Knowledge Process Outsourcing

Knowledge Process Outsourcing (KPO) is a form of outsourcing. KPO firms provide domain-based processes and business expertise, rather than just process expertise. The nature of these works demand in advanced analytical and specialized skills.

The History of KPO

Knowledge Process Outsourcing (KPO) has evolved from the success of the Business Process Outsourcing (BPO) model. KPO as an idea was initiated in early 1987 when McKinsey set up a knowledge center in India. KPO saw true acceptance in the year 2000 when companies like GE, Frost & Sullivan, Gartner and Office Tiger established captive research and analytics, and third-party knowledge services from offshore facilities in India. The five years from 2000 to 2005 were the growth years for KPO during which niche service providers like Evalueserve, including large consulting and investment banks, established offshore knowledge centers in India, making India a leading destination for KPO. According to Evalueserve, the Indian KPO sector is expected to notch up 71 percent of the global KPO share, with revenues of USD 12 billion, by 2010.

The Evolution of KPO

The evolution and maturity of the Indian BPO sector has given birth to yet another wave in the global outsourcing scene: KPO or Knowledge Process Outsourcing. KPO is essentially an offshoot of BPO. It is the high-end activity of the BPO industry and is estimated to have a magnificent growth in the next few years.

Organizations are adopting outsourcing that high potential as it is not restricted only to Information Technology (IT) or Information Technology Enabled Services (ITES) sectors, and include other sectors like Intellectual Property related services, Business Research and Analytics, Legal Research, Clinical Research, and Publishing.

It is expected that the Indian KPO market will grow at a CAGR of 49.5 percent between 2003 and 2010, compared to a CAGR of 30.6 percent for the Indian BPO market.

Knowledge based services:

Some of the important sector the KPO concentrates on,

Investment Research
• Corporate finance
• Financial modeling and analysis
• Investment banking support

Legal Research
• Legal, Para-legal content and services
• Drafting, review of documents and contracts
• Legal research (case history)

Market Research
• Data acquisition and data entry
• Data processing
• Presentation

Analytic Services
• Data warehousing
• Data preparation, ETL services
• MIS & reporting
• Business intelligence
• Statistical and econometric modeling
• Optimization modeling and or solutions

Sourcing Management
• Spend data analysis & supplier intelligence
• Low-cost country sourcing
• Advisory service

Information Management
• Database creation
• Quantitative/financial statement analysis
• Data/information synthesis

India - the leading focal point for KPO

Some of the factors fuelling growth in developed economic country, such as the US, the UK, and countries in Western Europe are increasingly facing a shortage of highly trained and specialized professionals in various knowledge-intensive high-skill sectors, such as R&D in VLSI, engineering design, IT, financial risk management, etc.

Buyers of off shoring services save more at the high end of the value chain, as compared to the low end on a per-job basis. High-quality specialized vendors and successful captives have emerged as role models and created awareness for KPO, both in the West as well as in India.

India is one of the most preferred destinations for KPO because of its competitive edge in terms of a large educational and technical qualification of the work force. The dedicated education system in India produces trained professionals in the fields of Education, Law, Finance, Science, Architecture, IT, Engineering and various other competitive fields. These strong resources along with enhanced technical expertise have a great command over the English language. Such skills backed by a strong education system yield an array of unforeseen opportunities.

Scope and Future of KPO

According to a 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.

Bottlenecks in Future Growth

A study on Knowledge Process Outsourcing (KPO) sector shows a huge supply gap that threatens to cripple its growth. Rocsearch, a UK-based research services company, has gathered evidence suggesting that the KPO market may just about reach a size of $5 billion by 2010, manned by 100,000 people instead of projections of a $12 billion market supported by 250,000 employees. This accentuates Nasscom's projections of a shortfall of 500,000 workers in ITES and BPO sectors by 2010.

For example, all the 2,000-odd IIM and top 10 B-School graduates are employable, while less than half the 84,000 graduates from Tier-II B-Schools would make the grade. The study sees only 500,000 of the over 3 million workers added to the labour pool in 2006s employable in global firms and of these, just 2 in every 100 are likely to opt for work in knowledge space.