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KPO, The Next Step Up for BPO As Outsourcing Moves Up Service Value Chain

In the last year or two, knowledge process outsourcing or KPO has been elevated in status – in some ways it is thought of as a progression of business process outsourcing. However, there doesn’t seem to be enough evidence to support the idea that the KPO sector is as well developed as some think it might be.

According to a recent report, a speaker at the NOA Sourcing Summit asked a question about how many people in the audience would refer to their existing business relationships as KPO. In a room of 300, just two people said ‘aye.’

Though KPO is widely held to climb the next step up the ladder for BPO as traditional outsourcing moves up the service value chain, there is not much talk of KPO at the moment. Suppliers in KPO are required to know more about their domain and the capability to perform more complicated functions and ultimately get closer to the core business functions of a company.

The advantage of outsourcing buyers seeking KPO services are apparent. Having access to higher skilled employees at fair prices is appealing and sensible. As skills become scarce in domestic proportions, KPO is likely to catch on. Another evident reasoning is that high end services from a specialized KPO provider is beyond competition when it comes to an internal department that is sometimes overburdened and often distracted.

There is also something to be said about the attrition rates here. Firms with KPO operations benefit from the complex nature of assignments. Studies have shown that the more complex the task the more likely the employee is likely to be engaged. In such an environment, firms expanding into KPO from traditional BPO offer opportunities for career progression. In this regard, the more efficient companies will be able to attract the best and most qualified staff.

Despite these attributes, KPO has not gone ‘full throttle.’ India’s trading body NASSCOM said in 2005 that KPO in India would add $1.2 billion to $17 billion toward the end of 2010. However, a more recent NASSCOM report claims that Indian KPO is positioned at $4 billion. Though the recession can be counted into these figures, it is still a wide margin, say analysts.

There seems to be something more to this story than just the numbers. It seems clear that most business are weary to give away too much. There seems to be hurdles keeping companies back with the mantra, ‘don’t outsource your central business.’ This goes to show that firms are not ready to engage in the KPO relationship for fear of giving up too much insider knowledge.

Nonetheless, with the recession now closer to a recovery phase, KPO is well poised to beat down the path of apathy it has faced in the past. Companies are offered an opportunity to grow in difficult times via KPO and this looks more achievable than it did in the past. The whole story is that suppliers will need to keep pushing while end users would need to test their boundaries to rise above their qualms. In the end with analysts, advisors, associations and suppliers playing their fair role, KPO is bound to make it, reports silicon.com

Jacob Cherian writes for SourcingLine, a leading provider of directories on top seo companies and mobile application developers.

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Tags: bpo, knowledge, kpo, outsourcing, process

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