KPO, the next outsourcing trend
The NOA predicts that knowledge process outsourcing (KPO) will be the biggest trend in outsourcing this year. What’s amazing though is the number of companies out there currently using KPO that are clueless as to what it is. With so many companies operating blindly, it’s clear to see that a simple explanation is needed to bring those in the dark into the light.
It is common knowledge that BPO involves the outsourcing of back end office functions such as admin, IT and payroll. KPO is simply an extension of this but, as the title suggests, it incorporates knowledge. KPO can be defined in three ways, the first being the outsourcing of business functions to an external organisation to add value. An example of this could be a car manufacturer outsourcing the design of their seats or wing mirrors. Although these may be a core components of the car manufacturers’ product, there may be a company out there who can do it better, thus adding knowledge (value) to the product.
Another way to explain KPO is the outsourcing of knowledge based functions. This is common in the financial sector whereby banks would outsource their risk analysis function, a knowledge based process, at a much cheaper cost. Due to the much cheaper cost involved, banks can execute a much more thorough risk analysis.
Finally, collaboration can also be classed as a form of KPO. By partnering up with an external company, ideas can be pooled together to help speed up functions such as research and development, something pharmaceutical companies have been doing for years. Speeding up these processes can help to reduce costs to the business.
I’m sure that after reading this, some companies will realise that they’re already using KPO and for those that aren’t, some light has now been shed on this seemingly complicated (albeit in actuality) quite simple outsourcing process. With any luck, by gaining a more thorough understanding of KPO, companies will understand how to use it wisely.
March 27, 2008 at 2:59 pm
Thank you for putting a nametag to what our niche practice has been offering for years. We are outsourcing specialists but not in the traditional high volume low cost sense. We are a niche practice offering specialist expertise to inward investment businesses. Not just the accountant, we like our clients to regard us as their mentor and busioness partner. It is our specialist knowledge in the inward investment sector which we are outsourcing - so truly KPO!