From BPO to KPO—The road ahead…

Some “Number-facts”:

Indian KPO Market size in 2006-2007:  $3 billion approx.

Estimated KPO Market size in 2010-2011:  $11.2 billion approx.

Employing: from 75K in 2006-2007 to 255 K in 2011. [1]

Indian BPO industry estimates are here

Just in case we missed it:

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. [2]

KPO is many times thought of as an extension to BPO, definition is worth advocating if the differences are retained well. “K” is the key in KPO. That is where KPO is so different from BPO. The level of complexity involved in KPO is immense; one would assume that it is for the same reason that KPO is taking rapid but small strides.

“So what makes KPO very different from BPO?” If somebody asks this, our obvious response would be– “Knowledge of course”. KPO demands:

• Very high technical and analytical skills from clients
• Intensive knowledge of domains of the client
• Ability to research and take business decisions on behalf of the client.

As Dr Richard Sykes puts it:

“KPO is merely a continuation of BPO, though with rather more business complexity. The defining difference is that KPO is usually focused on knowledge-intensive business processes that require significant domain expertise. The offshore team servicing a KPO contract cannot be easily hired overnight as they will be highly educated and trained, and trusted to take decisions on behalf of the client.” [2]

So KPO might mean delegating “power” and responsibility to the vendor. BPO generally involves hiring people at the lower stratum of a clients business to reduce costs by off-shoring. But KPO seeks to delegate “high-business-competence” activities to the vendor and gain cost benefits that are otherwise not possible. For e.g. a highly reputed U.S firm requires an R&D department for its new product. Setting up such an office in Bangalore would be called as KPO. Again, to maintain the patents and consistency in laws that accompany production in India have to be taken care by a LLB, and yes that would have to be another expert from India. So the whole process aims to set up an independent process through a vendor, which can coordinate with the client.

Of course, to achieve the required, vendors need to maintain high quality service levels by employing and training specialized professionals in various knowledge-intensive high-skill sectors. Unlike the BPO, which is process-centric, KPO concentrates more on knowledge expertise and requires service providers to possess very high technical and analytical skills.

KPO isn’t only about “arbitrage”, it intends to provide highest quality business expertise by improving clients time to market, absorbing pressure and by enhancing overall efficiency. In doing so, KPO invents seeds for new business models, since vendors have huge knowledge base in their own country, which can lead to further emergence of new players in the industry. “New players” means varied expertise, which means further expansion.

All said and done, it is not easy to set up KPO unit, because unlike the BPO, wrong hiring in BPO can lead to quality compromise. The recruitment for KPO has to be of highest quality, and should ensure that people have very high domain experience on the road reaching to this “job”. Of course, such an industry would thrive only if the experts are retained.

KPO is to outsourcing industry, what a joker is to game of poker, but if not used properly, “risks” are high. But lots of highly specialized vendors have come to spread the awareness of KPO that will prompt  SMEs to take a step towards “BPO—KPO” integration [3].

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