Knowledge process outsourcing set for take-off

Knowledge process outsourcing (KPO) could finally be stepping out of the shadow of business process outsourcing (BPO), as firms look to reduce costs and improve service efficiencies, according to Datamonitor.

The analyst firm's Trends in Knowledge Process Outsourcing report attempts to define the market and outline its growth opportunities.

"KPO is an area that was talked about a lot, but not always well defined. Five or six years ago it was extremely hyped, but in 2006 more BPO vendors got interested and it grew in maturity," said Datamonitor analyst and report author Ed Thomas.

"We are defining it as the movement of core business processes requiring a high level of domain expertise out to third parties."

KPO is becoming a popular choice for traditional BPO and outsourcing providers, because it offers access to the core of a client's business and makes the supplier indispensable, according to Thomas.

"It is a cliché of outsourcing in general that partnerships are important between [customer and outsourcer], but in KPO it is key because of the nature of the data being handed over," he said.

"The providers need to go out of their way to demonstrate the resilience of their processes."

Companies are also likely to see the key benefits of KPO as cost reduction and greater efficiency, according to Thomas.

"They are able to go into areas you are not able to and target your business, and show you the areas of the market you need to focus on and design a strategy for," he said.

However, although the market is maturing, as evidenced by some of the large BPO providers now beginning to target KPO offerings at the mid-market as well as the more traditional global enterprises, Thomas warned that it remains a fairly immature area.

There are still a large number of fairly small, boutique KPO providers, in what is quite a fragmented market, he explained.