In the growing world of IT-enabled services, there is a lack of clarity as new services emerge, appearing to some like old ones. Business Process Outsourcing (BPO) is a common enough term now to describe services that are repeatable, scalable and executable from a remote offshore location like India. A Knowledge Process Outsourcing (KPO) business requires substantially more domain expertise — or specialist knowledge — unlike BPO where skills can be taught in a matter of days. KPO also requires continuous upgrade of knowledge: Doctors may learn new treatments, lawyers may learn new interpretation or laws. Hence it is not surprising that training in KPO can range anywhere from two months (in market research) to eight months (in intellectual property). More than size, what matters for a KPO firm are the depth of knowledge, experience and the judgement skills of its professionals.
Not surprisingly, experienced professionals generate more revenues for a KPO firm, which can earn anywhere between $80 and $600 per hour in the US and $20 and $80 per hour in India. An Indian telecoms expert with ten years behind her can get as much as $100 an hour, while one with only two years behind her can fetch about $30 an hour. Since domain expertise is the key factor, not only can a company easily differentiate itself from another but also one country can distinguish itself from another. The countries that will emerge strongly in the KPO business are those that have large numbers of engineers, medical doctors, graduates in sciences and technology (e.g., biotech, pharmaceuticals), MBAs, Certified Public Accountants, Financial Analysts, Statisticians, high-end IT professionals, lawyers, etc. The low-wage countries that seem to have these professionals in large numbers include India, China, Russia, Poland, Hungary, and some former Soviet republics.
As specialists are key, KPO teams are typically only a fifth or tenth of the size of a BPO firm. A key facet of the KPO business is scalability like a BPO but there is a premium placed on domain expertise. In contrast, research and development departments of high-technology companies (e.g., IBM Research) and consulting companies cannot be included as KPO firms and not surprisingly such organisations take substantial time to reach scale. For example, IBM Research took nearly 50 years to reach 3000 researchers and McKinsey took 75 years to get to 6000 consultants. In contrast, a KPO firm like Evalueserve may only take ten years to reach 5,000 professionals. Finally, in KPO, the client is involved during the entire process of service delivery. The offshore KPO company may only contribute 80 to 85 percent of the work whereas the client may contribute the remaining 15 to 20 percent.
To the best of my knowledge, the first two companies to set up KPO centres in India include General Electric and McKinsey and Company. Finally, I may add that the term KPO was coined by Ashish Gupta, the chief operating officer of Evalueserve in October 2003, mainly to help differentiate the service from BPO activities like call centre services and credit card processing.
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