Knowledge Process Outsourcing: Unlocking Top-Line Growth by Outsourcing the Core
ADVISORY
IT ADVISORY
Knowledge Process Outsourcing
Unlocking top-line growth by outsourcing “the core”
At a glance
• Knowledge Process Outsourcing (KPO) enables clients to unlock their top-line growth by outsourcing their core work to locations that have a highly skilled and relatively cheap talent pool. We consider this to be the single most important factor that differentiates Knowledge Process Outsourcing from its predecessor,
Business Process Outsourcing (BPO).
• KPO is about “intellectual arbitrage”. This differentiates KPO from IT Outsourcing
(ITO) or Business Process Outsourcing (BPO), both of which emphasize cost arbitrage. KPO is characterized by niche offerings, highly skilled staff and a relatively small scale. It cuts into the traditional “core competencies” of many organizations. • Knowledge processes are fundamentally different from business processes, with clear differences in process complexity, skill sets and scalability.
• There is a good mix of both third-party and captive structures in the KPO industry at present. KPMG expects hybrid multi-sourcing models of KPO to emerge in the near future. They will likely consist of captive units managing relationships with third-party KPO providers.
• Organizations with experience in outsourcing IT and business processes will likely have a shorter learning curve when entering into KPO.
• Acquiring the necessary skill sets, attracting talent, protecting intellectual property and managing conflicts-of-interest will likely be the major challenges facing the KPO industry over the next three years.
• We foresee a significant shift in boundaries between “outsourceable” and
“non-outsourceable” activities.
• Activities that are analytical skills-intensive are expected to be increasingly outsourced going forward as KPO providers prove their execution capabilities.
Activities that require high domain expertise will likely be at the lagging end of the outsourcing curve as service
IT ADVISORY
Knowledge Process Outsourcing
Unlocking top-line growth by outsourcing “the core”
At a glance
• Knowledge Process Outsourcing (KPO) enables clients to unlock their top-line growth by outsourcing their core work to locations that have a highly skilled and relatively cheap talent pool. We consider this to be the single most important factor that differentiates Knowledge Process Outsourcing from its predecessor,
Business Process Outsourcing (BPO).
• KPO is about “intellectual arbitrage”. This differentiates KPO from IT Outsourcing
(ITO) or Business Process Outsourcing (BPO), both of which emphasize cost arbitrage. KPO is characterized by niche offerings, highly skilled staff and a relatively small scale. It cuts into the traditional “core competencies” of many organizations. • Knowledge processes are fundamentally different from business processes, with clear differences in process complexity, skill sets and scalability.
• There is a good mix of both third-party and captive structures in the KPO industry at present. KPMG expects hybrid multi-sourcing models of KPO to emerge in the near future. They will likely consist of captive units managing relationships with third-party KPO providers.
• Organizations with experience in outsourcing IT and business processes will likely have a shorter learning curve when entering into KPO.
• Acquiring the necessary skill sets, attracting talent, protecting intellectual property and managing conflicts-of-interest will likely be the major challenges facing the KPO industry over the next three years.
• We foresee a significant shift in boundaries between “outsourceable” and
“non-outsourceable” activities.
• Activities that are analytical skills-intensive are expected to be increasingly outsourced going forward as KPO providers prove their execution capabilities.
Activities that require high domain expertise will likely be at the lagging end of the outsourcing curve as service