(Published in Manila Standard Today under the Greenlight column, April 16, 2007)
A trade delegation organized by the Center for International Trade Expositions and Missions (CITEM), the export promotions arm of the Department of Trade and Industry, is scheduled for a tour of United States and Canada in June.
Delivering content expertise
The goal is to sustain the growth in local business process outsourcing sector by enticing more investors to locate in the country for skills-based BPO activities such as finance and accounting. Of particular interest in this mission is the increased understanding for higher-value BPO called Knowledge Process Outsourcing (KPO).
KPO refers to the outsourcing of high-value complex tasks and processes to specialized service providers. As compared to traditional BPO, KPO delivers ‘knowledge’ or content expertise that demand advanced analytical and/or technical skills and some decision-making or decision-support processes; rather than process expertise that simply involves executing standardized processes.
Some examples of KPO are market research services, network consulting and management, data search, integration and analysis, remote education, website services, legal and medical advice, research and development services, distributed product development, among others.
Emerging higher-value services
The major strength of such tasks and processes is the value that these services provide to the outsourcing organization, as opposed to the traditional cost-saving aspect that firms expect from outsourcing low-value business processes like customer and HR support services. As organizations in the Americas and Europe experienced huge successes in outsourcing their low-value business processes, e.g. contact center services, to low-cost Asian countries such as Philippines and India, there is now an emerging market for higher-value services that capitalizes on the supply of technical and business skills of host countries.
This opportunity in KPO is precisely the reason why the Philippine government should seriously look into this emerging sector. According to estimates by research firm, Evalueserve, revenues from the KPO market will grow globally from US$1.29 billion in FY 2003, to US$17 billion by FY 2010. This implies compounded annual growth rate of 46 percent, for the global KPO market.
These present huge opportunities for established BPO organizations in the country, apart from new potential ventures that will specialize in domain expertise. For one, the success of established contact centers, back-office support services, and shared services by multinational firms, has prepared them for the emerging demand for KPO services.
For instance, legal outsourcing firm Baker & McKenzie, has been operating legal transcription and other document management services in the country for a few years now; but beyond these, it has started providing research and analysis support services for their 70 offices worldwide.
Already a number of local BPO players and new business ventures are shifting to or establishing KPO initiatives in various areas such as financial research, medical advice, and web services.
Another opportunity is the higher returns that KPO services fetch relative to BPO deals. As the value-add in knowledge intensive industries increase, the billing rates in KPO are 50 to 100 per cent higher than that in BPO.
This, however, translates to higher investments in new processes, systems, and infrastructure. But the high income and related investments in KPO translate into higher revenues bringing in a multiplier effect, which means more funds for further investments into KPO and even in the traditional BPO.
Capitalizing on KPO
One may wonder why further invest in BPO, after much aggrandizement on the opportunities in KPO. Well, the global growth in KPO may lead to a growth in the local BPO business.
According to Evalueserve COO Ashish Gupta,“as BPO has got commoditized [in India], the very low end work will soon shift to destinations like Bangladesh and the Philippines”.
As the Indian KPO sector is forecasted to increase its share in the global KPO sector to 71 percent or US$12 bn by 2010, the BPO industry in India will soon be overtaken by the emerging KPO sector, which will prove to be the biggest revenue grosser in future. As a result, India’s low-value low-return BPO sector may shift some of its operations to relatively low-cost countries such as Philippines. Already a number of BPO companies from India have been setting up or ramping up operations in the country, such as Infosys, HTMT, IBM Daksh, and Genpact.
So how do we, as a country capitalize on this huge opportunity in KPO? As one moves towards KPO, domain expertise becomes key. In this respect, government and the private sector alike, should jointly draft a plan towards targeting a specific group of KPO initiatives. We should take stock of our pool of graduates and entering college students, and understand which skill areas our country can specialize in.
One obvious domain area is in the field of business and accountancy. The Philippines has more than 100,000 accountants and business-related college graduates, the biggest pool in the region. About 3, 000 accounting graduates become certified public accountants every year. With this resource base, local BPOs and entrepreneurs may engage in KPOs in the financial and market research and advisory services areas, which may probably be our country’s competitive advantage.
Ensuring qualified professionals
To ensure the continuous supply of qualified professionals for the KPO sector in particular, and BPO sector in general, the government and the industry should strengthen their partnership with educational institutions by offering BPO/KPO appreciation sessions in high school to guide students in the courses they will take in college.
Additionally, BPO/KPO-related courses in selected colleges and universities should also be offered which will provide critical skills to prospective BPO professionals while they are still in school.
A noteworthy undertaking is the initiative of De LaSalle Professional Schools Graduate School of Business to offer an MBA elective called ‘Managing Business Process Outsourcing’ starting first term of school year 2007-2008. This course will equip potential managers, professionals, and entrepreneurs alike with the concepts and skills in managing a BPO/KPO. Interested readers may join our MBA students in this course.
-------------------------------
Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.
A trade delegation organized by the Center for International Trade Expositions and Missions (CITEM), the export promotions arm of the Department of Trade and Industry, is scheduled for a tour of United States and Canada in June.
Delivering content expertise
The goal is to sustain the growth in local business process outsourcing sector by enticing more investors to locate in the country for skills-based BPO activities such as finance and accounting. Of particular interest in this mission is the increased understanding for higher-value BPO called Knowledge Process Outsourcing (KPO).
KPO refers to the outsourcing of high-value complex tasks and processes to specialized service providers. As compared to traditional BPO, KPO delivers ‘knowledge’ or content expertise that demand advanced analytical and/or technical skills and some decision-making or decision-support processes; rather than process expertise that simply involves executing standardized processes.
Some examples of KPO are market research services, network consulting and management, data search, integration and analysis, remote education, website services, legal and medical advice, research and development services, distributed product development, among others.
Emerging higher-value services
The major strength of such tasks and processes is the value that these services provide to the outsourcing organization, as opposed to the traditional cost-saving aspect that firms expect from outsourcing low-value business processes like customer and HR support services. As organizations in the Americas and Europe experienced huge successes in outsourcing their low-value business processes, e.g. contact center services, to low-cost Asian countries such as Philippines and India, there is now an emerging market for higher-value services that capitalizes on the supply of technical and business skills of host countries.
This opportunity in KPO is precisely the reason why the Philippine government should seriously look into this emerging sector. According to estimates by research firm, Evalueserve, revenues from the KPO market will grow globally from US$1.29 billion in FY 2003, to US$17 billion by FY 2010. This implies compounded annual growth rate of 46 percent, for the global KPO market.
These present huge opportunities for established BPO organizations in the country, apart from new potential ventures that will specialize in domain expertise. For one, the success of established contact centers, back-office support services, and shared services by multinational firms, has prepared them for the emerging demand for KPO services.
For instance, legal outsourcing firm Baker & McKenzie, has been operating legal transcription and other document management services in the country for a few years now; but beyond these, it has started providing research and analysis support services for their 70 offices worldwide.
Already a number of local BPO players and new business ventures are shifting to or establishing KPO initiatives in various areas such as financial research, medical advice, and web services.
Another opportunity is the higher returns that KPO services fetch relative to BPO deals. As the value-add in knowledge intensive industries increase, the billing rates in KPO are 50 to 100 per cent higher than that in BPO.
This, however, translates to higher investments in new processes, systems, and infrastructure. But the high income and related investments in KPO translate into higher revenues bringing in a multiplier effect, which means more funds for further investments into KPO and even in the traditional BPO.
Capitalizing on KPO
One may wonder why further invest in BPO, after much aggrandizement on the opportunities in KPO. Well, the global growth in KPO may lead to a growth in the local BPO business.
According to Evalueserve COO Ashish Gupta,“as BPO has got commoditized [in India], the very low end work will soon shift to destinations like Bangladesh and the Philippines”.
As the Indian KPO sector is forecasted to increase its share in the global KPO sector to 71 percent or US$12 bn by 2010, the BPO industry in India will soon be overtaken by the emerging KPO sector, which will prove to be the biggest revenue grosser in future. As a result, India’s low-value low-return BPO sector may shift some of its operations to relatively low-cost countries such as Philippines. Already a number of BPO companies from India have been setting up or ramping up operations in the country, such as Infosys, HTMT, IBM Daksh, and Genpact.
So how do we, as a country capitalize on this huge opportunity in KPO? As one moves towards KPO, domain expertise becomes key. In this respect, government and the private sector alike, should jointly draft a plan towards targeting a specific group of KPO initiatives. We should take stock of our pool of graduates and entering college students, and understand which skill areas our country can specialize in.
One obvious domain area is in the field of business and accountancy. The Philippines has more than 100,000 accountants and business-related college graduates, the biggest pool in the region. About 3, 000 accounting graduates become certified public accountants every year. With this resource base, local BPOs and entrepreneurs may engage in KPOs in the financial and market research and advisory services areas, which may probably be our country’s competitive advantage.
Ensuring qualified professionals
To ensure the continuous supply of qualified professionals for the KPO sector in particular, and BPO sector in general, the government and the industry should strengthen their partnership with educational institutions by offering BPO/KPO appreciation sessions in high school to guide students in the courses they will take in college.
Additionally, BPO/KPO-related courses in selected colleges and universities should also be offered which will provide critical skills to prospective BPO professionals while they are still in school.
A noteworthy undertaking is the initiative of De LaSalle Professional Schools Graduate School of Business to offer an MBA elective called ‘Managing Business Process Outsourcing’ starting first term of school year 2007-2008. This course will equip potential managers, professionals, and entrepreneurs alike with the concepts and skills in managing a BPO/KPO. Interested readers may join our MBA students in this course.
-------------------------------
Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.
Comments
Regards,
Yolanda
Josh