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Outsourcing rose by three rungs with the emergence of KPO. It reflects the increasing globalization and the willingness of companies to outsource work that was previously executed in-house. By positioning themselves as value creators, primarily by reducing variable costs, KPOs have found their way into the integral chain of business.

The KPO industry is in its infancy and players are still experimenting with various business models. The industry is currently segmented by models such as captives, pure-play firms, and integrated service providers. Among them, integrated service providers have taken the lead due to their ability to provide synergy across different verticals.

Any type of outsourcing activity is driven by one or a combination of factors such as cost advantages, scalability, the ability to provide quick turnaround, and geographical attractiveness. The KPO industry successfully integrates these factors, making it an attractive business proposition. However, it is still early days, and to take the KPO industry to the next level, players need to demonstrate their capabilities in handling complex assignments that demand advanced analytical skills and domain expertise.

As a people-intensive industry, manpower will be a crucial issue for the KPO sector. Analysts expect that the lack of talented manpower will be a limiting factor for the growth of KPO. Therefore, geographies with significant numbers of talented manpower will be preferred KPO destinations. Geographies with educated professionals, preferably post-graduates with domain specialization, will gain the largest pie of work. Other major factors for geographies to gain eminence on the KPO map will be infrastructure, communication skills, time zone attractiveness, and English-speaking skills.

The major drivers for the KPO industry have been financial services research, followed by business research and market intelligence. Services that are more technical in nature, such as intellectual property and clinical drug trials, etc., are expected to gain share as KPOs demonstrate domain knowledge and expertise in analyzing issues related to these sectors.

Analysts anticipate a bright future for KPOs. Although analysts are divided on how fast the industry will grow, they agree that it will register strong growth, albeit after overcoming some challenges. Enterprises across the board can benefit from services rendered by the KPO industry.

Call centers and help desks have been shipped overseas for so long that Americans are used to customer service with an accent. You call New York and get New Delhi. Many other routine functions, such as insurance claims processing, data entry and help desks have followed suit. This movement is called business process outsourcing, or BPO, and has been a significant driver of emerging economies such as India.

Lately, professional services are traveling overseas. The advanced phenomenon is called knowledge process offshoring, or KPO, in which knowledge worker jobs are performed elsewhere. White-collar, white-hair professions such as financial analysts are supplemented by 30-something MBA's in India, China and even Latin America. With broadband, the barriers due to distance are evaporating and your colleague could be in the next cube or continent.

KPO is gaining wide acceptance as the benefits for companies that outsource are becoming enormous. Major KPO services include financial research, market research, life sciences research, legal research and analytics. The KPO industry is expected to enjoy rapid growth in the near future.

Our partners at Analysts Perspectives present an overview of analyst observations on current trends in the knowledge process outsourcing market, and their opinions and predictions about its future prospects.

Some key findings include the KPO industry employed approximately 106,000 professionals in 2006-07 and is predicted to grow to 350,000 in 2011-2012; India's KPO sector is forecasted to garner USD 11.2 billion in 2011-2012; and the equity research and investment banking domain currently represents one of the fastest growing areas of analytics offshoring.