Knowledge process outsourcing (“KPO”) represents the pinnacle of value in a sourcing relationship. In KPO, complex business information is collected, sorted, evaluated, synthesized and reported to senior executives of the enterprise customer as a basis for evaluating critical business decisions. KPO brings the promise of having educated, sophisticated business professionals conduct ongoing operations that accelerate the ability of the enterprise customer to respond to changes in its markets, develop and implement strategies and engage in innovation and process renewal.
Who Provides KPO?
KPO requires specialized knowledge of a business process or market phenomenon. It may involve market research or the use of business or professional judgment to provide inputs to decisionmakers. Accordingly, “KPO” providers may be expected to have specialized training or advanced educational levels.
Scalability of KPO
KPO provides scalability to the global business enterprise by the simple process of staff augmentation. It differs from staff augmentation because the KPO service provider has established policies and procedures, as well as supporting information technology, to rapidly scale a customer’s services through process training. While staff augmentation providers might merely engage in assembling people to fit requested skill sets, KPO structures those people into autonomous work groups that segment their services by industry, business function involving higher educational levels, or other business segment.
Types of KPO Services
KPO services include stock market research, mathematical research, market research, engineering research applied to identify “prior art” in patent applications and describe the novelty, usefulness and non-obviousness of an inventor’s inventions. Enterprise customers range from inventors to investors, from legal, marketing and finance departments to law firms.
KPO is driven by a tectonic shift in global demographics, legislation (such as Sarbanes-Oxley) that mandate a separation of investment research from commissionable broker-dealer trading and the mobility of labor through high-speed, high bandwidth telecommunications. As a result, virtually any skilled and licensed profession can be performed remotely, subject to applicable oversight and supervision by the enterprise customer.
Competitive Impact of KPO on Professional Service Firms
As KPO increases, new opportunities for skilled personnel in such professions may be shifted to KPO providers. Skilled professionals will face a choice between hiring a local junior professional as an employee and hiring a highly educated senior professional KPO provider.
As such sourcing decisions affect professional services development, KPO will become more competitive. KPO service providers will compete on price for “lower” level repeatable professional services. Traditional professional services firms will use new “partnering” tools to maintain and preserve their market share. Such partnering will include greater integration into the client’s business processes through technology collaboration tools, exchanges of interns with clients, introductions to potential business partners without necessarily charging a fee, the development of “joint response teams” to plan for business contingencies and transaction processing automation.
Gazing into the Crystal Ball
Along the way, KPO service providers will probably develop symbiotic relationships with the professional service firms that are threatened by them at lower levels. Professional service firms will focus on business process design (such as the “perfect” format for a class action lawsuit, or the “perfect” model of client relationship partnering), with KPO service providers offering responsive, low-cost and rapid support.