The Challenges faced by the KPO Industry today

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The Challenges faced by the KPO Industry today

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Updated 7th of August 2019


What is KPO?

Investopedia defines KPO as “the outsourcing of core, information-related business activities to individuals that typically have advanced degrees and expertise in a specialized area.” KPO or Knowledge Process Outsourcing is the process of outsourcing information related business task or knowledge-based processes such as research, analysis, consultancy or any other high-level task.In this post we try to analyse the challenges faced by the KPO Industry today.

Given that the need for professionals is spread over so many varied domains, the demand for educated professionals in India will also subsequently rise.
As per research,  the sector currently provides employment for nearly 3.5 lakh graduates and it is set to double in the coming years. Projected employment for 6-8 lakh people is predicted in this particular genre.

Types of KPO Services

KPO activities are generally data driven and encompass the process of gathering, managing, analyzing and delivering insights to the businesses.

  • Financial consultancy
  • Research and development
  • Business operations
  • Technical Analysis
  • Investments
  • Legal Research
  • Intellectual Property Research
  • Medical
  • Data Analytics and Insights
  • Data Management
  • Market Research/ Business Research


Why the need for KPO ?

Companies utilize KPO when they are looking for specialized knowledge and expertise and there is a shortage of skilled professionals. However, companies that engage in KPO offshore typically do so to reduce costs by hiring skilled workers at a lower cost in another location.


Advantages and Disadvantages of KPO

As per reports,

The global Knowledge Process Outsourcing (KPO) Market is expected to reach USD 124.29 billion by 2025

1. Cost-effectiveness: The flexibility that comes with KPO allows a company to increase or reduce staff easily. There is no requirement of setting up any infrastructure or bear any operational or running costs. And it gets effective, expertise services at almost a fraction of the cost. For cost cutting,  a company can easily reduce its KPO staff or conversely, a company can quickly hire specialized staff to boost profits or revenue.

2. Access to the best talent: KPO’s provide the company with the best, most knowledgeable and skilled professionals available in the global talent pool. And if the KPO is in a developing country like India or Philippines then the cost of such talent is also relatively low. KPO can help companies reduce the costs of their operations or producing their products and services. KPO also fills the gap or need for skilled employees in a particular field. KPO also frees up existing staff, including management, to do other work boosting efficiency and productivity.

3. Focus: Outsourcing some of the processes, allows the company to focus on its core functions. The KPO handles the peripheral functions, and the company can better focus on its core functions and improve their efficiency and results.

4. Better Utilization of Resources: If the company outsources the process that is not at the core of their business strategy, it can use the resources it saves in better places. Say a company outsources its supply chain management. Then the resources it saves on this can be utilized to streamline the manufacturing process, R&D activities, better marketing etc.


List of KPO Companies in India

  • Accenture
  • Boston Analytics
  • Deloitte
  • EXL Services
  • Eclerx
  • Genpact
  • HCL
  • iGate
  • McKinsey and Company
  • Moody’s Investors Service
  • Mphasis
  • Sutherland Global Services
  • SG Analytic
  • WNS
  • Wipro Limited


These two terms are frequently used interchangeably. Very few know that KPO is actually a subset of BPO.  A BPO is Process based and is capable of handling both front end and back end operations of an entity. It involves the contracting of the operations and responsibilities of specific business related functions, typically IT related, to a third party service provider.

Knowledge Process Outsourcing (KPO) functions on similar lines with the exception that highly critical tasks that involve skill, knowledge, education and expertise are outsourced to third party service providers.

Types of services carried out by BPOs include administration, finance and accounting, human resources, payment services, logistics and distribution, customer support, etc.

Challenges faced by the KPO Industry today

KPO delivers high value to organizations by providing domain-based processes and business expertise rather than just process expertise. These processes demand advanced analytical and specialized skill of knowledge workers that have domain experience to their credit. Therefore outsourcing of knowledge processes face more challenges than BPO . What are the challenges faced by  the KPO industry today?  Some of them are maintaining higher quality standards, investment in KPO infrastructure, the lack of talent pool, requirement of higher level of control, confidentiality and enhanced risk management. Also,

— Working indifferent time zones:   Working in night shifts for clients based out of US or UK or APAC,  employees have to work in night shifts and this affects their health due to errctic sleep patterns in the long run.

— Poor Infrastructure and Rising Real Estate Prices : Poor infrastructure is posing immense challenges in delivering high quality services to the international clients. Metro cities are slowly getting congested and costs of operations are rising. In such a scenario Tier II cities need to emerge with well-developed infrastructure.

— Concerns over Data Security : According to industry sources, KPO units are privy to information not otherwise available in public domain. At times, clients hesitate to offshore any
sensitive or confidential data to any third-party service provider. A bigger challenge is to convince clients that the quality of off-shoring services provided at low cost is associated with assurances such as confidentiality and NDAs.

— Manpower and Knowledge Issues : A KPO professional requires possession of right skill-sets and domain knowledge. Therefore, access to a large, high-quality skill pool (in diverse fields such as law, patents, economics, management, finance, engineering) is a precondition for successful KPO operations. Monotony emerges as a psychological factor that is also attributed to the increasing attrition rate in KPO units. This is increasingly being observed even in domain areas where highly skilled and qualified professionals are engaged.

— Industry and Business Understanding : A thorough understanding (of the businesses and processes executed within the KPO domain) is required to execute the knowledge-based assignments successfully. The demand-supply gap for quality workers in India is relatively getting enlarged and this poses a big challenge to this sector.

— Stiff Competition from other regions : India faces stiff competition in the outsourcing arena from the Philippines, Russia, China, Poland and Hungary as they are all vying to get the ravaged economic arena back on track.


Comparing these challenges with the Indian IT and ITES service providers, it is not surprising that India has been ranked the most preferred KPO outsourcing destination owing to the country’s large talent pool, quality IT training, friendly government policies and low labor costs.

India is well equipped to meet this emerging sector’s challenges and all set to be the global KPO hub.

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