Challenges & Advantages for Indian KPOs

Knowledge Process Outsourcing, or KPO, is contracting with a company to receive professional services that only an upskilled specialist with deep knowledge can do. It’s unlike other outsourcing companies, where more complex or logical work is done. They are mostly related to financial research, data analysis, legal advice, and healthcare solutions. Companies or organisations that intend to receive top-notch expertise from companies that are adept in the research, analysis, and development. Incorporating with knowledge process outsourcing companies has become a necessity if you want to achieve overwhelming growth and lead the competition in your niche.

Because of their effectiveness, the global KPO market is booming. Its size was worth USD 110.69 billion in 2024, which is anticipated to surpass 238.7 billion in 2032, according to a report. Its CAGR is likely to be 17.22% during this tenure. And India is now in a dominating position for being a place where KPOs are the fastest growing. Do you know why?

Let’s dig out the details.

Advantages of Indian KPOs in 2025

How does it feel when Google answers every query?

Certainly, you become thrilled. KPOs are similar to Google when it comes to answering your queries. Various companies or organisations hire KPO companies to know the feasible solutions to challenges they face. These challenges can be roadblocks in efficiency, productivity, operations, sales, or anything. Indian KPOs emerge as shining stars. They make its beneficiary companies winners in real life by integrating benefits of insights into aligned objectives.

1.  Highly Skilled Workforce

Have you seen the report of NASSCOM, 2024? It states that India produces the largest population of engineering graduates (1.5 million) and management graduates (300,000) every year. So, it has the consistent flow of talent to fuel the KPO sector. That’s why companies from various sectors seek knowledge to boost production in the finance, healthcare, data analytics, legal services, and engineering sectors.

Indian KPO companies like Genpact are dominating the market. They have data scientists, analysts, and highly qualified business management consultants with proven domain-specific expertise in financial analysis and healthcare. That’s why overseas companies prefer them to outsource KPO services.

2. Cost Efficiency

Certainly, money is a big factor. Every company tries to save it. Coming to Indian KPOs, they offer cost-effective solutions without compromising the quality. The cost compared to outsourcing companies in developed countries is way lower. It ranges between $356 and $580 per high-end KPO service in India. On the flip side, the hourly rate in the US and Europe is $50 per hour.

It will be $500 if you calculate the wage of 10 hours. And if an in-house team does it, add 40% more as operational cost. It’s clearly an economical alternative to incorporate with an Indian company.

3. Technological Advancements

AI, or artificial intelligence, is in trend and popular for automating repetitive tasks. India has adopted the culture of advanced technologies, which cover AI, machine learning, and robotic process automation (RPA). With these automated solutions, outsourcing companies are able to deliver faster and more accurate results.

Notably, a Deloitte survey reported that 70% of respondents anticipate transformation within one to three years because of GenAI integrity. Furthermore, TCS uses AI to reduce delivery time by 30% without compromising precision.

Overall, leveraging advanced technologies is another reason for contracting with Indian outsourcing companies for business intelligence.

4. Global Client Base

This Asian continent serves customers across the globe, leveraging its proficiency in English and cultural adaptability. It has attained the sixth largest English language proficiency. Markets like the US, UK, and Australia find Indian outsourcing companies competent, and hence, they choose them to outsource legal processes and equity research.

 In order to build trust, knowledge outsourcing companies embrace quality standards like ISO 9000 and Six Sigma. These certifications mark its eligibility to be trusted.

A Statista report suggests that Indian KPOs share 70% of the global business process outsourcing market in 2025, which is valued at $5 billion.

5. Government Support and Policy Framework

The advanced digital infrastructure complements knowledge process services. Indian government policies & laws favour businesses from across the world. That’s why foreign companies find it a seamless platform to seek knowledge-based business solutions.

• The most promising and helpful government policies are the following that foster KPOs:  
• Patent Amendment Rules, 2021, which is patented for drugs and chemical products.
• Rapid setup of software parks in multiple metropolitan cities where companies leverage customs duty exemptions.
• Special Economic Zones.
• Tax benefits like GST exemptions are a plus.

6. Data Security

Several rules and regulations are evolved to safeguard company’s data, such as

A. DPDP Act (2023)

Under this act, the following regulations are executed:

• Protecting citizens’ rights to their personal data is a must.
• Companies have to establish a robust framework for personal data processing.
• The Act will secure digital personal data gathered online or offline.
• The data subjects can ask to delete data, avoid data access, and correct inaccurate information.
• Violation of this Act can result in a penalty, which is up to 250 crore INR ($30 million).

B. IT Act, 2011

• Must access the client’s permission before sharing sensitive data with third parties.
• The consent from outsourcing companies must be in writing for accessing sensitive information from overseas companies.
• Comply with International Security Standard IS/ISO/IEC 27001.

C. National Cyber Security Policy, 2013

The points to emphasize under the National Cyber Security Policy are:

• Deploy a Chief Security Officer for cybersecurity.
• Design legal frameworks that guard and resolve sensitive glitches in cloud computing, social media, and mobile computing.
• Resolve cyber security threats or vulnerabilities through the National Critical Information Infrastructure Protection Centre (NCIIPC).

Challenges Faced by Indian KPOs in 2025

1. Increasing Competition

According to the McKinsey report, Vietnam’s KPO industry is leading in terms of growth, which is 15% in 2024. So, India is obviously facing competition from Poland, the Philippines, etc., as a big challenge where other competitors are offering similar services at lower costs.

2. Talent Retention Issues

The high attrition rate is a big concern, which is 20-25% in Indian KPOs. The fierce competition for skilled jobs and upskilled employee burnout are its primary reasons. However, training programs can resolve this matter, but this solution still needs attention.

3. Data Security and Privacy Concerns

However, the emergence of the DPDP Act has already resolved the privacy concerns. But GDPR in Europe and CCPA in the US are way more effective in terms of data security. And non-compliance dreads the companies there. But here, companies lose hefty amounts and business opportunities because of non-compliance.

4. Rising Operational Costs

Despite being cost-competitive, the rising operational cost (the sum of infrastructure, salaries, and technology adoption) is frustrating companies here. Besides, inflation and increased expectations of employees for better payout make it worse.

5. Skill Gaps in Emerging Domains

With the evolution of GenAI, industries overly expect advanced solutions, especially in areas like blockchain, cybersecurity, and advanced analytics. But the proficient people in this technology are fewer in number. So, the skill gap is a big problem.

KPO Business Models

With digital advancements, KPO business models are extremely evolved. Let’s see some prominently ruling knowledge process outsourcing models.

1. Offshore KPO

It represents contracting with an expert company from another country to handle specialised tasks. It’s like a US company delegates its financial analysis and medical research to an Indian company.

2. Onshore KPO

Unlike offshore KPOs, this type of outsourcing takes place within the same country. Let’s say a company in Mumbai hires a smaller KPO or BPO company in Gurgaon to proactively manage its data analysis or legal research tasks. The expertise and proficiency outshine cost in this case.

3. Captive KPO Centres

When a big enterprise like IBM establishes its own dedicated office in the very same country, it is a captive KPO centre.

4. Hybrid KPO

This is a combination of offshore and onshore KPO models. Simply put, some logical tasks might be processed locally (in the same country) because of privacy concerns or compliance reasons. Others are typically outsourced abroad, which can be related to data entry, collection or extraction.

5. Freelance/Project-Based KPO

This is a pervasive model, where companies hire dedicated experts, but not a company as a whole on a project basis. A US-based company hires, for example, an Indian KPO to complete its data conversion task. Certainly, it will be over once the scanned PDFs are digitised.

The Future of Indian KPOs

As we are living in 2025, Indian KPOs must evolve to exaggerate their advantages.

• Upskilling Workforce: Run upskilling programs to embrace emerging technologies and fill the skill gap.
• Expanding to Tier-2 and Tier-3 Cities: Promote the idea of relocations to cities where the operational cost is low and the talent pool is overwhelming.
• Enhancing Data Security: Making data protection laws or regulations more agile and encouraging companies to get certifications like ISO 27001 for winning customers’ trust.
• Collaborative Ecosystems: KPOs will incorporate with global firms to exchange knowledge and technologies for winning a competitive edge.

Conclusion

In 2025, Indian KPOs continue to dominate the global outsourcing landscape, supported by their skilled workforce, cost advantage, and technological prowess. However, rising competition, skill gaps, and data security concerns pose significant challenges. By investing in upskilling, leveraging government policies, and focusing on innovation, Indian KPOs can maintain their leadership and adapt to the evolving demands of the global market. Strategic planning and a commitment to excellence will ensure that India remains the preferred destination for high-end knowledge process outsourcing in the years to come.