Outsourcing of routine or peripheral business functions is in vogue. It implies contracting with the third party service provider, with respect to operations and responsibilities of business processes. At present, there is hardly any multinational company which is left untouched from outsourcing its business operations. Over the time, Business Process Outsourcing (BPO) has gained ample importance, by providing services related to marketing, human resources, customer support, technical support, etc.
Knowledge Process Outsourcing (KPO) is a subsegment of BPO, wherein those processes which involve knowledge related work are handed over to outside party. There is a fine line of difference between BPO and KPO, which we have discussed in the article in detail.
Content: BPO Vs KPO
Comparison Chart
| Basis for Comparison | BPO | KPO |
|---|---|---|
| Acronym | Business Process Outsourcing | Knowledge Process Outsourcing |
| Meaning | BPO refers to the outsourcing of non-primary activities of the organization to an external organization to minimize cost and increase efficiency. | KPO is another kind of outsourcing whereby, functions related to knowledge and information are outsourced to third party service providers. |
| Based on | Rules | Judgement |
| Degree of complexity | Less complex | High complex |
| Requirement | Process Expertise | Knowledge Expertise |
| Relies on | Cost arbitrage | Knowledge arbitrage |
| Driving force | Volume driven | Insights driven |
| Collaboration and Coordination | Low | Comparatively high |
| Talent required in employees | Good communication skills. | Professionally qualified workers are required. |
| Focus on | Low level process | High level process |
Definition of BPO
Business Process Outsourcing or BPO is the outsourcing of any segment/ process/ function of the business organization to an outside organization. The major cause behind the outsourcing of business process is to reduce costs and maximize efficiency. The focus is made on the process, i.e. the process is predetermined, and the provider has to bring consistency and productivity in the assigned processes. The different types of BPO are explained below:
- On-shore BPO: The outsourcing of business activities to another company but in the same country.
- Nearshore BPO: The outsourcing of business activities to the company located in the nearby country.
- Offshore BPO: The outsourcing of business activities to the company located overseas.
A BPO is capable of handling both front end and back end operations of an entity. BPO provides an array of services such as:
- Customer care, i.e. call center, help desk, etc.
- Human resources, i.e. recruitment and selection, training and placement, payroll processing, etc.
- Technical support
- Services related to finance and accounting.
- Website services, i.e. web hosting, etc.
- Transcription
Definition of KPO
Knowledge Process Outsourcing or KPO refers to the assignment or transfer of knowledge plus information related process to another organization. The organization may be a different entity or the subsidiary of the main organization that can be located in the same country or overseas to minimize cost.
KPO firms perform high-level tasks for which highly skilled personnel are required by the firms. It is an extended version of BPO. Low-level decisions can also be taken by these firms. It requires in-depth knowledge, domain expertise, judgment and interpretation power of the workers, who are capable of applying their knowledge because the work entails decision making on specific issues.
The spectrum of services provided by KPO includes:
- Investment research services
- Market research services
- Data analytics
- Business research services
- Others: Legal Process Outsourcing, Financial Process Outsourcing, Media Process Outsourcing.
Key Differences Between BPO and KPO
The important differences between BPO and KPO are mentioned in the following points:
- BPO is an abbreviation used for Business Process Outsourcing whereas KPO is a short form of Knowledge Process Outsourcing.
- BPO refers to the outsourcing of peripheral activities of the organization to an external organization to minimize cost and increase efficiency. KPO is described as the functions related to knowledge and information are outsourced to third party service providers.
- BPO is based on rules while KPO is based on judgment.
- The degree of complexity in BPO is low in comparison to KPO.
- BPO requires expertise in the process, but KPO requires expertise in knowledge.
- BPO depends on upon cost arbitrage. Conversely, KPO is dependent upon knowledge arbitrage.
- BPO is volume driven. On the other hand, KPO is insights driven.
- The collaboration and coordination are low in BPO which is just opposite in the case of KPO.
- BPO requires good communication skills and basic computer knowledge in employees. As opposed to KPO, where only professionally qualified and highly skilled workers are required.
- BPO focuses on low-level process, whereas focus is on the high-level process.
Conclusion
Almost all the transnational companies, today, outsource their non-core activities, just to pay attention to their primary business. Both forms of outsourcing work in a B2B environment where the service provider and buyer of services both are business organizations.
One thing must be kept in mind that KPO is nothing but an extended version of BPO. Over the time, it has been observed that with the expansion of KPO, the BPO is losing its existence. Now, the service provider companies provide both BPO and KPO services simultaneously to the organization.
Arti Doshi says
The tabular format gives a very clear idea about the difference between BPO and KPO.
Can a company provide both BPO and KPO services under one roof? or any specific requirements have to be fulfilled by the service provider?