Industry chat is awash with talk of how organisations can actually measure the impact of outsourcing on their bottom line. Outsourcing is all well and good and everyone knows that it’s supposed to cut costs and improve quality. But unless the results are carefully assessed, claims like that are spurious.

The NOA has just completed a piece of research on Business Orientated Metrics, otherwise knows as BOMs. They are real measures of the business impact of outsourcing, as opposed to what we call “output orientated metrics” which measure the operational efficiency of outsourcing. Typical BOMs might include: reductions in error rates; employee satisfaction; levels of absenteeism etc.

The NOA research, which was conducted by outsourcing analyst firm, NelsonHall, found that only 18 percent of organisations use BOMs, as opposed to 70 percent that use output metrics. But the number using BOMs is due to double in the next two years, as organisations wake up to the benefits of considering outsourcing in the wider respect of the business.

Whilst in the early days of outsourcing, companies were blinded by cost savings, they seemed to lose track of how it should be measured. BOMs are the industry’s answer. It will be interesting to see how outsourcing measures up.

Outsourcing really is an ever changing market, from HR to admin to call centres there is nothing that can’t be outsourced. If it makes business processes cheaper and more effective, then why not?

However, it would seem that most companies, though talking about knowledge processing outsourcing (KPO), actually have no idea what it is. Everyone knows what business process outsourcing (BPO) is, so why is it so hard for companies to figure out what KPO is?

BPO has been a popular outsourcing process for quite some time now, therefore, as with all business functions, it has to evolve. The most commonly used definition of KPO is the outsourcing of a process that will have a direct impact on high level processes within the businesses – domain level processes and business expertise that will add value to a business.
For example: Pharmaceutical companies have been developing drug research using KPO for years and through this have developed products at a much faster pace and at a much cheaper rate. Market research uses KPO by outsourcing areas where technology can significantly improve the research process.

Similarly smaller firms can also benefit from KPO as they are cost effective and remain within the budget constraints faced by smaller organisations. In effect this reduces the gap between the small and large - another leveling effect similar to the internet.

A less common definition of KPO is transformational business process outsourcing. This involves a company outsourcing a function in order to utilise the supplier’s specialised knowledge to improve it. The difference here is instead of being a core process – as above – this could be any BPO that the end user wants the supplier to transform.

With so many companies unaware as to what KPO is, a single common definition would be helpful. Transformational BPO is actually an entity in itself, so the outsourcing of core functions like R&D is becoming established as the definition of KPO. Now all companies need to go and do is to practice it!