1. KPO Demystified
1. What is Knowledge Process Outsourcing?
Knowledge Process Outsourcing (KPO) is the outsourcing of high-end business functions in an organization. These
functions include both core and non-core activities.
How it is different from Business Process Outsourcing
2. KPO Value Chain examples
Low-end High-end
Back office Analysis and Statistical Synthesis/Reports/Presentations
support, Data Modelling
Collection, Data
Business Entry, Secondary
Analytics Research
Data Entry, Patent Search, Contract Litigation Support, Legal
Legal Transcription Drafting Research
3.
4. What functions does it cover?

2. KPO being a nascent segment, there is no universal consensus on the processes that can be classified within the ambit of
KPO. Currently, the following knowledge functions are outsourced to varying extents.
Segment Segment breakdown Key skills requirement
Legal Services Patent search, contract drafting, Proficiency with English,
legal research, litigation support, knowledge of the client country
secretarial work, legal coding, laws.
transcription
Engineering Services 2D and 3D modelling, conversion, CAD/CAM, drafting, modelling,
finite analysis, value engineering, product design.
dynamic analysis, etc.
Content Development & Data warehousing, content English writing skills,
Publishing planning, proofing, pre-press journalism/editing experience,
production, writing, editing, knowledge of design tools and
designing, etc more.
Market Research & Data Analysis Primary research, surveys, Analytical skills, knowledge of
secondary research, statistical statistical tools, presentations,
modelling, report writing, MBA, Econometrics.
synthesis.
Financial Research & Analytics Industry research, company Knowledge of financial markets,
valuation, equity research & statistical tools and a masters in
analysis, due diligence, financial finance – CFA, MBA finance, etc.
reporting, risk assessment
Biotech/Pharmaceuticals Clinical research, gene mapping, Masters in science, medicine etc.
drug discovery, etc.
Education & Training Instructional design, courseware Subject matter expertise,
development teaching experience.
5.
6. How big is the sector globally? How big will it get?
There are varying estimates on the growth of the global KPO sector. These estimates range from $10 billion (ASSOCHAM)
to $17 billion (Evalueserve), by 2010. Given below is an estimate of the growth of various segments within KPO in India.
Segment Revenue (2006-07)* Expected Revenue (2010-11)*
Banking, Securities & $175 $600
Insurance Research
Data Management, Search & $590 $2500
Analytics
Business & Consulting $125 $450
Research
Human Resources - Research $25 $120
&
Analytics
Market Research & Comp. $175 $460
Intelligence
Eng. Design & Architecture, $315 $950
CAD
Game-design & Animation $245 $900
Services
Legal, Paralegal & Intellectual $95 $500
Property
Scientific & Medical Content $165 $100
Publishing
Remote Education. Publishing, $300 $1,000
Tech. Writing
Contract Res. Orgs, Biotech $580 $2,500

3. Services
Translation and Localization $75 $360
Marketing & Sales Support, $20 $150
Answering RFPs
Remote Logistic services & $40 $160
Procurement
Network Optimization & $125 $450
Analytics
TOTAL $3,050 $11,200
*In millions
Source: Evalueserve
7.
8. India – the most preferred KPO destination
India is expected to corner a lion’s share of the overall KPO market. By 2010, India is expected to account for almost 70
percent of global market. India’s dominance – though imminent in the near future – could be severely tested by some of
the emerging destinations such as the Philippines, Russia, Ukraine, Poland, China, South Africa, Singapore, Ireland,
Australia, Canada and Wales.
9. Key Issues in the KPO sector
Skills Acquisition and Retention
One of the decisive factors for the growth of any destination will be the ability to acquire the right kind of talent and
retain it. For India, it will be a major challenge with high annual churn rates and wage inflation playing dampener. In fact,
UK based research firm RocSearch has tempered the optimism with its findings that the Indian KPO market may only
grow up to $10 billion by 2010 as opposed to the industry estimates of $12 billion. The corresponding number of
professionals employed in this sector will be only 100,000 as opposed to the predicted 250,000.
On the other hand, destinations such as Australia and Canada have a substantial pipeline of skilled talent waiting for the
opportunity. While it is true that outsourcing of knowledge processes relies more on intellectual arbitrage more than cost
arbitrage, a high wage inflation rate and turnover may ward off clients.
IP Management & Data Security
Outsourcing high-end functions to an offshore location involves the exchange of confidential information, especially in
segments such as financial services and biotech. In such a situation, vendors need to have stringent internal measures to
prevent any misuse or trading of sensitive information. The government on its part should come down heavily on any IP
or data theft or infringement.
Training and Development
Knowledge processes require a high degree of specialization. In addition to the required educational degree, professionals
also need to be abreast of the laws or methodologies governing the process in the client destination. Be it legal
processes, pharma outsourcing or financial services outsourcing, any knowledge process requires familiarity with the
concerned domain as it exists in the client country.
Value Chain Analysis
The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in
his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in
the total value delivered by an organisation.
The 'margin' depicted in the diagram is the same as added value. The organisation is split into 'primary activities' and 'support
activities.' Also see value curve.
Primary Activities.
Inbound Logistics.
Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods
are moved around the organisation.
Operations.

4. This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of
books/videos/games by an online retailer, or the final tune for a new car's engine.
Outbound Logistics.
The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.
Marketing and Sales.
In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers.
This area focuses strongly upon marketing communications and the promotions mix.
Service.
This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.
Support Activities.
Procurement.
This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for
purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally
be done in-house are done by other organisations), and ePurchasing (using IT and web-based technologies to achieve procurement
aims).
Technology Development.
Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and
sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing,
Customer Relationship Management (CRM), and many other technological developments.
Human Resource Management (HRM).
Employees are an expensive and vital resource. An organisation would manage recruitment and s election, training and
development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM
strategy.
Firm Infrastructure.
This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and
other mechanisms for planning and control such as the accounting department.