The next book on the outsourcing industry could well be One night @ a knowledge centre. Companies are outsourcing knowledge-intensive processes to India.
Outsourcing of data mining and analysis could form the largest chunk of this knowledge process outsourcing or KPO, seen as a $12 billion opportunity by 2010. Margins in this business of analytics process outsourcing, or APO, tend to be higher as it is a 'creative craft', Lalit Wangikar, head of India operations of APO firm Inductis, tells Business Standard.
HDFC Bank is one of your clients. What did they outsource to you?
They had a significant attrition problem in their saving accounts portfolio. We gave them a predictive model that gave them a likelihood of attrition and also the potential actions that they can take to prevent it.
They gave you the data. You crunched it. Couldn't they have done it in-house?
The number of variables that can be simultaneously monitored by a small in-house team is just about 10, and even that would be challenging. We can analyse up to 500 variables simultaneously and all it takes is a few months. It is like multi-dimensional modelling, rather than linear modelling.
And most of the demand for such modelling would be emanating from outside India?
That's true. The Indian market is not so profitable today though we expect it to become exciting in the next 3-4 years. Actually, availability of data in India is an issue. So 14 or our 16 active clients are from the US.
Your client within the organisation is...?
The chief marketing officer rather than the chief information officer, which is the single point for most other software or outsourcing assignments.
So the people you employ are not techies?
We look for statisticians, econometricians, management graduates, engineers and the number-crunching analysts.
Since you operate in a niche with just a handful of players, the margins must be high?
Gross margins are 40-55 per cent while net margins range from 10-25 per cent.
Your billing options are very interesting too? What is this risk-reward option that you offer?
Typical project size is $100,000 to $1 million. Clients can be billed by the hour (up to $40/hour), give us a retainer, or we could put in our resources upfront and share the gains.
Are there always gains?
The rule of thumb is that for any assignment, the impact of our analysis is 10-30 times the fees paid.
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