KPO Ahead of BPO

The global KPO industry is still in a nascent stage. However, it is growing at a rapid pace. The sectors that are expected to 'shine' within the KPO industry include data search, integration and management services, financial services, research and analytics, technology research, computer aided simulation and engineering design and professional services, such as business research and legal services. Unlike the conventional BPO, where the focus is on process expertise, the focus in KPO, is on knowledge expertise and requires service providers to possess advanced technical and analytical skills.

Developed economies, such as the US, the UK, and countries in Western Europe are increasingly facing a shortage of highly trained and specialized professionals in various knowledge-intensive high skill sectors, such as R&D in VLSI, engineering design, IT, financial risk management, etc. Buyers of off shoring services save more at the high end of the value chain, as compared to the low end on a per-job basis. High-quality specialized vendors and successful captives have emerged as role models and created awareness for KPO, both in the West as well as in India.

In fact, players solely based on cost differentials will hardly be sustainable in the long run. The central theme of KPO is to create value for the client by providing the highest-quality business expertise and superior productivity/effectiveness rather than cost savings based only on geographic cost arbitrage. KPO services help improve the time-to-market, access to special skills, absorb peak load and enhance organizational effectiveness. Moreover, it simplifies the process and makes it more flexible. Consistent quality is the key word and primarily drives the buying decisions.

For example, an error made in a corporate finance valuation model can have a huge financial downside, which is likely to be in factors of 1000+, possibly larger than the savings made by having the spreadsheet produced in India. Similarly, a patent with badly written claims can damage the protection of multi million dollar products in global markets. Finally, the outsourcing solutions for high-end processes are usually highly customized, which is an important element of value creation for the client, but also requires the vendors to run multiple customized processes in parallel.