Financial institutions such as Goldman Sachs, JP Morgan, Morgan Stanley, ABN Amro and several others have actively promoted India as an off-shore base to set up domain-oriented knowledge processes.
The financial knowledge process outsourcing (KPO) market is also active with several large outsourcing firms such as Infosys, Cognizant, and EXL, which offer high-end services, and niche players such as Amba Research and Evalueserve, who have created highly specialized outfits to conduct financial analytics and research work.
KPO involves tasks that range from financial modeling of companies, industry analysis and equity research, including company and sector research, all the way to sophisticated index and derivative product support, quantitative analysis, and underwriting support.
Normally, KPO engagements comprise 10 to 50 member teams and are delivered by highly skilled domain specialists including CAs, CFAs, MBAs (Finance), statisticians, mathematicians and data scientists, with or without industry experience, with entry-level salaries ranging from 3-8 lakh per annum.
Understand the client’s perspective
I remember running a very large engagement to build 500 financial models and equity research reports for an investment banking client who did not deem it important to share that they were going to publish this research almost instantaneously on their research website. As we started to deliver these reports, the outputs did not integrate very well with the website’s publishing platform. This led to a lot of rework and delays in sending out timely research to their institutional customers. KPO work is very integral to a client’s business: knowing the ‘big picture’ always helps.
Build relationships with end-users
Unlike BPO (business process outsourcing) or ITO (information technology outsourcing) work where it is sufficient to align with strategic business leads and vendor management teams, success in KPO engagements is largely driven by strong integration and communication with individual business end-users. It is the end-users who determine which part of their core domain tasks should be moved to the vendor, including the pace and complexity of the work.
I have seen outsourcing program managers creating ambitious goals for the KPO program that get waylaid because the end-users have not bought into the program or are nervous about sharing critical tasks with a vendor.
This will only change when they build direct confidence in the vendor’s capability by interacting with the specialists and skilled resources that the vendor provides.
Knowledge workers at the vendor’s end also highly value their interpersonal relationships with end-users, and make the highest contribution when they feel they are a logical extension of the client’s team. One of our analysts, Ajay Dogra (name changed), prides himself for the fact that he is directly working for a celebrated US Telecoms Analyst–Tim Stevenson (name changed)–and would not like to change his sector for as long as he gets to work with Tim.
Consciously plan for work evolution
When I was part of the BPO industry, we used to be heavily preoccupied with ‘dumbing down’ the work profile to make tasks more process-oriented and easily trainable. In the past six years of running KPO units, I have realized that the exact reverse should be done! Knowledge workers naturally want to move up the value chain and do more sophisticated tasks for their clients. So don’t disrupt the natural evolution of work complexity, and instead encourage it. It makes for a happy client and a happy employee.
Choose the right team
The critical success factor in a KPO engagement is choosing each team with the right skill sets and not merely the right leader. Each individual member often directly interacts with the client and is responsible for the quality of the output he/she delivers. Any compromise on this front leads to frustration at both ends. If the chemistry between them is not working, make a quick swap of the team member as the relationship is unlikely to sustain in the long run anyway. Also, given that billing rates in this business are upwards of $60,000 per annum, there is low tolerance for mediocrity. It is also important to over-invest in the engagement in the first 90 days to closely iron out these issues expeditiously.
Sound culture to drive success
We cannot create a successful KPO doing equity research unless our knowledge workers (called analysts) behave like they belong in a capital markets firm. Our analysts should have morning meetings to discuss overnight developments in stock markets, discuss valuation impacts on critical stocks, or pursue CFA degrees in their spare time. A KPO firm providing insurance KPO support will not be worth its pedigree if their associates are not encouraged to take the LOMA or FSA (UK) exams. Therefore, it is this culture and ecosystem of specialization that distinguishes a successful KPO and allows it to obtain its disproportionate share in the market place.
In summary, the best KPO firms in the industry focus heavily on understanding the client’s domain and his objectives, investing in strong domain specialists, and relentlessly living the culture of the domain in which they operate.