The recent economic crisis has made it increasingly imperative for global firms to pursue outsourcing strategies to stay agile and competitive. Although traditional areas such as back-office and middle-office Business Process Outsourcing (BPO) in IT and customer service continue as the mainstay of the outsourcing spectrum, newer definitions are also rapidly emerging. Companies are increasingly looking at ‘partnering’ with third-party outsourcing providers to realise efficiencies of scale and skill. Outsourcing of knowledge processes around research and analytics, commonly referred to as Knowledge Process Outsourcing (KPO), is the emerging cornerstone of this outsourcing world.
While several large global corporations are formulating company-wide strategies to leverage KPO in a big way, small and medium enterprises (SMEs) are also gaining an equally significant competitive advantage through utilising these new business models. The focus is no longer on just cost savings. Building the right capabilities through innovative and efficient models is at the heart of KPO-related outsourcing decisions of these firms.
Looking east
For many SMEs, KPO is all about leveraging skills and capabilities from a specialised partner. For instance, a niche consulting firm in Europe with three partners and six associates has been able to triple their revenues and improve their profitability significantly by partnering with a KPO in India. Without the KPO firm, the consulting firm’s partners and associates were conducting all the research and analytics activities themselves. Partnering with the KPO firm meant that the consulting firm was supported by a team of seven junior analysts in India, who did the research, synthesised the findings and presented them in a user friendly format. The associates at the consulting firm then enriched this output with their own insights and perspectives. The partners were able to get more bandwidth to expand their business, rather than spending most of their available time on research activities. Simply put, this was the knowledge value chain at its best efficiency.
Global is the new local
As another example, one firm’s customer proposition development team wanted to increase revenues for one of its service lines by introducing add-on features to its existing products along with new products and services. The firm partnered with a KPO firm to evaluate a comprehensive list of over one hundred innovative products and services from across different market players in 20 countries. The end result included revenue-generating ideas with a detailed analysis of growth drivers and threats that can potentially contribute to $8m of incremental revenue for its division.
There are several examples of SMEs leveraging knowledge and analytics capabilities of KPO firms to reduce time-to-market. A KPO firm assisted a European technology start-up in patent landscaping and market assessment of its technologies, thereby helping the firm to reduce its time-to-market significantly. Surprisingly, there are even successful cases of entrepreneurs who did not have a local team, but built their entire business model around utilising KPO effectively. For example, a UK-based telecom researcher built his entire syndicated research offerings through leveraging a team of 7-8 analysts located thousands of miles away. Without the KPO partner, he could publish one paid report a month. By co-operating with the KPO, he was able to deliver 3-4 reports a month, earn much more, and still spend less than half the time he used to spend earlier!
Identify, learn and reap the profits
Companies are also looking at research and analytics to help them achieve internal efficiency. For a large US firm, a KPO partner worked on-site with the client for over eight weeks to assess and identify potential savings for one of its divisions. By assessing all active supplier and invoicing information, not only were key saving opportunities identified (short term: $3-5m, medium term: $6-8m), but also a platform for developing a new supplier on-boarding process was established.
Mid-sized firms can learn some interesting lessons from larger corporations that have been working with KPO partners to achieve higher productivity and service levels. KPO firms have been able to forge deeper partnerships with their clients, helping them redesign, consolidate and automate their processes to build strategic capabilities. For example, one multinational company cooperated with a KPO firm to identify various productivity-improvement areas and implemented 20% of those, yielding direct annual savings of over $6.5m. Additional process redesign saved about 5% of total onshore costs, amounting to $5m. With the current automation processes still being improved to an optimum level, the total annual savings potential is estimated to be well over $16.5m.
Monitoring the market
There is a growing acceptance that companies need to be more forward-looking. They should be pre-empting customer requirements in order to remain market leaders or gain market share. Typically viewed as a highly in-sourced function, marketing analytics has recently emerged as a hot area for outsourcing. Understanding customer trends and requirements has never been as important for a firm’s marketing team as it is now. Proactive and regular monitoring of customer segments, understanding satisfaction levels, developing targeted marketing plans and building a robust Customer Relationship Management (CRM) system are examples of areas that can be outsourced to KPO firms.
Marketing analytics is just one of the several illustrative areas where KPO firms have been delivering information, analysis and insights to executives in large corporations and SMEs alike. What appears as the core need in Evalueserve’s interactions with industry leaders, is a capability to manage internal know-how and external market knowledge effectively. That is gathering, storing and disseminating knowledge so that it is available in real-time for all relevant stakeholders.
Multinational solutions
Well managed internal know-how is critical to building a sustainable competitive advantage. This is more so for global players with worldwide locations and a global sales and management team with a constant need to remain informed. In the era of Web 2.0 and beyond, companies are trying to bring together the disparate and diverse business intelligence that rests within their organisations, and are seeking technology solutions that facilitate this process. For example, a multinational company wanted to provide real-time coverage on competitors across multiple countries to its business-unit heads at these locations. The solution developed to resolve this issue was an internet-based knowledge portal, allowing users to access strategic, financial and operational intelligence on competitors with country and regional updates in a timely manner.
The latest and greatest
Technology has increasingly become an enabler of knowledge processes. By bringing together research and technology, managers have access to more flexible analysis, richer insights and better representation and visualisation. It allows users to handle larger data sets with relative ease, creates enhanced analytics, leads to better collaboration between business units and most importantly, transforms research analysis into tangible insights.
During its evolution over the last decade, KPO has developed into providing sustainable processes involving large or medium-sized dedicated teams integrated into the core of organisations (e.g. credit risk assessment, innovation support, campaign management). The new wave of knowledge and analytics outsourcing will focus on the evolution of external vendors as partners in opportunity identification, and will increasingly rely on technology to improve knowledge management. SMEs that assess and capitalise on this new wave will have the right tools at their disposal to stay competitive in the next decade.
Frank Yazdi is the Head of Investment Research for Evalueserve China, and Manoj Madhusudanan is Vice President for Evalueserve India and heads the Business Research group. Evalueserve provides knowledge services to a global client and covers areas such as Financial and Investment Research, Business Research, Market Research, Intellectual Property and Legal Support Services, Data Analytics and Knowledge Technology Services.
Further info:
For more details, please visit: http://www.evalueserve.com
