Knowledge Process Outsourcing (KPO), frequently compared to Business Process Outsourcing (BPO) is the next step in the outsourcing value chain. It is not an offshoot of BPO as people like to think but an independent industry. 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. While BPO stresses on process expertise, KPO emphasizes business expertise. KPO requires advanced analytical and technical skills coupled with judgment to execute highly complex and customized processes.
Knowledge process can further be high added value processes chain where the achievement of objectives is highly dependent on the skills, domain knowledge and experience of the people carrying out the activity. And when this activity gets outsourced a new business activity emerges, which is generally known as Knowledge Process Outsourcing.
KPO involves a specialized domain knowledge of a higher level. It is a combination of BPO, Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). KPO Industry handles more amount of high skilled work other than the BPO Industry. While KPO derives its strength from the depth of knowledge, experience and judgment factor, BPO (Business Process Outsourcing) in contrast is more about size, volume and efficiency.
The main driver for outsourcing is cost reduction coupled with the value adds of these services. Labor cost savings overseas are just too great to be ignored. In knowledge-intensive industries such as Analytics and Data Mining Services, Research and Development, and Intellectual Property Research, companies can save significantly 40 to 50% by off shoring work to low-wage countries. On the value front, KPOs typically offer competitive advantage to its clients by providing market and industry research, data and statistical analysis, competitive analysis, and support in legal and administration processes.
Having one or more offshore centers, provides flexibility in terms of human resource and time management. Outsourcing allows companies to add or reduce personnel easily avoiding an expensive layoff process. By utilizing the time difference between different parts of the globe, development can take place constantly. The ability to send massive data amounts anywhere via the Internet allows a continual collaboration on a large scale.
There are some minor risks associated with KPOs which are well handled by KPO (Knowledge Process Outsourcing) organizations to ensure optimum benefits to the outsourcing companies. There is a tight wall of security in place during the data transfer and during the knowledge transfer. The confidentiality of the data is maintained by the KPOs that take due care to maintain high quality of work and personnel. A full fledged data back up is in place at the KPOs to make sure the outsourcing company can access whatever information they require at any time. Time lines are worked out in advance to accommodate the necessary smooth work flow.
There is a high potential for KPOs in the present day scenario. The scope of KPOs is not restricted to Information Technology (IT) and Information Technology Enabled Services (ITES). KPOs have a future in other areas like Legal Processes, Intellectual Property and Patent Related Services etc. While the company concentrates on its core specialization and competency activities, it can outsource other activities and gain a lot of momentum in the core areas. There is a cost minimization this way and a total optimization in the business.