Knowledge Process Outsourcing (KPO) is an organization's use of an external entity to perform complex organizational tasks based on knowledge, data, and experience. KPO is a relatively new development of the traditional outsourcing phenomenon (Business Process Outsourcing—BPO) and typically exists in fields requiring specific skills and specializations, such as knowledge management, intellectual property protection, patents, strategic research, and the implementation of complex technological solutions.
KPO and traditional outsourcing differ from each other in two fundamental aspects:
First, while BPO organizations primarily outsource simple tasks that require low skill, are repetitive in nature, and are of low value to the company, KPO is characterized by functions of high value to the organization that requires high skill, experience, and expertise and whose execution largely depends on the capabilities and in-depth knowledge of those performing them.
The second difference between the two is that while the advantage of BPO lies in size (the ability to provide many workers) with efficiency and low costs, the advantage of KPO for organizations lies precisely in deep knowledge and experience and, therefore, in the ability to make more informed and better decisions.
The development of the KPO phenomenon has two sources. First, many organizations' success and positive experiences with traditional outsourcing encouraged them to outsource their knowledge-intensive tasks. Like BPO, cost savings and increased efficiency were the attractions of this solution. The second source for the development of KPO is the phenomenon of specialization, which focuses on core knowledge that characterizes the business world today. Outsourcing most organizational tasks, including important and complex ones, allows the organization to direct the lion's share of its resources to developing core knowledge and skills, constituting its competitive advantage. Moreover, outsourcing for complex and knowledge-intensive tasks allows the organization to access experienced, professional employees with high capabilities trained in organizations where this is precisely their core knowledge and area of expertise.
Experts predict that the use of KPO will increase and that India will become a leader in outsourcing in the next decade. A study conducted by Global Sourcing Now predicts that by 2010, the use of KPO will reach a volume of 17 billion dollars per year and that 70% of it will be carried out in India. According to this study, other leading countries in this field may be Russia, China, the Czech Republic, Ireland, and Israel.
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