|
|
Introduction
The success in offshoring Business Process operations with respect to reducing costs
and often improving quality has encouraged many firms to start offshoring their
high-end knowledge work as well. Their underlying expectation is that offshoring
high-end processes will result in additional cost savings and operational efficiencies,
coupled with access to very good talent in the low-wage offshore countries. In this
paper, we will refer to this offshoring of higher-end services as Knowledge Process
Offshoring (KPO).
This paper analyzes the evolving KPO market, the opportunities it offers, the associated
challenges, and the key drivers associated with the move from BPO to KPO.
According to our estimate, the KPO market is expected to grow from USD 1.2 billion
in FY (Financial Year) 2003 to USD 16 billion in FY 2010. The sectors that are expected
to ‘shine’ within the KPO industry include data search, integration and management
services, financial and insurance research, biotech and pharmaceutical research
and computer-aided simulation and engineering design.
In terms of challenges, this paper analyzes the impact of key parameters such as
quality, precision, confidentiality and project management expertise in the KPO
industry. This paper also forecasts the number of professionals that are likely
to be employed by this industry and we also present some important drivers behind
the movement from BPO to KPO.
Finally, this paper attempts to compare countries (such as China, India, the Philippines,
Ireland, Israel and Russia) that can provide KPO services with respect to labor
costs, geographic location, demographic factors and other miscellaneous factors.
The paper also discusses the future outlook of the global offshoring industry.
What is KPO?
The maturity and evolution of outsourcing strategies is leading businesses to shift
towards the offshoring of high-end processes to low-wage destinations, a trend referred
to as KPO. This involves offshoring of knowledge-intensive business processes that
require significant domain expertise.
In comparison to BPO, KPO delivers higher value to organizations that offshore their
domain-based processes, thereby enhancing BPO’s traditional cost-quality paradigm.
The central theme of KPO is to create value for the client by providing business
expertise rather than process expertise. Hence, KPO entails the shifting from simple
execution of ‘standardized processes’ to carrying out processes that demand advanced
analytical and technical skills as well as decisive judgment. Figure 1 provides
two examples – one relating to IT services and the other relating to insurance services.
With global businesses becoming more competitive, the cycle time for introducing
products and services has become smaller, and customers are more demanding with
respect to the quality of services provided. This has forced enterprises to adopt
systems and business models that will not only provide operational efficiency, but
also add strategic value to their products and services.
KPO services can enable enterprises to reduce design-to-market lead times; manage
critical hardware efficiently; provide research on markets, competition, products
and services; enhance organizational effectiveness in business administration; and
help in dealing with rapidly evolving business scenarios. Finally, the outsourcing
solutions for high-end processes, unlike traditional BPO solutions that are commoditized
fixed-price solutions, are usually customized and value based. It is often this
customization that enhances the value proposition of KPO.
|
|
|
|