KPOs are Talent Breeding Ground

Most bulge-bracket investment banks are aggressively reducing their headcount or limiting the number of new positions available and have been looking to leading KPOs to pick up much of the slack. As the work being outsourced these days is similar to what an internal research associate or analyst would do, KPOs have become a breeding ground for developing talent.

KPOs have now expanded their operations to gain a “research edge,” allowing clients not just to look for cost efficiencies but focusing more on domain and regional expertise provided.

In the past, much of the KPO space was hampered by higher-than-average attrition rates as KPOs typically based their operations in low-cost countries to capture wage arbitrage. Interestingly, leading KPOs have now expanded their operations to gain a “research edge,” allowing clients not just to look for cost efficiencies but focusing more on domain and regional expertise provided. To attain region-specific expertise, KPO providers are tapping local talent by establishing research centers in countries such as Chile, Argentina, China and Romania.

Another clear sign that the KPO industry is shifting its focus from cost to knowledge efficiencies is the significant halt in headcounts at captives. A recent study by NASSCOM-Everest that examined the arbitrage opportunity for India’s outsourcing industry concluded that the “arbitrage window” may diminish in the medium term, providing several scenarios that include a range of currency and inflation rates. Given this stark view, it comes as no surprise that firms are shifting their strategy with respect to their own captives and third party providers are seeking ways to remain competitive.

Top talent that understands the work is similar to an internal role and also wants to gain experience across different investment banks and investment management firms have made the KPO space their sector of choice. “We have seen an increasing number of analysts ask about roles with KPO firms recently, especially from the investment banking sector where hours are long and job security is becoming increasingly tenuous,” says Amar Gautam, managing director for N.Y.-based recruiting firm, Archive Partners. “Initially attracted to the KPO space for lifestyle reasons, analysts are now looking to KPOs for the quality of work being performed and the exposure.”

KPO firms provide a platform of knowledge and experience through a vast array of engagements that the firm has.

While an investment banking associate will often work directly with one analyst or team, KPO firms provide a platform of knowledge and experience through a vast array of engagements that the firm has. While engagements adhere to the strict confidentiality protocols most banks have in place, the depth of learning is something that KPO analysts have found to be a valuable addition in their toolkit.

An analyst can complement their educational knowledge with hands-on experience based on the specific processes and methodologies that are built for a predefined set of deliverables. In essence, the KPO space takes the art of research into a more structured format similar to what top-tier consulting firms have been doing for years. What’s required is for bright minds to be able to execute these processes.

The training process within the KPO space is rigorous, yet hands-on, as training modules are often created for different deliverables for a specific set of clients.

The training process within the KPO space is rigorous, yet hands-on, as training modules are often created for different deliverables for a specific set of clients. In one instance, an analyst will work directly for a multi-billion dollar hedge fund manager, giving them an opportunity to learn and develop their skill sets according to that client’s requirements.

When an analyst grows out of their role, they don’t need to search for another job, but just request that their skill set be used for a more advanced client engagement. It is in this type of environment where a steep learning curve never appears to end. For a willing and able analyst, this is a real asset to their portfolio that can be amassed in a relatively short time frame. This has been a key driver for the industry, as an analyst can gain experience within just a few years that is equivalent to working at several leading financial firms.

KPO’s often work with the Who’s Who of investment banks, hedge funds, venture funds, research firms and asset managers across different regions and sectors, making them an attractive way for analysts to gain essential investment research experience. As many financial services firms aggressively recruit from top KPO firms, it is astounding that many analysts opt for more experience rather than the near-term monetary gain. Gautam added, “Today, KPO recruiters are regularly competing with investment banks for the same talent. This was not the case three years ago.”

The growth within the KPO space has also created the opportunity to build a solid career track in the sector. For those aspiring to move up the corporate ranks into a senior management role, the fast pace and people-centric environment of a KPO firm provides a great setting for leadership development. As many leading KPO firms post high double-digit employee and revenue growth figures, grooming internal leadership continues to be an important area for this industry. Managers are required not only to have domain expertise and manage a large team of analysts but also have the ability to manage growth in a fast-paced multilingual and multicultural environment.

KPO firm provides a great setting for leadership development.

One must wonder if these analysts joining KPO firms are running the numbers to assign a value to experience that’s greater than cash in hand. It’s reminiscent of the calculations most MBA graduates made prior to entering their respective programs.

Source from: Indusbusinessjournal.com

Knowledge Process Outsourcing Represents the Next Generation of Outsourcing Services

KPO is likely to gain traction as business process outsourcing providers conttinue to build financial services-specific expertise.

Knowledge process outsourcing, or KPO — in which service providers take over high-level tasks requiring professional judgment and industry experience — looks to be the next frontier for the outsourcing industry. Many expect financial services companies to lead the way in KPO, and there’s data to support such a 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.

Top Five Drivers of Business Process Outsourcing: Financial Services vs. Other Industries

Financial Services vs. Other Industries

Business Process Outsourcing: Financial Services vs. Other Industries

Another reason is that there’s a notable “strategic minority” of companies, according to the InformationWeek Analytics survey of 372 business technology professionals, including 110 in financial services, that 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. In financial services, that strategic group is about 15 percent (with another 24 percent responding that BPO is “more strategic than tactical”).

Yet the top concerns about BPO revealed by the survey 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. Yet the No. 1 concern financial services companies have about BPO is data security, according to InformationWeek Analytics, a sibling property of Wall Street & Technology. 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.

Where’s the Outsourcing Innovation?

There’s also the question of whether outsourcers have the innovation capability needed for KPO. Just 10 percent of financial companies gave providers high marks for innovating process change. 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.

All signs point to companies’ use of BPO continuing to grow. The survey finds 28 percent of companies plan to increase BPO, about four times more than those planning to decrease the use of outsourcing. Yet cost cutting through additional outsourcing only goes so far. Given that outsourcing is mature — with organizations having made significant investments in offshore BPO capabilities — any increase in the amount of outsourcing has to press beyond self-imposed limits and barriers with which companies have become comfortable. Market pressures — including troubles within the financial services industry — may compel companies to push those limits into areas such as KPO.

By Chris Murphy, InformationWeek
August 14, 2008
Source: Wallstreetandtech.com/operations/showArticle.jhtml?articleID=210100188

The New Face of Outsourcing: Knowledge Process Outsourcing

Outsourcing entered the global business scene in the 1980s, and has changed the way it looks, feels and functions since then. Knowledge process outsourcing or KPO refers to the outsourcing of knowledge intensive tasks and functions to experts overseas or outside of your organization. In this age of competition, companies are increasingly turning to specialization for improving cost and time feasibility and increasing efficiency. They focus on core functionalities and outsource the rest. With knowledge intensive areas entering the fray, it allows organization the flexibility and provides the resources for the business growth of the organization.

Quite different from Business Process Outsourcing (BPO), KPO signifies high end value added tasks in which execution depends on skill, expertise, domain knowledge and experience of the experts handling the tasks. KPO usually includes a segment of Business Process Outsourcing (BPO), Research Process Outsourcing (RPO) and Analysis Proves Outsourcing (APO). It deals with highly knowledge intensive tasks and activities and focus is on depth of knowledge, experience and judgment. On the other hand, a BPO deals with improving process efficiency and is focused on single processes, size volume and efficiency.

It can be said that the growth and maturity of the BPO industry led to the significant rise of the KPO industry. The success and substantial results achieved by many organizations in outsourcing operational tasks have led them to outsource high end knowledge and skill intensive tasks. Cost and time feasibility, sound infrastructure, skilled and knowledgeable workforce, and improved quality are some the factors that have worked to the advantage of KPO organizations the world over. KPOs in India benefit from the easy availability of skilled and trained specialists, technologically advanced infrastructure and advanced communications tools that the country wields.

Knowledge process outsourcing in India

Knowledge process outsourcing calls for the application of skill, knowledge and expertise pertinent to a high level area of specialization. These prerequisites are being discovered and tapped by leading businesses across the globe resulting in the outsourcing of high-end processes to low-wage destinations. Hence Knowledge Process Outsourcing involves offshoring of knowledge intensive business processes that require specialized domain expertise.

Design, accounting, manufacturing and engineering fields are opening up to the idea of overseas experts handling domain knowledge intensive projects. This talent is soon Favorable Destinations for Knowledge process outsourcing.

Due to the availability of highly skilled task force than is indigenously available, sound technical infrastructure and vast domain knowledge and expertise countries such as India and Philippines are leaders in the KPO industry. This type of work demands essential skills, vast domain knowledge and excellent communication skills (as most clients are overseas) hence, higher education degrees are most often prerequisite to getting employed with a KPO. The KPO industry in India, entails architectural KPO, engineering KPO, accounting KPO and has already expanded to KPO consultancy.

Scope of KPO

Architectural and engineering KPOs handle design, CAD and drafting related projects that require architects, technicians, dedicated infrastructure and technology. Architecture KPOs in India have earned their place due to the easy availability of highly qualified architects, designers and draftsmen, skilled technicians in the field of rendering, modeling and designing, dedicated technology, communication tools and advanced infrastructure.

The IT segment has also realized the potential of this avenue of outsourcing. Knowledge process outsourcing is believed to increase productivity and improve efficiency. Manufactures and construction companies are also finding it increasingly beneficial to outsource projects rather than invest in infrastructure, staffing, training and compensation for a skilled work force.

Knowledge Process Outsourcing deals with executing standardized processes ok high end skill level depending on analytical and advanced technical skills. Knowledge process outsourcing involves legal works carried out at law firms like patent document writing, global filing, search, trademark search, trademark registration, prior art searches, legal advise on infringements, invalidation search, freedom of use search, etc.

Areas with significant KPO indluence include:

  • Pharmaceuticals
  • Integration and management services
  • Financial services
  • Research and analytics
  • Computer aided simulations
  • Computer aided design (CAD)
  • Engineering design and professional services

Benefits of KPO

The primary benefit of KPOs remains the same i.e cost savings, but it does not end there. KPOs allow the added advantage of leveraging the expertise and experience of seasoned professionals, experts and specialists in their specific areas. Outsourcing your knowledge intensive projects or parts of your projects allow you the time, flexibility and resources to take on more and more challenging projects. Hence knowledge process outsourcing provides you more than traditional cost feasibility.

Recent Trends in the KPO Industry

According to a report by GlobalSourcingNow, the Global Knowledge Process Outsourcing industry is expected to reach USD 17 billion by 2010. A report by Evalueserve predicts that India will capture more than 70 percent of the Knowledge Process Outsourcing sector by 2010. Apart from India, countries such as Russia, China, the Czech Republic, Ireland, and Israel are also expected to join the Knowledge Process Outsourcing industry.

The future of KPOs is not restricted to the ITES sector alone. It spans other sectors like legal research and documentation, business research and analytics, Clinical research, publishing, market research etc.