Wed, Oct 15, 2008 6:11 EDT

The Key Drivers Behind Knowledge Process Outsourcing

Posted by: ExecutiveBrief in Best Practices Topic: Enterprise Management Current Rating: Comments: 0

The shift from business process outsourcing to knowledge process outsourcing did not happen by accident. Instead, the ongoing change is a natural outcome as players in the BPO gain the necessary expertise needed to provide higher-level services.

Knowledge Process Outsourcing (KPO) has become an offshoot of business process outsourcing over the years. While BPO focuses on basic back-office services, such as data entry, transaction processing, or customer service, KPO requires higher level of specialization in practically all aspects of outsourcing management, such as organizational communication, information analysis, and systems design and integration to name a few.

The shift from business process outsourcing to knowledge process outsourcing did not happen by accident. Instead, the ongoing change is a natural outcome as players in the BPO gain the necessary expertise needed to provide higher-level outsourcing services. The key drivers cover hardware/software advances, human capital, process maturity, and "soft skills" management. Let us look at some of the key drivers of KPO.

Improvements in technology infrastructure
Technology is the backbone of business process outsourcing. Through the years, infrastructure improved and acquisition of hardware and software became more affordable. Fiber optic cables and satellite communication became widely available, allowing vendors and clients to transmit data and enjoy instantaneous communication from different parts of the globe. Clients and service providers no longer have to be in the same location. In most large corporations, people and knowledge are just a few clicks away, no matter the time zone.

BPO experience
KPO is important in the success of an organization for it deals with the management of a large body of critical organizational knowledge. In the era of knowledge economy, companies that take information—in every form—have a competitive advantage over their peers. They exploit the knowledge gained from R&D, customer service, and research and analysis to attain their key business objectives. Over time, the experience and expertise that they earned in these efforts are reinvested to provide more complex services.

Human capital
As the outsourcing industry became more competitive, companies sought to hire only the best talents that vendors could provide. In turn, vendors made sure that the consultants that entered their payrolls had the right tools to provide the services that their clients demanded. Millions of dollars are being spent yearly on updating workers' knowledge in application development, project and team management, business and data analysis, and soft skills. College degree alone is not enough to gauge a candidate's aptitude for the job; post-graduate degrees and certifications are some of the key selling points for talents. At the start of the decade, Eastern Europe's oversupply of engineers fueled its IT outsourcing industry, thanks to its educational and economic model's--and history's--emphasis on courses in the sciences.

Moreover, surveys have often pointed to the fact that "soft skills" are among the top competencies that companies look for, in addition to technical aptitude. Outsource workers eventually graduate from "sweatshop jobs" to highly analytical specializations. This development resulted not only in performing tasks, but delivering results.

Lower Cost
As in BPO, cost is a key driving force behind the growth in KPO. It allowed companies to access more and promising talents located in different territories without having to shell out as much as they would have on onshore knowledge workers. Even with the valuable knowledge they bring on the table, offshore outsource talents still command competitive salaries compared to their onshore counterparts.

By ExecutiveBrief
Technology Management Resource for Business Leaders
www.executivebrief.com