Posts Tagged ‘KPO’

China Specifies VAT Exemption for Offshore Outsourcing Services

December 26th, 2013

In the recent “Notice Regarding the Inclusion of Railway Transportation and Postal Service Industries under ‘Value-Added Tax (VAT) in lieu of Business Tax’ Pilot Reform (Caishui [2013] No. 106, hereinafter referred to as ‘Circular 106′)” jointly released by the Ministry of Finance (MoF) and the State Administration of Taxation (SAT), it specified that offshore outsourcing services in China will be VAT exempted from January 1, 2014, to December 31, 2018, as a pilot transitional policy during ongoing VAT reform.Outsourcing23

Under Circular 106 offshore outsourcing services refer to ITO (Information Technology Outsourcing), BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing) services provided by a pilot taxpayer of the VAT reform to a foreign company under an entrustment contract.

The “Circular on the Tax Collection Policies for the Nationwide Adoption of the Business Tax to Value-Added Tax Pilot Conversion in the Transportation Industry and Certain Modern Service Industries (caishui [2013] No. 37, hereinafter referred to as ‘Circular 37′)” came into effective on August 1 this year and is the current major guideline for enforcing the VAT reform. Circular 37 allowed VAT exemption for offshore outsourcing services provided by companies located in certain cities of China and is scheduled to expire at the end of this year. Circular 106 expands this exemption to all pilot taxpayers and provides the detailed scope of eligible services. It will be effective starting next year and will abolish the provisions of Circular 37.

Greater detail of the eligible services for VAT exemption can be found below:


1) Software research, development and outsourcing:

a) Software research and development services

  • The development of customized software, embedded software, packaged software, system software, and software testing services provided to departments and enterprises of/in finance, government, education, manufacturing, retail, services, energy, logistics, transport, media, telecommunication, public utilities and medical and public health for the operation, production, supply chain management, customer relationship management, human resource and financial management, auxiliary design in computers, engineering, and other activities of clients.

b) Technical software services

  • Technical services such as software consulting, maintenance, training and testing.

2) Outsourcing of research and development services in information technology:

a) Design of integrated circuits and electronic circuits

  • The design and provision of relevant technical support services for integrated circuit and electronic circuit products.

b) Platform testing

  • Platform testing for the development and application of software, integrated circuits and electronic circuits.

3) Outsourcing of the operation and maintenance of information systems:

a) Operation and maintenance services of information systems

  • Internal information system integration, network management, desktop management and maintenance services for clients.
  • Information system application services such as information engineering, geographic information system and remote maintenance.

b) Fundamental information technology services

  • Fundamental information technology services such as integration of management platforms for fundamental information technology, IT infrastructure management, data centers, hosting centers, security services and communication services.


1) Process-design services for enterprises:

  • Process design for enterprises in internal management and business operation.

2) Internal management services for enterprises:

  • Services in backstage management, human resource management, financial, audit and tax management, financial payment, data analysis of medical and other internal management operation, data mining, data management, data usage, and special data processing, analysis and integration.

3) Enterprise operation services:

  • Services in technology research and development, and client analysis and database management for enterprise operations, sales, after-sale service of products, mainly including financial operations, government affairs and educational operations, manufacturing operations, life sciences, retail and wholesale, and transportation operations, public health operations, communication and public utilities operations, call center operations and E-commerce platforms.

4) Enterprise supply chain management services:

  • Overall solution design and database services for client’s procurement and logistics needs.


  • Research services on intellectual property rights, the research, development, and testing of pharmaceutical and biological technology, the research and development of product technology, industrial design, analytics and data mining, design and development of animation and online games, the research and development of educational courseware, and engineering design.


KPO industry booming despite supply shortage

August 6th, 2013

India’s growing Knowledge Process Outsourcing (KPO) will be valuated at almost $30 billion by 2015 due to the steady demand of knowledge-based services. However, a recent Assocham report suggests that there is a supply crunch in the industry due to the growing number of professionals.Outsourcing27

“The rising demand for professional-based services is expected to drive the growth in the industry. It would be in areas of research for capital and financial markets, legal and editing jobs for international publishing houses, among many others,” according to the Assocham study.

According to Economic Times, currently approximately 3.5 lakh people work in this industry but in time, almost 6-8 lakh professionals will be needed in India. There is a wide variety of knowledge-based professionals present in India such as engineers, doctors, lawyers and management professionals working in the several fields but there is a supply shortage. Although there is a steady demand, the number of educated professionals are more leading to the acute supply crunch.

“It is the kind of shortfall predicted between target and realistic growth which is worrying. If the industry is unable to sustain the momentum, it is quite possible that other alternative destinations will become attractive for clients,” Assocham Secretary General D S Rawat said.

Rawat also added that the supply crunch coupled with competition from the likes of China, Philippines, Russia, Poland and Hungary who can also supply services at low cost and sales and marketing capabilities, domain expertise and location advantage is plaguing the KPO industry at present.


KPO strategy is to boost investments, says MDeC

July 31st, 2013

Multimedia Development Corp Sdn Bhd (MDeC) and its cluster MSC Malaysia companies are optimistic that investments driven by knowledgeprocess outsourcing (KPO) strategy has huge growth potentials, said MDeC VP Michael Warren on the shared service and outsourcing (SSO).Outsourcing11

Warren said among the industries that will be in focus are banking, financial services and insurance (BFSI), oil and gas (O&G) and information and communications technology ( ICT).

The BFSI industry contributed RM2.26 billion in revenue in 2012, while O&G and ICT industries contributed RM2.45 billion and RM3.66 billion respectively within the same period.

“International ICT players are more interested in highervalue investment areas such as KPO which has the capability to move up the value chain and thus, attracting more investors,” he said at a press conference held in Kuala Lumpur yesterday.

KPO is a form of outsourcing where knowledge and information related work is carried out by a different company subsidiary within the same organisation to save costs or resources, in contrast to manufacturing outsourcing.

This usually involves highvalued work conducted by highly-skilled staff.

At times, KPO firms make the decision on behalf of the sourcing company.

There is a huge potential for the growth in the SSO industry, adding value to KPO practices which has an emerging market size of 24% annual growth or US$17 billion (RM54.91 billion) globally,” he said, adding that 502 new jobs was created in the KPO sector, a 15% increase from 2011.

But salary growth has been eye-popping with a 51% growth from 2010 to 2012, to RM7,028. At present, he said the contribution of KPO segment in Malaysia is less than 10% of the total industry with RM10.4 billion turnover recorded in 2012. Meanwhile, on a global basis, it is estimated to grow up to RM54.7 billion in 2014, from RM28.6 billion in 2010.

Warren said MDeC expects 25 local and foreign companies to invest in SSO sector by end of this year compared to 16 last year. As of June this year, he said MDeC has concluded investments from 16 companies in which three out of it has KPO-type services.

As such, he said MDeC is pushing homegrown players in various programmes to adopt to KPO-type services to attract new investments as well as to go globally.

“This will be done under the Entry Point Projects (EPP2) programmes whereby benchmarks will be set between local outsourcers and International Association of Outsourcing Professionals global standards, providing incentives and initiatives to allow smaller local players to flourish,” Warren said.

Incorporated in 1996, MDeC posted RM33.53 billion revenue, up 5.7% from 2011, however, local SSO companies grew less about 0.2% in 2012 contributing RM5.8 billion to the nations gross domestic product.


Aussie, Pinoy partnersopen KPO firm in Cebu

February 5th, 2013

An Australian investor has tied up with Filipino counterparts with at least 12 years of experience in the outsourcing sector to  set up a knowledge process outsourcing (KPO) company in Cebu.

One GlobalSupport Business Solutions opened shop last Friday on the third floor of the Crown 7 IT Building in Mabolo, Cebu City employing a  staff of 20.Outsourcing14

Jeff Hausler, founder and director of the company, and his partners Kino Sarabosing, Shawee Sinajon, Bennet Cabarion and PJ Celso said they planned to hire more than 100 personnel this year.
Hausler said that he was expecting the Philippine economy to continue to grow attracting more investors and businesses to the country.

More investments

“More businesses will be coming here and in the next 10 years, everything will change here in Cebu. Manila is already crowded and Cebu is the next place that investors will be looking at for investments,” Jeff Hausler, founder and director of One GlobalSupport Business Solutions, said.

Hausler, who is into the tourism and accommodations business in Australia, and came to the Philippines last year to look at prospects for investment in the tourism industry.
He instead found more potential in the outsourcing business.

100 seats

The firm’s office occupies a space of about 350 square meters, which is enough for 100 employee seats, according to Sarabosing, co- founder and managing director of the company.
“At present we have about 20 people but these are mostly the core and support staff. With the opening of the office, we will grow the numbers by April when our first account is expected to start operations,”
Sarabosing said.

The firm offers web-based solutions for graphic designs and partly teaching ESL or English as Second Language.


“For now we cater to the medium-sized companies in Australia and the US through our marketing partners in those countries,” Sarabosing said.

He said they were also talking with two companies in the energy business in Australia, that wanted them to handle their inbound customer service support.

The firm is also targeting the market in the United Kingdom, which according to Sarabosing would help make the business more sustainable.

According to Hausler, most Australian companies were recognizing the benefits of outsourcing some of their operations like savings on cost.

“When they outsource, they can save so much because they will be only spending one-third of the cost should they have it in house and there’s so much talent here with most Filipinos speaking fluent English,” said Hausler.
With Cebu’s increased ranking as the eighth emerged outsourcing destination in the world, Sarabosing said marketing their services would be easier as companies around the world already knew Cebu and its strength as an outsourcing service provider in the world.


NIIT Limited : NASSCOM and NIIT partner to enhance skill development and quality capacity of graduates

January 4th, 2013

The NASSCOM Sector Skills Council (SSC), today signed a Memorandum of Understanding (MoU), for three years, with the leading talent development organization NIIT to offer enhanced training programs to students through its training campuses all across the country. The strategic alliancewill offer first-of-its-kind training programs that have been designed, developed and endorsed by the industry through two initiatives- FSIT (Foundation Skills in IT) – for engineering graduates and Global Business Foundation Skills (GBFS) – for graduates of all streams.

While FSIT aims to develop foundation skills in IT, GBFS has been specifically designed to meet the needs of the BPO/KPO and the LPO industry. NIIT will leverage its on-campus delivery model – NIIT Careers@Campus, designed to enhance employability skill sets of engineering graduates in particular and the overall employability of all graduates in general.

The training program has been designed by IT-ITeS Sector Skills Council NASSCOM and the achievement levels are certified through the NAC and NAC-Tech assessments. The collaboration between NASSCOM’s IT-ITeS Sector Skills Council (SSC) and NIIT aims to train over 1 lakh students over three years, starting with 30,000 students in the first year.

Speaking on the occasion, Mr. Som Mittal, President, NASSCOM, said “India has the world’s largest pool of talent across geographically dispersed locations within the country and outside. Indian IT-BPM industry has been working round the clock to build a favourable environment in preparing this talent pool and making them industry-ready. While diverse efforts and initiatives have been taken by the industry and academia at various levels, there is a lot that can and needs to be done. This initiative of NASSCOM with NIIT is a step-forward in the same direction and is aimed to scale quality capacity of our graduates. We believe our initiative will go a long way in contributing towards achieving the scale that is required by the industry.”

Commenting on the alliance, Mr. Rajendra Singh Pawar, Chairman, NIIT said”NIIT’s training expertise together with NASSCOM’s industry insights will empower college students across India.”

The programs – FSIT and GBFS, are of a duration of 120 hours each and cover topics ranging from on technology to soft skills and professional skills and project management. Most of the topics covered are applicable to multiple industries and although all students are eligible to take part in the program, it is best suited for engineering students studying in third year and final year. The industry has invested substantially in the design and development of these programs and these will be continuously updated to keep it current and relevant.


How to build a successful financial KPO unit

December 27th, 2012

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.


Global cos hiring PhDs for KPOs in India: Experts

December 10th, 2012

Global companies are increasingly hiring candidates with PhDs for their captive operations in India, experts have said.

With the Indian operations moving up the value chain i.e. from back office work to specialised Knowledge Process Outsourcing (KPO), global companies are looking to tap specialised manpower including PhDs, they added.images

“The whole thing started with banking and financial services industry, but now it is there with retail, healthcare as well. Accordingly, recruitment of well qualified people such as PhDs have also increased,” said Randstad India, President Staffing and Director Marketing, Aditya Narayana Mishra.

MNCs setting up their captive centres in India, indicate that the quality of work in India is on the rise, said experts. A number of retail and consumer companies, healthcare companies and engineering firms are going to be benefited through GICs, said industry officials.

Earlier, processes such as statistical modelling and analysis were being carried out at the companies headquarters abroad, but now increasingly these kind of research work is happening in India, Mishra said.

“Look at the number of patents that the back offices of MNCs are generating from India. The world has recognised the quality (of talent) that India produces,” he added.

According to industry experts, earlier people used to pursue PhDs to be in academics, but as more and more number of multinational companies (MNCs) are seeking post doctoral experienced talent and are approaching IITs for their R&D centres, these courses are being increasingly viewed as an opportunity to earn better and join the corporate sector.

Global In-House centres (GIC) have played a key role in the IT-BPO sectors phenomenal growth story, establishing ’proof of concept’ and branding India as a global sourcing destination, according to Nasscom.

There were around 750 IT-BPO MNCs captive centres in India in FY2010, 28 per cent of them with multiple locations and employed almost 4 lakh people. GIC contribute over one-fifth of the country’s IT-BPO export revenues as well as employees.


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