This article was contributed by PharmARCians, and was first published in www.pharmabiz.com.


BANGALORE, September 07, 2006- Knowledge process outsourcing is the most recent significant trend that is making waves across the global business scenario and more so in India. Beginning as a part of the BPO industry, knowledge process outsourcing (KPO) has grown rapidly to become an industry in itself.

Broadly speaking, KPO refers to the outsourcing of any knowledge intensive business process and requires considerable domain as well as technical expertise on part of the service provider. The growth of KPO has been driven by its inherent advantages of cost reductions, better focus on core business areas, improved service levels and access to hitherto unavailable special skills, which accrue to the companies engaging in it.

It has been estimated that the KPO industry will continue to grow at a rapid pace in the coming years. As per a NASSCOM survey published in 2005, the global KPO sector is expected to grow at a CAGR of over 45% to reach USD 15.5 bn. by 2010 and India is likely to capture a major market share of this industry.

A significant proportion of the KPO growth in India has come from the life sciences and biotech industries, which by virtue of their knowledge intensive nature present a huge potential for a range of KPO activities.

This has been further propelled by the increasing interest of the multinational drug firms in the US and Europe to outsource activities that support various stages of the product development lifecycle, in an attempt to lower R&D and product marketing costs.

In this context, the key opportunity areas that are likely to register continued growth to support the pharmaceutical value chains of global companies are:

1. Bioinformatics
2. Drug Discovery Services
3. Clinical Research Services
4. Sales and Marketing Analytics
5. Business Intelligence

As the multinational companies in the US and Europe seek to tap the above opportunities; India is emerging as a major outsourcing hub of the global life sciences and biotech industries.

A number of factors are driving the choice of India as a logical outsourcing destination, as highlighted below:

1. Regulatory Environment: Change in the patent regime in 2005 resulting in a market friendly regulatory environment
2. Inherent advantages in R&D
3. Availability of a skilled and competent workforce
4. Availability of diverse ethnic and genetic population
5. Familiarity with western medical facilities
6. Competency in the English language
7. World-class medical infrastructure
8. Cost Effectiveness: India offers a compelling cost-value proposition to US/EU, due to labor-cost arbitrage with average cost savings of ~52% In the wake of the KPO boom, especially in the life sciences and biotech industries of India, a number of other trends are also gradually taking shape on different fronts that will define the future of this industry.

Changed customer expectations: Customers have started giving more importance to high degree of specialization and value addition, as compared to cost effectiveness. In this context, consistent delivery of both high quality and innovative services will become increasingly important for survival.

Emerging outsourcing options: During the next few years, companies will prefer third party vendors for outsourcing over setting-up their own captive units, as they are easier to implement, require less lead time and limited investments. Another innovative outsourcing option that may emerge is the third party captive unit, where the company sets-up a captive centre with a third party that provides the necessary infrastructure & manages the day to day activities within the scope of the systems, procedures and quality parameters laid down by the outsourcing company.

Expansion to smaller cities: After exploiting the major cities of Bangalore, Delhi, Mumbai, Hyderabad, Chennai and Pune for etting-up KPO units, the industry is now expanding to the smaller cities and semi-urban areas to take advantage of the lower real-estate costs.

Increased demand for professionals: The growth of the KPO industry has resulted in an increased demand for experienced and well-qualified professionals and the consequential demand supply gap that is already being felt in some of the KPO destinations of India such as Bangalore. Dearth of employable, quality manpower is also likely to result in high attrition rates in the industry similar to those experienced in the IT industry, as KPOs attempt to fulfill their resource requirements by poaching trained professionals from their competitors.

Focus US and Europe: The US and European markets continue to be the main sources of business for KPOs. At the same time, these service providers are also sourcing talent from these locations which is likely to give them an international flavour while helping them move-up the value chain.

Penetration of the Indian market: Some KPOs, especially those operating within the sales and marketing area are also attempting to tap the Indian pharmaceutical and biotechnology companies. Following suit of their international counterparts, these companies also may gradually start outsourcing their sales and marketing analytics to KPOs within India. However, it may take a few years before this trend becomes more evident.

Against this backdrop, the life sciences and biotech KPO industries present attractive business investment opportunities. Minimal entry barriers and low infrastructure as well as set-up costs will encourage even the smallest of players to enter this lucrative business area. However, the success of these firms and that of India within this industry will depend on how best they will respond to the emerging trends and challenges of the KPO industry.

Adoption of well-thought out strategies to meet the challenges that the coming years may present, can definitely make KPO another success that has the potential to bring India to the forefront of the international arena!

About PharmARC:

PharmARC provides sales and marketing analytics, and business consulting services to the global pharmaceutical and healthcare industries. The PharmARC team comprises over 250 highly qualified analysts including domain experts, technical analysts, statisticians, physicians, and software engineers.

Today, PharmARC's client list includes over 50 major healthcare companies in the world, of which 15 figure among the Top 20 global pharmaceutical players. PharmARC provides long-term analytical support through a simple engagement model delivering Innovation, Quality and Cost-effectiveness.

Media Contact:
Amrita Gupta
amrita.gupta@pharmarc.com
+91-80-4018 2700