There is little academic literature on the subject of knowledge process outsourcing KPO – an area of growth in the outsourcing sector. We question whether KPO is evidence of a lack of strategic risk management. We argue there is much merit in focusing on the specific strategic risks encountered in KPO.
The purpose of this paper is to put forward the need for further academic research and examine how organizations deal with strategic risk around KPO. Our methodology in preparing this paper is based on a qualitative assessment of a number of the major KPO outsourcers in India and secondary data from consultancy studies. We believe there is much merit in focusing on the specific strategic risks that a firm may encounter in deciding whet er to engage in KPO.
In addition, understanding the particular strategic risks facing a KPO opportunity can have great value for the management of both the outsourcer and the vendor. The standard case for free trade holds that countries are best off when they focus on sectors in which they have a comparative advantage - that is, sectors that have the lowest opportunity costs of production. KPO is rapidly creating a new competitive reality for employers, employees and government agencies. This new competitive environment creates strategic risks that will need to be identified, managed and controlled. Further, it should be a fruitful area of continuing management research.