Trends in KPO

KPO is predicted to grow to anywhere between $10 and $17 Billion (USD) globally by next year [2010]. Areas that are experiencing growth in the KPO arena include: data search, data integration, market research, project management, remote education, radiology, medical transcripts preparation and legal processes. Some of the factors driving the growth in KPO include the adoption of global standards for qualifications, access to a large pool of skilled and experienced professionals abroad and improved remote project management capabilities due to improvements in telecommunications and other enabling technologies. The way decisions are made about outsourcing is also changing. KPO decision making will move from the CIO and COO level to divisional business managers and board of directors.

Benefits of KPO

While the main attraction of BPO was improved efficiency and cost reduction, the main attraction to KPO is increased revenue and improved competitive advantages as a result of having access to a large pool of skilled professionals in knowledge intensive industries. Other benefits of KPO include cost savings, converting fixed costs into variable costs, flexibility for companies to add or reduce personnel based on business cycles and the continuous execution of work by taking advantage of different time zones.

KPO Challenges

The challenges of pursing a KPO strategy are both external and internal. External challenges include finding a suitable KPO vendor that can offer the necessary skills in a scalable manner. Protecting intellectual property is a challenge since it will have to be shared with the vendor. For some industries, protecting data and privacy as well as abiding to legal and compliance requirements are challenges to overcome. The physical location of the KPO vendor creates challenges from a language and time zone perspective. Internal challenges stem from adapting the organizational and management mindset from managing internal resources to managing the KPO vendors resources situated in a remote location. The definition of quality and performance metrics can pose a challenge since some of them may not exist. Internal processes and managers usually do not have quality metrics in place and will need to be defined before outsourcing the process. In some cases, the outsourcing effort exposes inefficiencies and weak areas in the process and a decision needs to be made to outsource the process as is or to optimize it before outsourcing. Technical challenges can also arise so the information technology department must be involved to ensure the infrastructure, applications and data is in place and well protected, and that the KPO vendor is using the data and applications as it was contractually agreed.

Risks of KPO

Process outsourcing is a risky initiative. The main risks include the impact on employee morale, key talent retention, outsourcing a core competence, negative public opinion, unfavourable currency exchanges, poor program management, poor project management, political instability in the KPO vendor's location, terrorist attacks, taxing structures, security, privacy, salary inflation, service interruption, technical issues. These are just some of the risks to be considered. Also consider that KPO vendors may experience a labour shortage or may be unable to attract key talent and skills needed and can eventually go out of business. Poor program management, lack of executive support, poor vendor selection, lack of understanding of the company's core competencies, undocumented processes and procedures are also risks to be considered from within the organization. Based on the business strategy, organizations considering a KPO strategy must first conduct a thorough analysis of their core competencies, process efficiencies and risks. The impact to employee morale and human capital is a significant risk and needs to be managed appropriately.