From business process outsourcing (BPO) to knowledge process outsourcing (KPO): Some issues

Abstract

There has been a growth in the amount of outsourcing in general and business process outsourcing in particular. Now a number of firms are beginning to outsource knowledge processes as well. This is being partly fuelled by an increasing shortage of skilled labor in industrialized countries while some emerging nations have a large pool of highly skilled workers at lower wages. Technological, political, and strategic changes and an improved ability to manage the inherent risks are some of the other reasons explaining its potential growth. Providers of these services are either moving up the knowledge intensity value chain with existing clients or are entering new opportunities in specific industries such as healthcare/pharmaceutical, legal and financial services. These services are more profitable to the providers than the standard business process outsourcing but require more expensive investments in infrastructure as well as specialized skill sets with more depth and domain knowledge. The structuring and management of this type of outsourcing is also very complex and fraught with new risks. This paper presents a number of issues related to knowledge process outsourcing from the client firm and the provider's perspectives. The issues are derived from five cases studied by the authors in India and Ireland.