Knowledge Process Outsourcing

Knowledge process outsourcing (KPO) may be described as work that has been outsourced to a different organization than the parent organization. The different organization may be within the same country or a different country. The work outsourced is related to knowledge and information. Generally businesses resort to knowledge process outsourcing when there is a shortage of skilled workers in the organization or when the same work can be done at a fraction of the cost to the organization. Jobs that can be outsourced  are customer support, Human resource development, manufacturing etc., The financial success of Apple is partly because of its outsourcing of manufacturing facility to china. (Chan, Pun, & Selden, 2013) The research here would consist of the benefits that have been translated by organizations in Australia through the process of KPO. It will also focus on the various process that have been outsourced.

The KPO industry is about 20 years old. It started with the initial requirement of the parent organizations to get financial gains.  The initial KPO organizations were Capgemini and Logica which shifted there IT work to India. Since then the KPO has progressed to offering tasks like back-office, finance and legal, R&D research and information management. (Hartshorne, 2015) KPO is also used by organizations as a strategy to achieve competitive edge. They use the benefits of cross-border knowledge and knowledge resources of a foreign country. (Jensen and Pedersen, 2012) With a pool of skilled and knowledgeable workers of third countries the parent organizations benefited immensely.

The pros and cons of R&D KPO for the parent organization helps to maintain a competitive edge in modern era. For parent organization a long term relationship with the outsourced organization can be beneficial in the long run. (Brettel et.al., 2014) The benefits of long term strategic alliance are :

• A better understanding of the requirements of the outsourced / offshore organization
• Ease in the process of development of the offshore / outsourced organization
• Building on the growth of the outsourced organization

The importance of sharing of the rewards and risks, strategic management, intellectual knowledge builds the trust between the vendor and the parent organization.

For extracting the benefits from R&D the KPO the parent organization have invested on various factors. These organizations have build on Relational Capital where the trusts have been built on sharing of intellectual knowledge and effective collaboration. The parent organization have created teams to better sense the views of the vendor organization. This is done through social platforms. (Huikkola, Ylimäki, & Kohtamäki, 2013)

The process of R&D KPO has been driven by the hunger to remain competitive. Whereas a single firm at a particular place utilizes the resources which are locally available. With  the growth of telecommunication facilities parent organizations are able to use the knowledge pool available worldwide. With fraction of the financial investment the parent organization can tap into this vast knowledge available. Thus it remains competitive in a market driven economy. (Kazadi, Lievens & Mahr, 2016)  

The pharmaceutical industry has gained immensely from this cross-border collaboration. It has been able to drastically reduce the R&D costs, reduce legal implications, reduce prices of pharmaceuticals and have shortened the exclusivity periods. Thus an array of stakeholders from patients, physicians, health-care providers, governments, universities and knowledge centers have come up in third world countries. (Kazadi, Lievens & Mahr, 2016) The primary pharmaceutical organization has thus been able to keep itself abreast with the development in other parts of the world.

Apart from financial consequences KPO can have loss in knowledge and skills. But there have been instances where the financial loss have offset through good practices. (Hong et.al., 2012)

The aim of the research is to find the relationship between the KPO and its effect (financial or otherwise) for Australia.

The research question for this assignment is as follows:

• What are the types of knowledge processes that have been outsourced?
• How does outsourcing affect the organization?
• What factors contributes to the successful implementation of the knowledge process?

The objective of the research is as follows:

• To find the various knowledge processes that are outsourced
• To find the advantages and disadvantages of outsourcing.
• To find the factors responsible for success of the knowledge processes outsourcing.

Data Collection

Primary data will be collected from employees of R&D industry where Knowledge has been outsourced. Mail survey will be used for the collection of the data. This will form the Quantitative data for the work. Data will also have to be collected about the financial investment on R&D in the parent organization. Since the organization has Outsourced knowledge hence data on the finances involved in the subsidiary organization and the revenue benefit will also be collected. Data on R&D activities in the subsidiary organization will also be collected. (Martinez‐Noya, Garcia‐Canal & Guillen, 2013).

Data Analysis

The data will be analyzed for differences in R&D activities in the organizations. The differences in R&D activities may be analysed by the number of employees in R&D vis-a-vis the number of employees in the firm. The number R&D activities undertaken by the organization will also have be taken into consideration. The data on timely delivery of R&D activity will also collected. (Berchicci, 2012) Data will also be analysed for the economic benefits in KPO. The change in R&D activities with correlation to the finances will also be analysed. The analysis results will be used to predict the benefits vs negative effects internalization and outsourcing.

Outsourcing or offshoring has become the norm for many organization like Capgemini, Logica, Evalueserve etc. The reason behind outsourcing are many. They may be

• financial and economic gain of the parent organization through the use of cheap labour,
• gain of knowledge from other organizations,
• use of skilled professionals from outside the parent organization
• remote management of projects
• Increased in competitive edge to the organization

KPO industries outsourcing works include financial and legal services, management consulting, research in life sciences.

      The downside involved in outsourcing of R&D activities are

• Finding a suitable KPO because of the finances involved.
• Inability to prevent the organization intellectual properties
• The language barrier is a hindrance in effective communication
• The inability of the parent organization to monitor the KPO from a remote location

Moreover the parent organization should consider the implications of KPO to the parent organization, specially the employee loyalty.

Knowledge process outsourcing has provided organizations more benefits then the risks involved. With the breaking down of telecommunication barriers outsourcing has become a norm. Asian countries like India, Sri Lanka, China and Baltic countries have emerged as centers for KPO.

India with its cheap labour is a big player in business process outsourcing (Wade, 2012) Outsourcing have benefited not only the parent organization but also the vendor. (Malik and Blumenfield, 2012) The vendor has been able to adopt six sigma management systems. Outsourcing of R&D activities have helped the parent organization. (Bertrand and Mol, 2013)

The outcome of the present research will show that extent to which Australian organizations have benefited by outsourcing of R& D activities.

It can be that with the breaking down of telecommunication barriers and the need of organizations to have a competitive edge KPO has become a norm. The parent organization has benefited greatly through the process. The benefits are in terms of financial gains, competitive edge and pool of skilled professional labour. The research outcome is going to strengthen the hypothesis that Australian organizations have also benefited through the process. Thus more number of Australian organizations should take the advantage of outsourcing of Knowledge in R&D.

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