business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that

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L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical ITprocesses.

CHAPTER NO.4 KNOWLEDGE PROCESS OUTSOURCING (KPO) 1.1

Introduction Knowledge Processing Outsourcing (popularly known as a KPO), calls for the

application of specialized domain pertinent knowledge of a high level. The KPO typically involves a component of Business Processing Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). KPO business entities provide typical domain-based processes, advanced analytical skills and business expertise, rather than just process expertise. KPO Industry is handling more amount of high skilled work other than the BPO Industry. While KPO derives its strength from the depth of knowledge, experience and judgment factor; BPO in contrast is more about size, volume and efficiency. In fact, it is the evolution and maturity of the Indian BPO sector that has given rise to yet another wave in the global outsourcing scenario: KPO or Knowledge Process Outsourcing. The success achieved by many overseas companies in outsourcing business process operations to India has encouraged many of the said companies to start outsourcing their high-end knowledge work as well. Cost savings, operational efficiencies, availability of and access to a highly skilled and talented workforce and improved quality are all underlying expectations in outsourcing high-end processes to India The future of KPO has a high potential as it is not restricted to only Information Technology (IT) or Information Technology Enabled Services (ITES) sectors and includes other sectors like Legal Processes, Intellectual Property and Patent related services, Engineering Services, Web Development application, CAD/CAM Applications, Business Research and Analytics, Legal Research, Clinical Research, Publishing, Market Research (Market research KPO ) etc.

1.2 Scope and Future of KPO According to a report of National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce that serves as an interface to the Indian Software industry, Knowledge Process Outsourcing industry (KPO) is expected to reach

USD 17 billion by 2010, of which USD 12 billion would be outsourced to India. Another report predicts that India will capture more than 70 percent of the KPO sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are also expected to the KPO industry. According to a recent study by “Evalueserve, a Gurgaon based outsourcing company having service chart for global world”, the global KPO market is expected to grow at a cumulative annual growth rate (CAGR) of 46 per cent, from $1.2 billion in 2003 to $17 billion in 2010. Compare this with the prediction for the low-end outsourcing services market. This is expected to have a CAGR of 26 per cent, from $ 7.7 billion to $39.8 billion in the same period. Evalueserve says India provided $3.5 billion of BPO and KPO (but non-IT) services in 2003 and is expected to grow at a CAGR of 36 per cent during 2004 to 2010. Hence, it is likely to earn $30 billion in 2010 by providing these services. Says country general manager, Kelly Services, Achal Khanna “India still maintains the competitive advantage for providing, the combination of the most cost-effective and high quality manpower- this is India's strength in the off-shoring business”. In the future, it is envisaged that KPO has a high potential as it is not restricted only to Information Technology (IT) or Information Technology Enabled Services (ITES) sectors, and includes other sectors like Intellectual Property related services, Business Research and Analytics, Legal Research, Clinical Research, Publishing, Market Research (Market research KPO), etc. "Over the past year or two, the outsourcing industry has been throwing up jobs for Doctors, Engineers, CAs, Architects," says Jacob William of the Bangalore-based Outsource2India, which employs 500 people and offers services in the big-buzz, big-bucks area of knowledge process outsourcing. "Unlike the first wave which was more about entering data and answering phone calls, these jobs involve skill and expertise." Also, of course, the talent is much more affordable. "Law firms in the US charge an average of $400-450 per hour, and we do the same work for $75 to $100 an hour" says Kamlani" who is an outsourcing provider in the same area.

In the Indian context, KPO salaries could be 25-50 per cent higher than those offered to the same domain experts such as Engineer, Doctor, CA, Lawyer, Architect, Biotechnologist, Economist, Statistician and MBAs, it said. In its annual publication Strategic Review 2005, Nasscom has said the high-end activity of the BPO industry—the KPO or knowledge process outsourcing could be worth $15.5 billion by 2010. According to earlier estimates, the BPO industry itself was expected to be about $20bn by 2008; hence a very significant portion of the sector—in excess of 50% is now projected to be knowledge based. This represents significant metamorphosis of call centre sector business to completely different model. Interestingly, Sunil Mehta, Nasscom vice-president research, distances himself from the estimates. The projections are based on a white paper released by Evalueserve. The paper cites reasons for a possible KPO boom. It says higher savings by outsourcing knowledge-based activities combined with the scarcity of specialized talent in developed countries could lead to growth in the KPO sector. Billing rates for KPO are higher at $30-45 per hour compared to just $10-14 in the BPO business. However, the paper also warns of several challenges like higher quality standards, greater investments and inadequate talent. The study estimates that while the compounded growth rate of BPO till 2010 would be just 26% KPO is expected to be grow at almost 46%

1.3 Need of KPO If we look into any financial newspaper, magazine or any literature giving knowledge about the outsourcing business in India, what is found to be most referred word is KPO meaning thereby knowledge process outsourcing. Many new business concerns are coming day by day in Knowledge Processing Outsourcing Industry and KPO is emerging as a new sector that promises to provide long-term jobs for intellectual, analytical and knowledgeable people with a pay scales much higher than the BPO sector. The following are the few areas which are being associated with the KPO sector. • Research & Development • Financial Consultancy and Services • Advanced Web Applications • Business and Technical Analysis • Learning Solutions • Animation & Design • Business & Market Research • Pharmaceuticals and Biotechnology • Medical Services • Writing & Content Development • Legal Services • Intellectual Property (IP) Research • Data Analytics • Network Management • Training & Consultancy

1.4 Benefits of KPO Standardized technical education is widely available to all in the developing countries especially in India. This skilled and trained manpower is accessible at very low cost as well. It, therefore, is always a wise decision and makes sense to utilize such services. Outsourcing of activities to KPO companies can provide the following benefits: •Valuable cost savings that can be utilized elsewhere. • Trained professionals at work. • Standard operational efficiency. • Increase in profits. • Savings in time and management energy for maintaining in house services. • Option to recruit a larger work force without raising costs. Any company involved as service provider in the KPO industry works in close coordination and association with the client and provides services that are predefined in of quality and standard of work. While working with a KPO firm, the outsourcing company can expect to get the following: • Good quality work. • Lower costs. • On time delivery of services. • Uninterrupted services. • Adaptability to changes in required quality. Does it imply that with the rise of KPO entities, BPO (Business Process Outsourcing) become extinct. It is undoubtable that KPO is a step ahead of BPO but this does not mean the end of BPO. The BPO Industry will exist and continue to be successful in India. BPO has its own strengths and way to solve a particular problem and the BPO market is long term in nature as compared to the KPO market. With every ing day the BPO market expanding and so is the various systems and processes through it. The following are various areas in which the BPO presence shall not remain in existence but shall also keep growing. • Data processing • Basic data entry • Department Outsourcing

• Provides technical • Provides email to its customers Even after the entry of KPO in the Indian market, the amount of total revenue earned in the outsourcing industry in BPO will be higher as compared to the KPO industry. The BPO exports will be as higher as $20 billion by the end of 2010 in comparison to KPO projections of $12 billion in the same period. As per a recent study done by experts the BPO industry is expected to grow globally at a CAGR of over 26 percent by 2010.

1.5 Threats & Precautions of a KPO 1. Do your homework properly. Find out for how many years the company has been outsourcing. Get adequate information on the company as to the strength of the company and their financial situation. 2. Find out about the quality of the services provided by them e.g. whether they have an ISO and CMM certifications. Customer reference and recommendation are the best way to figure out a company's services. 3. Before you finalize the outsourcing company it is pertinent for you to take into consideration all the hidden costs from maintenance, training, connectivity /infrastructure, transition etc. instead of just the obvious costs such as licensing and consulting costs. 4. Ensure that the company does not make unrealistic promises and keeps them. 5. The outsourcing company should meet requirements in respect to data privacy including infrastructure security (Firewalls, Access Controls, Data Encryption, etc) and human resource related like Pre-Recruitment precautions and checks, Non-Disclosure agreements, etc.) 6. Ensure that the company offers business continuity and disaster mitigation plans as a means of reducing your business related risks. 7. Companies have to be honest when dealing with invoicing and material type of contract. Always check for referrals of customer for ensuring that the company is honest in financial dealings.

8. Ensure that the company chosen for outsources work is compliant with statutory laws. 9. The company chosen should match work culture and ethics. This will help offshorer in carrying out smooth communication with the company. 10. Ensure that the chosen company has well-trained professionals on their staff and good capacity to handle the work.