Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves high-value work carried out by highly skilled staff. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisions—typically those that are easily undone if they conflict with higher-level business plans.
Process transparency is a major barrier to using KPO services.[clarify] Many organizations do not track carefully which decisions are made by whom, and rely so much on informal social processes (and "soft skills") that it is unclear how much the use of KPO would disrupt existing operations. However, requirements like Sarbanes-Oxley and radical transparency movements like full cost accounting, shareholder activism and eco-labels and moral purchasing require organizations to be more explicit about when and by whom decisions are made. These trends make it easier for outsourcing non-critical jobs to be considered by qualifying the impact of decisions in advance.[clarify] Furthermore, it becomes easier to evaluate and compare success. A fully developed service economy enables KPO by treating all functions as services.[clarify] So do more technical trends such as service oriented architecture, enterprise application integration and telework: it is easier to outsource a job if it is already being performed outside the head office. Organizations adopting ISO 9000 and ISO 19011 should also find it much easier to integrate externally provided KPO into their operations and audit them on a fair basis.
As of 2007, most US organizations were hiring foreign professionals under H-1 visas to do jobs in the USA for several years, after which they would return to their home countries as managers to train and supervise others, continuing to report to their former business units.
Due to the availability of large numbers of skilled staff working for lower pay rates than in the developed world, a few countries like India and the Philippines are front runners in providing these services. This type of work demands advanced analysis and communication, so specific higher education and language skills are essential. MBAs, Pharmacists, PhDs, engineers, doctors, lawyers, writers, ghostwriters, designers, web designers and other specialists with formal credentials tend to be required.
In India as well as the Philippines, KPO is envisaged as having a high potential, not only in the Information Technology (IT) or Information Technology Enabled Services (ITES) sectors; it could include patent and copyright related services, other legal research functions, business intelligence and analytics, clinical research, publishing and supply chain management, all of which require a large number of small decisions, and the final products of which tend to be relatively easy to evaluate for accuracy or effectiveness.
The maturity of the BPO sector in both countries gives it an obvious lead in KPO, essentially an offshoot of BPO. It is the high-end activity of the BPO industry and as of 2007 was estimated to provide substantial growth over the next few years. More complex fields of work that the Indian KPO industry focuses on include intellectual property or patent research, content development, R&D in pharmaceuticals and biotechnology, market research, equity research, data research, database creation, analytical services, financial modeling, design and development in automotive and aerospace industries, animation and simulation, medical content and services, remote education and e-learning, publishing and legal support.
Some practitioners argue that one region likely to suffer extreme job loss due to KPO is the USA. Princeton economist Alan Blinder estimates 40 million white-collar jobs in the US alone could move offshore in a decade or two.
In addition to the challenges faced by clients, KPO companies themselves have challenges:
Leaders in the market research industry are slowly seeing the benefits offered by KPO and have begun outsourcing. Comprehensive IT solutions are offered by vendors who provide solutions covering the entire life cycle of a market research project. Smaller firms can also benefit from these solutions as they are cost effective and remain within the budget of smaller organizations.
KPO is claimed to efficiently increase productivity and increase cost savings in the area of market research. Advocates claim that the trend is likely to prove increasingly popular in the global market research industry.