KPOs could see US slowdown impact

The US slowdown coupled with rupee appreciation, talent crunch and rising salaries, and the 2010 sunset clause on tax holiday for IT firms, is putting knowledge process outsourcing firms in a bind.

Some experts predict that KPO revenues will fall as the ir US clients' growth could be affected. Others feel that because of margin pressures, companies in the US will outsource even more.

Dharmesh Mistry, vice president, Ugam Solutions, says: "I think both viewpoints are justified. While revenues might see slower growth where the 'penetration' of outsourcing is higher, companies would need to focus on getting businesses from SMEs who outsource little as compared to bigger organisations. One will need to adapt one's sales and operations strategy to be able to capitalise on the opportunities that could be available. It's definitely not going to be a year of 'business as usual' for the Indian KPO industry."

Sameer Walia, managing director, The Smart Cube, another business research and analysis KPO, says: "The far more serious impact has been the turmoil in the financial services sector. We now face a situation where bankers in the US and UK are in no mood to discuss future offshore initiatives."

Analysts say that KPOs need to spread their risks. Organisations are expected to look for alternative locations for additional delivery centres for business continuity, better responsiveness, risk minimisation (multiple vendors to deliver specific activities) and regulatory constraints.

In fact, KPOs have started looking for locations such as Canada, Australia, the Philippines, Czech Republic, China, Latin America, Poland, and Bangkok. Unlike IT services companies, these KPOs plan to deliver their services out of India with front-end presence in China.

The booming Chinese economy is attracting Indian KPOs. The demand for KPO services in China has been steadily increasing as the market is still on a maturing curve and there are ample opportunities.

Though some KPOs have been providing services in China largely for the MNCs from India, it is the local Chinese companies which are now becoming the target.