Knowledge Process Outsourcing (KPO)
How will it change the outsourcing landscape?
Knowledge Process Outsourcing, or KPO, is the outsourcing of knowledge processes. It is a subset of the broader Business Process Outsourcing industry, estimated to be a $1 trillion market, and refers to the outsourcing of high-end work that requires specialized knowledge in the areas of research, investment, law, accounting, architecture, analytics, intellectual property rights and other related fields.
The field attracts MBAs, CPAs, engineers, economists and the like who wish to aspire to a rewarding career. KPO businesses are cropping up in industries like financial and management services, legal services, research, pharmaceuticals, biotechnology and are expected to expand to other high-end knowledge based industries in the near future.
In early June, the Los Angeles-based Integreon Managed Solutions announced it had acquired Datum Legal, a litigation support and electronic data discovery company in New York City. Terms of the transaction were not disclosed. The acquisition was a further step by Integreon in cementing its role as a global leader as a legal process outsourcing firm with 400 offshore professionals reviewing litigation documents for law firms and Global 2000 corporations.
“Law firms and corporate legal departments want a single provider to efficiently handle all their litigation support needs at a lower, more predictable cost,” said Liam Brown, CEO of Integreon. “Our acquisition of Datum Legal means we now offer a single discovery management solution that includes best of breed review, processing and hosting tools and world-class document review teams in the U.S., India and the Philippines, to deliver faster review at a predictable per-document price.”
How does KPO affect your firm?
The impact of KPO is similar to that of other outsourcing. However, KPO affects the jobs of highly-skilled employees, as well as middle-level professionals and managers. Often employees find themselves faced with two possibilities – take an early retirement or acquire new skills. The latter is considered a costly proposition for two reasons. First, training employees can be expensive and, second, the benefits of training may not be realized quickly. However, outsourcing has allowed businesses to remain competitive and adaptable.
Not only does the outsourcing firm get a robust return by having highly qualified staff employed at a much lesser cost, but also the KPO vendor makes far higher margins than he can make from traditional outsourcing call center work. Most KPO business is expected to head to India, but China, Vietnam, Ireland and Israel are among the other countries offering an operations base for KPO business. Companies such as IBM, Motorola, Nokia, DuPont, Accenture, Intel, Cisco have opted to outsource some of their knowledge-process work.
KPO businesses also offer its clients round-the-clock operations allowing hospital patients in a rural Nebraska community to talk with a doctor in the middle of the night – with that doctor consulting them via an Internet connection from his office on the other side of the world.
It is not just cost savings and operational efficiency that will drive companies to seek KPO business. Other countries, notably India, have a labor supply advantage over the United States. The U.S. graduates about 65,000 engineers annually compared to the 500,000 engineers graduating annually in India. The aging of the U.S. workforce, with many Baby Boomers at or near retirement, also will drive offshore outsourcing to places like India, which has about 500 million people under the age of 25.
Dean Baker, co-director for the Center for Economic and Policy Research, feels the risk for American workers is summarized as “Walmartization,” in which some large company aggressively offers U.S. corporations a large menu of service-sector jobs abroad at everyday low prices.
“That would be what really starts to change the nature of the market in those sectors,” Baker said.