KNOWLEDGE PROCESS OUTSOURCING

Knowledge Process Outsourcing

Knowledge Process Outsourcing

Introduction

The Outsourcing Industry has been extensively researched in the past decade. Business Process Outsourcing (BPO) in particular has been the topic of many analyses. Outsourcing first appeared in the IT industry in the 1980s. This was the time when companies recognized the benefits of having IT service partners in order to develop complex systems, and enhance the way that a business process or service is managed (Schumacher, 2005). Since then, the outsourcing industry has gone through its introduction and growth stages, with growth rates of around 50%, and has reached its transformation stage. Increasing globalization and high pressure to innovate have substantially shortened the product and service life cycles. Industry life cycles have therefore become shorter and shorter - outsourcing is no exception. Over the past five years a new form of outsourcing has become popular and promises, as BPO once did, huge growth and profit potential.

Objectives

The main objective of this report is to analyse the Strategic importance of Knowledge Process Outsourcing in todays business environment and in managing information.

Scope

Knowledge Process Outsourcing (KPO) is the next step up the outsourcing value chain. While BPO provides extensive process expertise, KPO is emphasizes on business expertise. The major strength of this approach is not the cost-saving aspect but it is more the value that these services provide. They offer a sustainable competitive advantage to its customers in all knowledge intensive industries by providing market and industry research, data and statistical analysis, competitive analysis, and support in legal and administration processes. This and similar forms of outsourcing have forced enterprises not only to adjust their organizational and operational structure to the global trend, but also to consider outsourcing in their overall business strategy (Sinha et al, 2005).

Figure 1: KPO

Method

This paper will compare and contrast three articles on a managing information topic Outsourcing. We analysed articles and analysed that KPO indicates a major industry shift, away from execution of standardized processes to carrying out highly complex and customized processes that demand advanced analytical and technical skills as well as decisive judgment (Aggarwal and Pandey, 2004).

Compare and contrast Articles

In this paper we analysed three articles

“Turning Risks into Opportunities” written by Boetzel et al (2002)

“Developing Superior Outsourcing Programs” by Power et al (2005)

“Outsourcing: Its Benefits, Drawbacks and Other Related Issues” written by Kakumanu and Partanova(2006).

Analysis

From the article “Turning Risks into Opportunities” it is observed that the main driver for outsourcing is cost reduction. Labour cost savings overseas are just too great to be ignored. In knowledge-intensive industries such as Analytics and Data Mining Services, Research and Development, and Intellectual Property Research, companies can save significantly - as much as 40-50% - by offshoring work to low-wage countries. Destinations such as India, China and Russia are ideal for these services as they provide a large pool of engineers and even PhDs at a substantially lower cost. According to Boston Consulting Group, a typical annual salary for an Indian IT engineer is ...