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Outsourcing moves to knowledge
arena
June 20, 2005
BPO business may soon be passe as
the country is ready to become the leading destination for
knowledge process outsourcing in areas of healthcare, pharma,
biotech, writes Aditya Raj Das.
“INDIA is the fountain of all wisdom and knowledge”,
thus goes the ancient saying. Knowledge commands power and
power begets wealth. This is now increasingly being reflected
in the international arena with the country fast emerging
as a power to reckon with in the area of knowledge-based industries.
A study conduced by the Confederation of
Indian Industry (CII) has revealed that India is all set to
move from being the most preferred business process outsourcing
(BPO) destination to a knowledge process outsourcing (KPO)
destination.
The CII study titled “India In the
New Knowledge Economy” has projected that KPO would
grow at 46 per cent to reach a staggering $17 billion by 2010.
Besides, the study points that the growth of services sector
would be 8 per cent plus and its contribution to India’s
GDP would be 51 per cent plus, affirming that India’s
transition from being a BPO destination to a KPO destination
is imminent.
Sectors
The areas with significant potential for
KPO include pharmaceuticals, biotechnology, and Information
and Communication Technology (ICT), besides legal support,
intellectual property research and design and development
for automotive and aerospace industries.
India stands to gain from its inherent strengths
in the healthcare sector, pharmaceutical and biotech sector
and ICT sector, the study says.
According to the paper, India could emerge
as a global KPO hub as the business requires specialised knowledge
in respective verticals and the country’s large number
of engineering and technical institutes are ready to address
the manpower demand.
Healthcare
The paper states that by 2012, the healthcare
sector could account for 7 to 8 per cent of GDP and provide
direct and indirect employment to around 9 million people.
India spends $22.7 billion on healthcare and the sector is
the largest service industry in terms of revenue and the second
largest after education in terms of employment.
Asserting that India could be an emerging
healthcare hub, the CII paper states “India has the
opportunity to provide the best of the western and eastern
healthcare systems.” With Indian systems of medicine
“staging a comeback,” doctors in the west are
increasingly prescribing Indian systems of medicine.
The paper has observed that more than 70
per cent of the American population prefer a natural approach
to health, and spend around $25 billion on non-traditional
medical therapies and products, thus making India one of their
most preferred destinations because of the presence of disciplines
like ayurveda, yoga and siddha.
Moreover, India has a proven healthcare system
with over 60,000 cardiac surgeries done per year that matches
international standards. Multi-organ transplants like renal,
liver, heart, bone marrow transplants are successfully performed
at one-tenth the cost, and patients from over 55 countries
come to India for treatment.
With India possessing cost advantage over
many countries the growth potential of the sector is immense,
and also offers huge potential for investments in the sector
over the next 10 years. The CII paper states that the sector
would require around $22-31 billion in the next 10 years.
Pharma
The CII paper suggests that the Indian pharmaceutical
industry too has practically achieved self-sufficiency and
global recognition as a low cost producer of high-quality
bulk drugs and formulations. The paper states that with Indian
companies now offering custom synthesis services at 30 per
cent to 50 per cent cost savings compared to global costs,
and with clinical trials costing about $25 million as compared
to $300 to 350 million, India could become the most preferred
destination for outsourcing.
The Indian pharmaceutical sector has come
a long way, being non-existing during 1970s, to a prominent
provider of health care products, meeting almost 95 per cent
of country’s pharmaceuticals needs. Currently the Indian
pharma industry is valued at approximately $8 billion. Globally
the Indian industry ranks fourth in terms of volume and 13th
in terms of value.
The industry for clinical trials in India
is now nearly $100 million. This market is growing at a rate
of 20 per cent per annum. This industry, it is being projected,
will be an industry worth anywhere between $500 million and
$1.5 billion by 2010.
The global research and development (R&D)
spend is to the tune of $60 billion. Out of this the non-clinical
segment accounts for $21 billion and the clinical segment
accounts for $39 billion. In terms of Indian prices, this
translates into $7 billion (at 1/3 of the US/EU costs) and
$7.8 billion (at 1/5 of US/EU costs) respectively. This constitutes
a total potential of $14.8 billion for the Indian pharma companies.
Many global pharmaceutical majors are looking
to outsource manufacturing from Indian companies, which enjoy
much lower costs (both capital and recurring) than their western
counterparts.
Biotechnology
The Indian biotechnology sector too is now
on an upswing, and is expected to earn $5 billion annual revenue
by 2010. Listing the sector’s advantage the paper observes
that India offers excellent network of research laboratories,
well-developed base industries, rich bio-diversity, extensive
clinical trial opportunities and trained manpower and knowledge
base, which makes it an automatic base for KPO.
Biotechnology is important for India as it
can deliver the next wave of technological change that can
be as radical as and perhaps even more pervasive than the
one triggered by the Information Technology. Employment generation,
intellectual wealth creation, increasing entrepreneurial opportunities,
augmenting industrial growth are a few of the compelling factors
that warrant a focused approach to the development of this
sector.
Experts say India has the strength to excel
in biotechnology. English speaking technocrats, varied natural
resources, different climatic zones and genetic discovery
are some of the reasons why Indian could be a force in biotechnology.
The CII paper says the Indian IT sector too
could strike it rich in a new breed of high-end knowledge-based
outsourcing as global corporations are moving process like
data and intellectual property researches to offshore locations
and more specifically to India.
India has a balanced portfolio of IT offerings
and the sector is moving up the value chain, aligning itself
to the latest technology needs, the paper has noted.
The growth of the IT sector has led to tremendous
pay-offs in terms of wealth creation and generation of high
quality employment. IT is an area where the country has a
competitive edge and can establish global dominance.
A study conducted by the industry body -
Assocham shows that US, Canada, Japan, Europe, Asia Pacific
and Latin America will be among leading economies of scale,
whose BPO market size is likely to grow at about $222 billion.
Of this India has the potentiality to corner 70 per cent of
the regions BPO market share.
To sustain its competitive edge in the global
market India’s software industry needs to move up the
value chain by developing high value products through R&D.
To ensure long-term sustained domestic growth and exports,
the software industry needs to move from being software solution
providers to manufacturers of packaged products.
Source: http://www.deccanherald.com
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