Indian BPO firms are increasingly focusing on the KPO business to tap into a global market that is poised grow 45% a year to $17 billion by 2010, of which $12 billion is likely to be outsourced to India, according to National Association of Software and Services Companies, which represents over 1,100 Indian software firms.

Infosys BPO offers five services in its KPO business – analytics, financial planning and analysis, digital publishing, legal process outsourcing and research.

“We hope (revenue from the KPO business) will be at least 15% of total revenue in the next two years to three years. We are aiming for at least 100% on-year revenue growth over the next two to three years,” Mukherjee said.

Infosys BPO’s revenue for the third quarter ended Dec. 31 was $64 million.

On fears of a U.S. slowdown limiting the pace of growth in the KPO business, Mukherjee said that though he did see “some slowdown in securitization work six months back, it has picked up now.”

Securitization is a structured finance process in which assets, receivables or financial instruments are acquired, classified into pools, and offered as collateral for third-party investment.

It is common in the lending industry, where it is applied to lenders’ claims on mortgages, home equity loans, student loans and other debts.

“As of now, there has been no effect on the knowledge services space,” he added. “We had targeted about 40 clients by the end of March, but we should be thereabouts – at about 38,” said Mukherjee.

At present, the KPO group services about 35 clients, of which 30 were signed in the last 12 months, he added.

Mukherjee expects analytics and legal process outsourcing services to grow the fastest among knowledge services, especially in the U.S., the U.K. and Australia.

The higher billing rates, which research-based services generate, also help mitigate the pressure a stronger rupee puts on the revenue and operating margins of Indian software exporters.

Infosys BPO currently has an operating margin of around 20%.

“This (KPO) is expected to be a higher margin business, which will drive the margins of the overall business higher. But at this point we are investing heavily within the business – in technology, manpower, sales,” said Mukherjee.

Infosys BPO started offering knowledge-based services around four-and-a-half years ago and currently employs about 900 people globally in this division. This is likely to increase by about 70%-80% in the next two years.