As BPO (Business Process Outsourcing) gradually gains traction, the make/buy decision continues to present itself in less traditional areas. One such area is a subset of BPO, KPO (Knowledge Process Outsourcing). Long past the era of diminishing returns for process re-engineering and personnel rightsizing, businesses are looking yet again to improve efficiency as a means for productivity gains. Training and the entire learning management process is quickly ascending to priority status in organizational development as a key element in enhancing per-employee productivity.

While KPO is in its nascence, firms should not ignore the opportunity to both enhance employee productivity and reduce costs while doing so. There are some hurdles to evaluating the benefits of KPO, as there are in any expense category. While firms can measure the reduction in hard costs and even soft costs, it’s difficult to ensure that outsourcing will produce a comparable benefit to that produced by internal resources. One can measure yield from training theoretically using learning/experience curve models, such as Bills’ or Wright’s, and these models have been validated by academia and industry. Researchers have used learning curve theory in measuring the limits of software development cycles as well.

Yet evaluation of the actual benefits of training is anecdotal at best. It appears that the post-mortem processes of training events are widely varied, subjective and lacking the hard metrics (e.g. testing) to evaluate the benefits of an event. Thus, measuring the cost of a widget, or even cutting a paycheck is far more evolved than post-event survey feedback that “the cookies were stale” or “the room was too bright”.

Yet with ever-increasing business dependence or workstation and infrastructure technology and coinciding training requirements, a process that was once seen as non-essential is crucial to everyday operation. The emergence of the CIO position in major corporations gave birth to training stewardship if not measurement. In many organizations, where technology and soft skills development are seen as operationally critical, even strategic in some operations, the CLO or Chief Learning Officer now stewards the knowledge process. With heavy investments in the tools and training necessary to enhance productivity through knowledge based initiatives, it behooves organizations to develop sound metrics to measure the relative value and effectiveness of the training investment. With these metrics in hand, organizations can gather, analyze and evaluate the data in order to optimize the investment.

Thus, the make/buy question wends its way back into the discussion. Of course there will be the instant objection that organizations can not measure something so subjective as learning. Even if that were the case, there are other hard metrics that serve as decision drivers in the make/buy of Knowledge Processes. Specifically, one can measure the cost of full time staff versus outsourced training. Typically, significant cost benefits are available in any form of non-core process outsourcing. Better still, part-time, contract training may further reduce costs, if carefully managed. Training firms typically use an average of 60% utilization of in house training resources as the cost case to outsource. While a 3rd party KPO may not yield the 40% savings one would think should be possible, it’s not unreasonable to think that 15-30% hard dollar savings are there for the taking in either outsource scenario. Additionally, there are 3-5% soft cost savings available, based on US DOL estimates for administrative costs per employee for small to large corporations.

It appears then, that the bogey in KPO equation is “quality”. Specifically, will your employees receive the same or better quality of learning experience from an outsource resource than they would with internal resources? Organizations will likely recoil at the loss of control over the program. As is the case in most outsourcing agreements, much of the quality issue is addressed by industry specifications. One such specification in technical and soft skill training is the courseware. Courseware, like fasteners or floor mops is produced by a short list of usual suspects and an array of specialists. As a result, organizations are empowered to control “quality” through the selection of courseware. Where the risk, if any, lies is in trainer selection. Courseware being equal, trainer selection is the key factor in the trainee’s qualitative experience.

One must consider though, the benefits of KPO trainers versus internal staff. It stands to reason that KPO trainers, in that training is their core business, will be more industry savvy having escaped the single institution vacuum. They’ll likely be better prepared to deliver the most current knowledge and possess a higher level of specialized knowledge in a given application, unlike their internal “jack of all trade” competitors. In essence, the same rules that apply to Business Process Outsourcing apply to Knowledge Process Outsourcing. It seems sensible then, that organizations seeking to optimize their training investment look hard at the benefits of Knowledge Process Outsourcing as a means not only to reduce costs but also to enhance employee productivity and ultimately, remain competitive.
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  1. Great article, you have successfully integrated facts to support your ideas.

    Studies have shown that companies who made a strategical moves on KPO claimed that aside from cost reduction, an increase of productivity can also be observed. It can be expected that the trends of KPO would definitely increase on industries or businesses involving global market researches.

  2. Nice article.Thanks for sharing this great and informative post.