KPO identified as the next wave of outsourcing
By Sandra Rossi
,
Computerworld
, 02/15/2008
- Share/Email
- Tweet This
- Print
A new report has labeled Knowledge Process Outsourcing (KPO) as a recognized and mainstream outsourcing option, particularly in the financial services sector.
The KPMG International report claims KPO has come of age with services in the financial services sector alone expected to
reach $5 billion by 2010.
KPMG IT advisory director, Bob Hayward, said KPO is seen as the third generation of the outsourcing evolution and involves
outsourcing more highly skilled processes basing its appeal primarily on intellectual arbitrage rather than the cost reduction
potential of its counterparts.
Within the global financial sector, KPO has already been used to handle - among other things - credit scoring, loss protection
calculations and fraud analytics.
Hayward said that Australia is well placed not only to make use of this new style of outsourcing, but also to provide KPO
services. "This form of outsourcing has been occurring for several years, however it is most mature in the financial services
sector, and we believe this will extend to other industries in the near future," he said.
"Australia is well placed to be both a key provider and consumer of KPO services. Our sophisticated economy gives us a wealth
of intellectual capital to underpin KPO providers, while many Australian based organizations will find KPO a compelling value
proposition."
KPMG's research found that the global KPO sector is set to be worth between $10 billion and $17 billion within two years.
To better explain KPO, Hayward cites the hypothetical example of a Wall St equities research firm which is faced with spending
$250,000 to cover a specific stock when the most it can hope to achieve in revenues from that research is $200,000.
However, if that research can be outsourced to a KPO provider at a cost of $100,000, the operation suddenly returns to profitability.
As well as the profit uplift, more of the home office analyst's time is freed up and can be put to use on even more high-value
activities.
Outsourcing began with IT Outsourcing (ITO) in the 1980s, when strategies were put in place for third parties to manage IT
systems' maintenance, development and application.
In the 1990s, this was followed by Business Process Outsourcing (BPO) which focused on relatively elementary and standardized processes.
"One of the most surprising aspects of KPO is that it focuses on the highly skilled activities which were traditionally considered
part of a company's competitive advantage or core activities," Hayward said.
"In this regard, this marks a major stepping stone for the outsourcing industry; moving from being at the periphery of the
enterprise to the very heart of it. Now it's there, the possibilities are endless."
Hayward said a long-term concern may be the apparent shortcomings in the KPO providers' legal and compliance departments -
which could place valuable intellectual property at risk - and the escalating battle for talent.
Due to the highly specialist skills which it offers, he said there is not the same sized talent pool available to KPO providers
as is the case for BPO or ITO.
For more enterprise computing news, visit Computerworld. Story copyright Computerworld, Inc.
Partner Content
Blue Stripe Software
www.bluestripe.com/
Improving Application Performance Troubleshooting
Diagnosing why an application is slow is hard, at times taking days or weeks to isolate and resolve. This paper explains the challenges involved using current management tools, provides a 'wish list' for application management and analysis, and explains the need for an application system-wide approach that monitors entire applications, not components.
Download Whitepaper
Virtual Vigilance: Managing Application Performance in Virtual Environments
This paper highlights the impact of virtualization on application performance. "Managing Application Performance in Virtual Environments" states: "Best-in-Class organizations are predominately taking actions around improving visibility across both physical and virtual systems, assessing the business impact of application performance and understanding interdependencies of applications in virtualized environments."
Download Whitepaper
Application Service Requests: The Missing Link for Pragmatic ITSM
Forrester Research analyst Glenn O'Donnell and BlueStripe co-founder Vic Nyman discuss a breakthrough approach to application problem management. Learn the new approach for ITSM problem management, which provides: Rapid isolation of application slow-downs to specific components for quick problem resolution, 24/7 monitoring for proactive notification of potential issues before end users are impacted and much more.
Register for Webcast
Comment