Knowledge process outsourcing

Knowledge process outsourcing (KPO) is the general practice of outsourcing valuable knowledge through the use of external providers often located in a different country to help identify issues with cost reduction, and to build a company's core business by employing a value chain. This differs from the use of Business Process Outsourcing (BPO) as the focus is to create a process driven environment that focuses on analytical, decision, and research-oriented findings to further promote the realm of technical skills and the advancement of knowledge.^[1]

Reasons behind KPO include an increase in specialized knowledge and expertise,^[2] additional value creation,^[3] the potential for cost reductions, and a shortage of skilled labor.^[2] KPO is a continuation of business process outsourcing, yet with rather more of business complexity. To be successful in knowledge process outsourcing, a lot of guide is required from interorganizational system.^[4]

Historical Background

The meaning of KPO came into existence due to the constant evolution of companies looking into improving cost driven outsourcing models to better strategies that relied on knowledge based outsourcing models. It was highlighted that early studies mainly focused on the transition between BPO to KOP by increasingly adopting the expertise of a different entity and acknowledging the positive results of relying on intellectual capital.^[5] This would become particularly noticeable in certain industry areas such as legal services, business finance, and big pharma, where this evolution relied in the finding of complex analytics combined with skills and tasks from a research and professional perspective.^[6]

Types

KPO services include all kinds of research and information gathering, e.g., intellectual property research for patent applications; equity research, business and market research, legal and medical services; training, consultancy, and research and development in fields such as pharmaceuticals and biotechnology; and animation and design, etc.^[7]

Scope and Purpose

There is a vast utility for the use of knowledge process outsourcing (KPO) this can range from intellectual property research, financial analysis, market research, legal research, and data analytics.^[8] It is imminent that these types of services are highly reliant on the use of decision-based capacities and proficient knowledge rather than processes that are exchange based.^[9]

However, the use of KPO has been greatly identified in the financial area to not only help with the ever growing need to handle complex analytic tasks but to also help with the discovery of new risk assessments including the use of financial modeling that is often outsourced to outside vendors that have a specific unit of experts that only work on this type of sector.^[10] Correspondingly, this method can be applied in the legal research of organizations that employ the use of KPO to enhance the efficiency, performance, and documentation of using external services such as Evalueserve to operate different types of workloads by applying the Integreon Model.^[11]

Strategic Value

The use of knowledge process outsourcing can provide a competitive advantage within the market because it allows organizations to tap into outside resources that have the necessary skills and knowledge without having to internally invest into their own employees.^[5] This investment can present many opportunities since it can enable firms to focus on developing new initiatives that can be strategically manipulated to help achieve goals or change by leveraging the new gain knowledge from outside vendors on intellectual property, analytics, and research.^[12]

New findings have shown that it is critical to use KPO for new and knowledge-demanding firms, whose main concentration rely on essential skills and external networks to produce new innovations and promote new opportunities for growth.^[9] However, this can be quite challenging in the pharmaceutical sector because the KOP that are used to support the theory of expansion can become a bottleneck for core competencies across network if firms do not enable the use of effectively implementing new innovation strategies.^[6]

Importance

The developing rivalry has brought about shorter time to market cycles, and clients are getting to be more demanding regarding quality. This has constrained the firms to give operational proficiency and increase the value of their products and services. The customer can launch an item quicker and get to the market immediately. A company can lessen the complexities included in overseeing and constantly constructing information in an extensive pool of human resources.^[13]

Businesses are constantly in search of reliable KPO service providers who have the ability to drive the best business strategy by analyzing the available data and information in a specific case.

Deployment and Global Developments

Over the last decade organizations have sought different strategies on how to deploy KPO models by assessing risk, feasibility, and potential gains. For instance, Baula (2025) found that using a model to evaluate the usefulness of outsourcing knowledge in a corporate setting can enable new ethical initiative conducts by emphasizing the significance that KPO shares with the objectives of an organization.^[14]

In terms of global developments countries such as the Philippines and India have become a focal point for KPO because many countries are interested in their talent acquisition, market price advantages, and mastery of language skills.^[5] Moreover, the use of overseas talent allows corporations to take advantage of the global market of outsourcing to cut on operational costs.

In India

The Indian National Association of Software and Service Companies (NASSCOM) estimated the total market size of the KPO sector in India in 2006 to be $1.5 billion.^[15] The year before, 2005, it had been $1.3 billion, with Evalueserve predicting that by 2010 it would be some $10 to $15 billion.^[16] The Indian government was predicting that by 2010 India would have 15% of the global KPO market.^[17] However, the 2008 financial crisis, coupled with domestic economic problems such as the IPO of Reliance Power in 2009, caused people to re-evaluate these predictions, incurring worries that India's IT, BPO, and KPO sectors — which by then, combined, were $8.4 billion in export revenues — would be greatly affected by these factors.^[18] The worldwide KPO industry is expected to reach about US $17 billion by 2015, of which US $12 billion would be outsourced to India. Furthermore, the Indian KPO area is likewise anticipated that it will utilize more than 2, 50,000 KPO experts by 2015.^[19]

In the Philippines

The Philippines Knowledge Process Outsourcing (KPO) services are often called "non-voice" or back office services, referring to activities outside contact center, customer and IT support services. In 2014, the KPO sector comprised 40 percent of the country's outsourcing industry. The Information Technology and Business Process Outsourcing Association of the Philippines (IBPAP) predicts that the Philippine outsourcing sector will reach $25 billion in revenues and employ about 1.3 million people by 2016.^[20]

The KPO industry is different from the BPO in the respect of that the former is more resilient to artificial intelligence (AI) and automation. With the 4th Industrial Revolution, it is estimated that most job losses will occur in low value-added contact center (“voice”) and other BPO services. Other services impacted by AI and automation include medical transcription, basic 2D animation services, parts of IT technical support and back-office transactions.^[21] Advanced functions that are projected to become more in demand include analytics and optimization engines, automation enablement, clinical data analytics, remote health management, Virtual Reality (VR)/Augmented Reality (AR)-enabled animation and supply chain optimization.^[22]

Challenges

Regardless of the benefits that KOP provides, there are risks associated with data security, talent retention, over reliance on outside vendors, and quality control of personnel.^[1] It is crucial for firms to do enough research before creating partnerships to define the type of agreement and necessary knowledge transfers during outsourcing to have a positive long lasting impact on operational goals.

Risks and benefits

Benefits^[23]

• Cost reduction
• Shortage of skilled employees
• Provides many graduates at very low cost
• High end services are provided at a lower cost to decrease unemployment and benefit their economy
• Provide flexibility in terms of HRM & time management

Risks^[23]

• Security- Classified information about the company can be lost
• Key talent retention
• The character of the employee and the quality of the work cannot be assured
• KPO is time consuming and cannot provide a quick fix to the company seeking immediate results.
• Lack of communication between partners due to legal, language and cultural barriers can lead to complications
• Quality of Personnel and Work Cannot Be Guaranteed
• Shortage of Skilled Employees
• Reduction in Communication due to Language barrier
• Inability to protect company's intellectual property

Differentiation from BPO

A KPO firm requires considerably more skilled personnel than a BPO firm. Experts working in KPO keep on learning and accomplished professionals can power their aptitude to produce more income for the KPO firm.^[24] The main difference between a KPO firm and a BPO firm is that in a KPO firm, the customer is included amid the whole execution process.^[13]

Origin of the term

Ashish Gupta, ex-COO of Evalueserve and co-founder & CEO of Benori Knowledge has often been credited with coining the term. Gupta, an alumnus of the Indian Institute of Technology Delhi, is also a Founder & Trustee of Ashoka University and Plaksha University, and serves on the boards of various companies. Published authors have credited him for coining the term in their works.^[25]