Knowledge Process Outsourcing and Performance in Kenya’s Commercial Banks

Abstract

Knowledge Process Outsourcing embraces global businesses by providing them high-end processes like valuation research, investment research, intellectual property, research and design. Despite all the above favourable factors, the adoption of BPO and KPO has not picked up as expected. The management of various companies, especially the local ones are faced with a challenge due to lack of relevant reference point on the drivers and effect of KPO. The purpose of the study is to establish the effect knowledge process outsourcing on performance of commercial banks in Kenya. The research study adopted a descriptive research design. The target population for this study included the 44 commercial banks operating in Nairobi as at December 2014.The researcher used a questionnaire as the primary data collection instrument. Descriptive statistics analysis was employed to analyze the first three objectives on the effect of the factors on adoption of KPO among commercial banks. For the forth objective on the effect of KPO on performance of commercial banks, the study conducted a regression analysis. This study found that there is a linear relationship between human resources, organization related challenges and ICT factors and adoption of knowledge process outsourcing. This study revealed that to a great extent, the banks outsource research and development, animation and design, equity research, business and market research, training consultancy and intellectual property research for patent applications. This study concludes that business and market research had the greatest effect on the performance of commercial banks, followed by research and development, then training consultancy, animation and design and equity research in that order while intellectual property research for patent applications had the least effect to the performance of commercial banks. The study recommends that it is necessary using an intelligent KM system to manage the firm's knowledge as a strategic resource versus the threat of loss of strategic information. Managers need to learn how to manage outsourced resources based on specific performance metrics and less subjective results. Banks need to decide if the process or knowledge area needs to be optimized before outsourcing. When a company decides to outsource provision of a service, it must determine how risk should be allocated between parties to the contract meaning the principal and the agent.