Knowledge Process Outsourcing (KPO)
Knowledge process outsourcing (KPO) is similar to Business process outsourcing (BPO) the difference is that the KPO is high on knowledge scale as compared to BPO.
KPO deals with outsourcing of business processes which are high in term of criticality, in terms of knowledge and required high skilled manpower in that particular domain of the process to be executed.
KPO is considered as the next big thing in the IT industry. KPO is a knowledge based activity rather than volume and hence startups with innovative KPO services are considered to be very attractive.
As per Wikipedia" Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves high-value work carried out by highly skilled staff. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisions—typically those that are easily undone if they conflict with higher-level business plans.
Process transparency is a major barrier to using KPO services. Many organizations do not track carefully which decisions are made by whom, and rely so much on informal social processes (and "soft skills") that it is unclear how much the use of KPO would disrupt existing operations. However, requirements like Sarbanes-Oxley and radical transparency movements like full cost accounting, shareholder activism and eco-labels and moral purchasing require organizations to be more explicit about when and by whom decisions are made. These trends make it easier for outsourcing non-critical jobs to be considered by qualifying the impact of decisions in advance. Furthermore, it becomes easier to evaluate and compare success. A fully developed service economy enables KPO by treating all functions as services. So do more technical trends such as service oriented architecture, enterprise application integration and telework: it is easier to outsource a job if it is already being performed outside the head office. Organizations adopting ISO 9000 and ISO 19011 should also find it much easier to integrate externally provided KPO into their operations and audit them on a fair basis.
As of 2007, most US organizations were hiring foreign professionals under H-1 visas to do jobs in the USA for several years, after which they would return to their home countries as managers to train and supervise others, continuing to report to their former business units.
According to a recent report of National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce that serves as an interface to the Indian Software industry, Knowledge Process Outsourcing industry (KPO) is expected to reach USD 17 billion by 2010, of which USD 12 billion would be outsourced to India. Another report predicts that India will capture more than 70 percent of the KPO sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are also expected to join the KPO industry.
Some of the emerging areas for KPO are
- Legal
- Accounting
- HR
- Marketing Analysis
- Pharmaceutical research analysis
- Insurance
- Engineering
- Architecture
Due to the availability of large numbers of skilled staff working for lower pay rates than in the developed world, a few countries like India and the Philippines are front runners in providing these services. This type of work demands advanced analysis and communication, so specific higher education and language skills are essential. MBAs, CFAs (Chartered Financial analysts) Pharmacists, PhDs, engineers, doctors, lawyers, writers, ghostwriters, designers, web designers and other specialists with formal credentials tend to be required.
In India as well as the Philippines, KPO is envisaged as having a high potential, not only in the Information Technology (IT) or Information Technology Enabled Services (ITES) sectors; it could include patent and copyright related services, other legal research functions, business intelligence and analytics, clinical research, publishing and supply chain management, all of which require a large number of small decisions, and the final products of which tend to be relatively easy to evaluate for accuracy or effectiveness.
The maturity of the BPO sector in both countries gives it an obvious lead in KPO, essentially an offshoot of BPO. It is the high-end activity of the BPO industry and as of 2007 was estimated to provide substantial growth over the next few years. More complex fields of work that the Indian KPO industry focuses on include intellectual property or patent research, content development, R&D in pharmaceuticals and biotechnology, market research, equity research, data research, database creation, analytical services, financial modeling, design and development in automotive and aerospace industries, animation and simulation, medical content and services, remote education and e-learning, publishing and legal support.
Some practitioners argue that one region likely to suffer extreme job loss due to KPO is the USA. Princeton economist Alan Blinder estimates 40 million white-collar jobs in the US alone could move offshore in a decade or two.
Certain challenges faced by the KPO industry are
- High attrition rates
- High training cost
- Information security as almost all the information is the critical part of the clients business
KPO Market size
India is likely to capture around 15 per cent of the over US$ 54 billion dollar knowledge process outsourcing (KPO) industry worldwide by 2010 from 5 per cent now, the ministry of communication and IT said.
“The estimated KPO market globally amounts to about $54 billion (as of 2005). India is aiming at capturing 15 per cent of this market by 2010 from existing 5 per cent,” Jainder Singh, secretary IT, said at a conference organised by IIFT and Nasscom here.
KPO for domestic market
The overseas-focused knowledge processing outsourcing (KPO) firms in India are now finding greener pastures back home too as there is increasing traction from domestic businesses seeking these high-end services.
Though a small business currently for the many of the KPOs based in India, it is expected to grow to a larger size as the domestic companies are becoming more sophisticated in their operations.
The booming KPO industry will also lead to development of allied sectors. Courses in US GAAP, patent filing, insurance underwriting are all likely to be in great demand.
|
