Knowledge Process Outsourcing Market

Market Overview

The global knowledge process outsourcing market size was valued at USD 3.9 billion in 2023 and is projected to reach a value of USD 7.9 billion by 2032, registering a CAGR of 7.9% during the forecast period (2024-2032). The increased desire for greater flexibility in Service Level Agreements (SLAs), simplicity of change management approaches, and cost-cutting will likely fuel the knowledge process outsourcing market growth.

Knowledge Process Outsourcing (KPO) is a business process outsourcing (BPO) strategy in which complex, knowledge-based tasks and procedures are outsourced to third-party service providers. Unlike typical BPO, which focuses on ordinary transactional tasks, KPO focuses on outsourcing operations requiring specialized domain expertise, advanced analytical skills, and a complete understanding of the subject matter. KPO vendors offer high-value services that help with strategic decision-making and business expansion.

The growing demand for professional services such as training, managed services, and maintenance will drive the global Knowledge Process Outsourcing (KPO) market over the forecast period. The increased adoption of such outsourcing strategies by emerging economies such as China, India, and Japan will help to broaden the market footprint. The expanding number of engineers, doctors, and lawyers will create further opportunities for the market to thrive. Integrating KPO services economically will boost the global Knowledge Process Outsourcing market share throughout the forecast period.

Highlights

• Analytics and market research generate the most revenue through service.
• IT and Telecom occupy the largest share of the market by application.

Market Dynamics

Global Knowledge Process Outsourcing Market Drivers

Globalization and Business Expansion

Globalization has resulted in the development of firms into new markets and areas, necessitating the demand for native expertise and market information. KPO services give firms access to people, resources, and market insights from various geographic locations, allowing them to broaden their global footprint, enter new markets, and make informed strategic decisions. 

 A multinational corporation (MNC) looking to enter a new market needs localized experience and market intelligence to understand consumer preferences, legal requirements, the competitive landscape, and cultural nuances. By outsourcing market research and analysis to a KPO with regional knowledge, MNCs can get significant insights into market dynamics, consumer behaviour, and competitive positioning, allowing for more informed decision-making and successful market entry strategies.

 Furthermore, a McKinsey & Company study discovered that financial services firms use KPO for complex operations, including risk management, financial modelling, and quantitative analytics. This highlights how financial institutions outsource complex tasks that require specialized knowledge to navigate the complexities of the global financial environment. Outsourcing complex R&D processes to KPO providers has led to speedier medication development, lower costs, and greater flexibility in responding to changing market demands. 

 As a result, companies can gain expertise that may not be available in-house by tapping into a global pool of scientific talent. The complexity of company operations, notably in pharmaceuticals and banking, drives the use of KPO. As industries encounter complex challenges, outsourcing to specialist suppliers becomes a strategic technique for efficiently addressing problems and generating innovation. As a result, the Knowledge Process Outsourcing Market trend is positively impacted.

Global Knowledge Process Outsourcing Market Restraints

Data Security Concerns

Data security and privacy are critical considerations when outsourcing knowledge-intensive tasks. Businesses routinely deal with sensitive information, intellectual property, and confidential data that must be kept secure. The fear of data breaches, unauthorized access, or sensitive information misuse can severely hamper Knowledge Process Outsourcing (KPO) implementation. Companies in the financial services industry handle massive volumes of confidential data, including customer financial information, transaction records, and compliance-related data. Outsourcing financial analysis, risk management, and compliance obligations to KPO providers entails exchanging sensitive information. Any security compromise involving sensitive data could have major financial and reputational consequences.

 In 2023, the average data breach cost in the banking sector was USD 5.9 million, 28% more than the global average of USD 4.45 million. This represents a 2.3% increase from 2022 and a 15.3% increase from 2020. The financial sector is the second most affected by data breaches, followed by healthcare. According to a Deloitte survey, data privacy and cybersecurity risks were among the most pressing concerns raised by financial services executives when considering outsourcing.

 Similarly, Statista reported that the healthcare industry's average data breach cost in 2023 was over USD 11 million, the most of any industry for the third year in a row. This represents an 8% increase from 2022 and a 53% increase from 2020. 

This cost comprises data breach detection, notification, reaction, and reputation management charges. Healthcare businesses and their KPO providers risk significant financial responsibilities in the case of a data breach, emphasizing the significance of strong data security procedures. 

Global Knowledge Process Outsourcing Market Opportunity

Advanced Analytics and Artificial Intelligence

Incorporating advanced analytics and AI into KPO services opens up a huge opportunity for providers to give more data-driven insights, predictive analytics, and process automation. Businesses increasingly rely on data-driven decision-making, and KPO providers can leverage technology to create more sophisticated and efficient solutions. KPO providers in financial service providers can leverage advanced analytics to provide predictive modelling for risk assessment, fraud detection, and investment analysis. For example, using machine learning algorithms to examine prior financial data can lead to more accurate market projections and help investors make more educated decisions.

 According to Keboola, a software startup, 90% of business professionals and enterprise analytics experts underline the importance of data and analytics in driving their enterprises' digital transformation efforts. In February 2024, Wipro Limited released the Wipro Enterprise Artificial Intelligence (AI)-Ready Platform, a service that allows users to create fully integrated and customized enterprise-grade AI environments. The Wipro Enterprise AI-Ready Platform offers dynamic resource management that leverages predictive analytics to adapt to changing workloads. The growing use of predictive analytics solutions in finance, healthcare, retail, and manufacturing highlights the need for data-driven insights to inform decision-making and drive business outcomes.

Furthermore, the Organisation for Economic Cooperation and Development (OECD) forecasts that health spending per capita will rise at an average annual rate of 2.7% across the OECD, reaching 10.2% of GDP by 2030. Furthermore, population health management (PHM) is the analytic use of data from several sources, and the increased acceptance of PHM drives the expansion of the investigated market. For example, beginning in August 2022, RTI Health Advance will combine the power of healthcare analytics, digital health, and patient experience to assist provider and payer organizations in developing PHM initiatives. The KPO provider employs healthcare analytics tools to examine patient demographics, medical histories, treatment outcomes, and healthcare utilization trends. Identifying high-risk patient populations, projecting disease development, and recommending preventive interventions allows the healthcare organization to execute targeted interventions, optimize resource allocation, and enhance population health outcomes.

Regional Analysis

Asia-Pacific Dominates the Global Market

The global knowledge process outsourcing market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

Asia-Pacific is the most significant global knowledge process outsourcing market shareholder and is estimated to grow at a CAGR of 7.9% over the forecast period. This surge is due to increased passenger vehicle sales in the region. It can be ascribed to the fast outsourcing of vital procedures and professional services. The rising number of qualified professionals such as engineers, architects, and lawyers in emerging economies like India, China, and the Philippines is propelling market expansion. For instance, in 2023, China will be the world's second-largest economy, with a nominal GDP of USD 17,786 billion and a GDP per capita of USD 12,540. China's economy is fueled by industry, exports, and investment, with a sizable domestic private sector. In 2022, China was responsible for 18% of the global economy in nominal terms and 19% in purchasing power parity (PPP). 

Additionally, in Asia-Pacific, India and the Philippines remain key outsourcing destinations. These countries have robust outsourcing ecosystems, a skilled workforce, and a favorable business climate. India is the world's leading KPO destination, with over 70% of the global market. The Philippines is likewise a top KPO location with a developed outsourcing industry. India's KPO growth is driven by highly skilled people, innovative technology and software, and the sixth-highest English proficiency in Asia. The Philippines leads the global IT Business Process Management (BPM) business, with at least 50 top sales outsourcing companies. These factors are predicted to affect the regional market. 

Latin America is anticipated to exhibit a CAGR of 8.0% over the forecast period. According to Knowledge Process Outsourcing Market insights, Latin America is likely the fastest-growing market. Enterprises in the area are investing more in R&D and producing analytical insights, which is projected to boost market growth during the forecast period. 

Furthermore, Latin America is gaining momentum in the KPO sector, which has enormous growth potential. With an expanding number of educated individuals fluent in many languages, countries such as Mexico and Brazil have emerged as industry leaders. Their expertise in providing high-value services such as market research, financial analysis, and legal assistance has attracted global firms seeking effective KPO solutions. However, according to a Census article from July 2023, quantitative research reveals that bilingualism among Latin American immigrant generations is diminishing. 

Similarly, Mexico has been making progress in the outsourcing sector, and one area where Latin American KPO providers have had an impact is finance and accounting outsourcing (FAO). For example, a multinational corporation may outsource financial analysis, bookkeeping, or compliance-related tasks to a KPO provider in Mexico to save money and gain specialized knowledge. 

Moreover, having a bilingual talent pool, especially in English and Spanish, is a huge advantage for Latin American KPO providers. This linguistic skill is required for dealing with North American and European clients. As a result, Latin America's market share has risen dramatically, demonstrating the region's growing importance in the global KPO landscape. 

The North American knowledge process outsourcing market is predicted to expand fast throughout the forecast period due to increased IT offshoring/outsourcing activities. This encourages the region's knowledge process outsourcing sector to grow. North America, particularly the United States, is a technological and innovation hub. The region's KPO services in software development, data analytics, and technology research are popular. The US is the primary destination for KPO services in North America. The country offers a robust business environment, a skilled workforce, and a strong emphasis on innovation. 

Europe has always been an essential region in the outsourcing industry, offering both BPO and KPO services. Countries like the United Kingdom, Germany, France, and Eastern Europe have been crucial in delivering knowledge-intensive outsourcing solutions. The United Kingdom, Germany, and Central and Eastern European countries have long been preferred outsourcing locations in Europe. These places provide a unique combination of language proficiency, skilled labor, and a favorable business climate. 

Segmental Analysis

The global knowledge process outsourcing market is segmented based on service and application.

The market is further segmented by service into Analytics and Market Research, Engineering and Design, Financial Process Outsourcing, Legal Process Outsourcing, Publishing Outsourcing, andResearch and Development Outsourcing.

The analytics and market research sector had the largest market share of 40% in 2023. Analytics and market research KPO services entail using data analytics techniques to extract meaningful insights from data sets and conducting extensive market research. Customer segmentation, trend analysis, competitive intelligence, and predictive modeling help organizations across industries make strategic decisions, develop products, and launch marketing campaigns.

In addition, the segment's growth is driven by rising demand for business intelligence and analytical solutions that minimize staff workload. KPO providers frequently specialize in specific areas or domains, such as banking, healthcare, or technology. This particular knowledge enables businesses to access professionals who thoroughly understand complex industry trends, legislation, and market dynamics. As firms look to harness specialized expertise without investing in full-time workers, the demand for KPO services grows. The analytics and market research section is further subdivided into customer and marketing analytics, operations and supply chain analytics, and competitive intelligence and industry analysis.

The legal process outsourcing segment is expected to grow at the quickest CAGR over the projection period, owing to improved service efficiency and cost savings. Legal process outsourcing (LPO) refers to outsourcing legal work and support services to third-party providers, including document review, contract writing, intellectual property management, litigation support, and legal research. LPO suppliers provide cost-effective solutions, domain expertise, and scalability to law firms, corporate legal departments, and legal service providers, allowing them to improve efficiency, manage workloads, and optimize legal operations. Businesses can save money on these duties by outsourcing them to KPO companies. Similarly, other businesses with complex knowledge-based processes save costs by outsourcing tasks requiring specialized expertise and substantial training.

The market can be bifurcated by application into BFSI, Healthcare, IT and Telecom, Manufacturing, Pharmaceutical, andRetail.

The BFSI category dominated the knowledge process outsourcing market, accounting for 30% of revenues. KPO services are used in various BFSI operations, such as financial analysis, risk management, regulatory compliance, fraud detection, and wealth management. KPO providers assist banks, insurance companies, investment firms, and financial institutions by providing expertise in data analytics, market research, financial modeling, and compliance reporting. This allows clients to optimize operations, mitigate risks, and drive profitability in a highly regulated and competitive industry.

Furthermore, the BFSI section contains sensitive client information and financial databases from several banks. Companies outsource procedures such as financial analytics, equities research, and data administration to ensure efficient information management. CRISIL Ltd., Credit Suisse Group AG, and WNS (Holdings) Ltd. are some corporations that provide financial services to other businesses. 

The IT and telecom segment is expected to have the fastest CAGR during the projection period. The enormous database in the IT and Telecom sector, which has been fragmented and growing for some time, is likely to boost market expansion throughout the projection period. KPO services in the IT and telecommunications sectors include software development, IT support, network management, cybersecurity, and consulting on digital transformation. KPO providers assist technology firms, telecommunications companies, and IT service providers by providing software engineering, data management, cloud computing, and cybersecurity expertise, enabling clients to innovate, scale operations, and deliver value-added services to customers in a fast-paced, competitive industry.

Recent Developments

• May 2024- Accenture and Oracle will collaborate to help clients accelerate generative AI adoption, beginning with the finance organization.
• April 2024- Genpact partners with Microsoft to drive modern finance transformation across enterprises.