Knowledge Process Outsourcing Services

Knowledge process outsourcing services are core activities that involve research, analysis and critical thinking. At the middle level of the knowledge process outsourcing (KPO) value chain, some KPO services may overlap with business process outsourcing (BPO) services, such as content development/publishing that can be both routine and analytical. Others classify KPO under the umbrella heading of BPO. 

In general, knowledge process outsourcing services are high-value activities that are strategically important to an organization. As the level of intensive knowledge and analytical thinking required increases, so does the value of the activity. KPO services allow companies to improve top line growth instead of simply reducing costs.

Today, the number of high-value activities is growing as knowledge process outsourcing services move toward maturity. KPO services cover all industries, professions and trades. Current KPO offerings include:

  • Financial Data Management
  • Business and Market Research
  • Marketing and Communication
  • Learning and Development
  • Sales Support and Operations
  • Consultancy
  • Data Management and Integration
  • Research and Development
  • Legal Process Outsourcing
  • Healthcare Process Outsourcing
  • Engineering Services
  • Software Development
  • Animation and Design
  • Game Development
  • Creative Services

Rapidly Growing Knowledge Process Outsourcing Services

Technology Partners International reported in 2008 that financial services accounted for the largest share of the KPO market (65 percent), followed by business and market intelligence (26 percent), legal, intellectual property and patent research (6 percent), and pharmaceutical (3 percent). Two of the fastest growing KPO segments are data search, integration and management (50 percent CAGR) and market research and business intelligence (54 percent CAGR), according to the 2009 study Knowledge Process Outsourcing: India’s Emergence as a Global Leader published by the Asian Social Science Journal.

Areas with high potential for growth include engineering and design, animation and simulation, biotech and pharmaceuticals, research and development, paralegal content and services, financial services and insurance research, and e-learning. In 2010, Evalueserve named three rapidly growing KPO services: banking, finance, securities and insurance (BFSI) research and analytics, legal, intellectual property and patents, and publishing. The following sub-segments are also expanding, but at a slower pace: data management, data search and analytics, architectural services, and translation and localization (KPO Industry Growth, Evalueserve 2010).

BFSI Research and Analytics

Research and analytics services in the BFSI industry include insurance and risk analytics, fixed income research, equities research, library information services, data modeling, and retail banking and marketing services. KPO services under this sub-segment can be low, mid- or high-value activities: fraud and delinquency analysis, product profitability analysis, underwriting algorithms, credit scoring, attrition modeling, propensity modeling, strategic customer or domain analysis, and market research support.

BFSI research and analytics are expected to grow further due to the technology and innovation-driven nature of the BFSI industry, which have led all other industries in IT, business process, and knowledge process outsourcing.

Equity Research and Investment Banking

High-value chain services under equity research and investment banking include mergers and acquisitions (M&A) valuation model creation and support, model update and maintenance, presentation and pitch books for investors, and new idea generation for M&A contracts. Low to moderately complex tasks under this segment include industry report preparation and creation, valuation models updating, and new company initiation reports.

Data Searching and Management 

Data searching and management KPO services overlap with BPO in some areas. Higher-value data searching and management activities include data collection and scrubbing, organization, searching, mining, and end-to-end management. These tasks typically require quantitative skills. The main verticals that leverage these KPO services include BFSI, biotech, pharmaceuticals, and healthcare. 

Legal, Intellectual Property, and Patents Research and Processing

Legal research and processing services include document management like legal transcription, coding and tagging, document discovery like e-records review, intellectual property services such as patents and trademarks research, evidence of use analysis, art research, and legal research such as drafting of employee contracts, non-disclosure agreements, and pleadings. Legal services will continue to grow due to cost pressures among legal departments and law firms, with low-value LPO services expected to grow faster than high-value services.

Software Development

Software development services include a series of specialized tasks: research, conception, design, specification, code development, testing, and documentation. Some lower-value activities like and rudimentary coding and maintenance are under BPO and performed by entry-level technicians, while higher-value development and testing activities belong under knowledge process outsourcing services and are performed by skilled and experienced programmers and IT professionals. The main buyers of software development services are organizations in the BFSI sector that require software for internal operations like finance and accounting. Another major buyer is software publishers that produce products and services for end users (The Globalization of Software R&D: The Search for Talent, Stanford University).

Product Development, Design and Engineering

A large number (38 percent) of small and medium-sized firms are outsourcing product development, design and engineering, according to a survey conducted by the Offshoring Research Network, Duke University. SMEs are offshoring product development because they want to increase speed to market for new products and better access science and engineering talent. India and China are top destinations for this KPO subsector due to their large pools of skilled professionals and low labor and operating costs (Beyond Borders: The Global Innovation 1000: Booz &Company Inc., Jaruzelski and Dehoff 2008).

Content Development and Publishing

Content development and publishing services include creation and organization of content for printed material (newspapers, magazines textbooks, B2B marketing materials, technical manuals, etc.) and for the STEM (science, technology, engineering and mathematics) fields and academia. Web content development and publishing is a significant sub-segment of this KPO service that continues to experience strong growth. 

Engineering Services

Engineering is one of the more mature sub-segments of the KPO services industry. Examples of core, high-value engineering services are very large scale integration (VLSI) design, simulation, chip design, vehicle design support, and prototype development.

Biotechnology and Pharmaceutical Research and Development

Biotechnology and pharmaceutical firms are increasingly outsourcing research and development. Common high-value activities that are offshored include gene identification, target identification, lead identification, pre-clinical trials, clinical trials, and R&D for new drugs/consumer products. Clinical trials monitoring are performed by qualified nurses and physicians, while gene, target and lead identification are typically carried out by scientists with doctoral degrees and years of experience (Chile Interview Series, Rigotti, Soza, Corbalán and Irarrázaval, 2009).

Biotech and pharma firms are looking for low-cost countries to offshore low-value services and high-talent locations for high-value services. (The Offshore Services Global Value Chain by the Center on Globalization, Governance & CompetitivenessDuke University 2010). The cost of clinical trials in developing economies is about one-tenth of the levels in North America and Western Europe, and R&D costs are about one-eighth of U.S. costs. Besides labor arbitrage benefits, developing countries also possess native patient populations in large numbers, trained scientists, and established pharmaceutical firms (The Emergence of the Pharmaceutical Industry in the Developing World and its Implications for Multinational Enterprise Strategies, Rao, PM 2008).

Knowledge Process Outsourcing in the Philippines

Learn more about offshore outsourcing and the Philippines as an outsourcing destination. 

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