Knowledge process outsourcing, next frontier for the outsourcing industry
Knowledge process outsourcing, or KPO, in which service providers take over high-level tasks requiring professional judgment and industry experience, is fast becoming the next frontier for the outsourcing industry, according to InformationWeekly.
It also being seen that many expect financial services companies will lead the way in KPO, according to the report, adding that there is date to support the view. For example, 45 percent of financial services executives who participated in a recent InformationWeek Analytics survey said they see the industry knowledge of their business process outsourcing (BPO) providers significantly improving. That’s more than any other area of improvement, the report added.
In the same survey of 372 business technology professionals, including 110 in financial services, a notable “strategic minority” of companies see BPO as a road to competitive advantage, with goals such as transforming processes and increasing revenue, not merely cutting costs and meeting short-term goals. This is another reason why this view is more and more gaining ground, the report said, revealing that in financial services, that strategic group is about 15 percent (with another 24 percent responding that BPO is “more strategic than tactical").
The survey also revealed that the top concerns about BPO will only be magnified as financial services companies consider KPO, which might be used for capital market functions such as equity research in support of domestic analysts. It takes a high degree of trust to transfer custody of customer data, share tacit knowledge and work as a single team, the report said. The No. 1 concern financial services companies have about BPO is data security, according to the survey. No. 2 is the difficulty of managing BPO, followed by tension between employees and outsourcers, the difficulty in reversing deals, and reduced flexibility to change processes.
The report added that there’s also the question of whether outsourcers have the innovation capability needed for KPO. It also said that just 10 percent of financial companies gave providers high marks for innovating process change; and only 16 percent of financial services respondents said they see improvement in vendors assigning quality people for their projects. Companies that aren’t getting bright ideas and top people on everyday projects won’t likely rush vendors up the knowledge stack, it added.
