Business Process Outsourcing and Knowledge Process Outsourcing share many common benefits.
But did you know the primary differences between BPO vs KPO?
To start with, KPO is a targeted industry that focuses on the outsourcing of knowledge-based services while BPO is the general outsourcing of non-core activities to a third party service provider.
KPO also differs quite a bit from BPO in terms of its services and complexity.
In this article, we’ll explore the seven key aspects of BPO vs KPO that set them apart from each other. We’ll also look at what both terms mean and their six common benefits.
7 key differences between BPO vs KPO
Business Process Outsourcing and Knowledge Process Outsourcing may sound similar, but they have quite a few distinguishing features that make them useful for different business needs.
Let’s find out some of the key differences between BPO and KPO to understand what works best for you and your business:
1. Driving force
Business process outsourcing companies are adept at handling routine front and back-end operations. These processes tend to be volume-driven, and as a result, require a larger workforce. For example, it’s common for businesses to outsource their customer service or call center operations to BPOs with massive teams to handle large call volumes.
On the contrary, KPO is insight-driven and businesses usually have a smaller team of domain specialists to outsource their core processes. For example, businesses will typically hire an expert corporate lawyer to handle all their legal issues.
2. Types of service provided
Since KPO is a subset of BPO, most of the common KPO services come under business processing outsourcing. However, there are a few types of outsourcing services that distinctly fall under one of the two categories.
Some of the common BPO services include:
- Call center outsourcing.
- Contact center outsourcing.
- Data entry and processing.
- Human resources management.
- Finance and accounting outsourcing.
- Healthcare BPO outsourcing, etc.
Some of the common KPO services include:
- Business Research.
- Legal Process Outsourcing (LPO)
- Market Research.
- Writing and Content Development.
- Creative Design.
- Data Analysis.
- Corporate Training Services.
- Education and Learning Solutions, etc.
3. Nature of service provided
Since BPO is volume-driven, its service scope is mostly based on cost arbitrage. This means that a BPO firm’s primary goal is cost reduction for your business while optimizing your non-core processes.
Some of the most common BPO roles include:
- Customer care specialist (help desk).
- Data collector.
- Account payable clerk.
- Bookkeeper, etc.
On the other hand, KPO relies primarily on knowledge arbitrage. So while you do save costs when you outsource to a KPO company, your primary objective is to gain expert advice and specialized knowledge on a subject you may not be trained in.
As a result, the common roles for the KPO sector may include:
- Financial manager.
- Technical data analyst.
- Project manager or consultant.
- Medical assistant, etc.
4. Required service expertise of companies
In the BPO industry, outsourcers often look for the industry experience of the service provider and their client reviews.
For example, if you hire a BPO call center with several years of experience, the chances are that they have well-researched processes, trained recruits, and adequate infrastructure to conduct business.
However, KPO services rely more on the subject expertise of the vendors. For example, hiring a KPO provider with a good experience is beneficial, but what you’d really need is proven expertise in your niche (accounting, law, supply chain, etc.).
5. Degree of complexity
When comparing the complexity of their services, the ones in KPO seem to be far more complex than BPO.
In BPO, outsourced employees are usually required to take low-level decisions and perform routine tasks that do not require strong analytical or creative thinking. For example, front office or customer service decisions. In contrast, KPO typically deals with important core decisions that impact the entire organization.
For example, in engineering services KPO, the outsourced employees may have to make high-level decisions or change key processes to optimize workflows. This requires in-depth knowledge and support and tends to be a lot more complicated than BPO.
6. Process formulation techniques
Historically, BPO has been based on a set of rules. What this means is that when you outsource your business to a BPO provider, you already have a set of processes in place that the service provider will follow.
For example, in customer support outsourcing, you’ll pre-define your expectations to your service provider before making a deal with them.
In contrast, KPO processes rely on judgment. So a KPO provider has significantly more operational control and can optimize or change key processes based on their expertise.
For example, in legal process outsourcing, the KPO lawyers use their own expertise and judgment rather than a predefined process to handle legal issues.
7. Employee skill requirements
Since BPO employees deal with non-core, everyday tasks, their qualifications may widely differ from those of employees appointed by a KPO company.
Since BPO is volume-driven, what it really needs is hardworking employees with essential computer knowledge and communication skills. These employees should be capable of handling processes like customer service, data entry, etc.
On the other hand, companies tend to have high expectations from a KPO employee. They’re required to have proven work experience in the relevant field, domain knowledge, and decision-making skills on top of basic soft skills.
For example, a KPO data analyst should be well versed with data management software like My SQL, Oracle, etc., and have a track record of dealing with large chunks of data for past clients. In contrast, a BPO employee can learn most of the required skills with minimal training.
Now that we understand the key differences between BPO and KPO, let’s discuss each of these outsourcing segments in detail.
More about business process outsourcing
Having discussed Business Process Outsourcing in detail, let’s explore the different types of BPO service delivery models and some popular BPO companies.
Most BPO operations may include front and back office assistance, human resource services, customer care, technical support, media process outsourcing, data entry, website services, etc.
That being said, the BPO sector can be categorized into three major types of BPOs. They are:
- On-shore BPO: When a company outsources its business to a third-party vendor within the country.
- Nearshore BPO: When a company outsources services to an outsourcing firm located in a nearby country.
- Offshore BPO: When the company delegates its services to another company located overseas.
Here are some top BPO companies in the world:
- TIS Global (under the parent company – Tata Services).
- International Business Machines Corporation (IBM).
- Wipro Limited.
- Genpact, etc.
Next, let’s take understand what KPO means.
More about knowledge process outsourcing
Knowledge Processing Outsourcing (KPO) is the process of outsourcing high-level core functions to a third-party vendor or freelancer. It’s like an extended version of BPO.
This means that all KPO services can technically be considered BPO. However, since KPO is specialized outsourcing, every BPO service may not be considered a KPO.
Let’s take a look at some common types of KPO service models:
- Captive centers: Multinational companies establish their dedicated KPO unit in an offshore country with highly skilled talent and lower cost of operations.
- Third-party KPO vendors: Independent KPO companies or freelancers that handle tasks on a project or time basis.
- Virtual captives: A hybrid outsourcing model where a third-party vendor sets up and manages a captive center on the company’s behalf.
Some of the common KPO services include:
- Investment research activities.
- Market research activities.
- Data analytics.
- Recruitment process outsourcing.
- Business research services.
- Legal services, etc.
The KPO industry is often chosen by companies requiring high-level expertise in any area. Some of these companies are:
- Sutherland Global Services.
- WNS Global Services.
- Boston Analytics.
- SG Analytics.
- Syntel, etc.
Next, let’s understand the common benefits of BPO and KPO.
6 common benefits of BPO and KPO
While BPO and KPO have their own unique qualities, they share a lot of common advantages that benefit business owners. Some of them are:
1. Reduced operational costs
When it comes to outsourcing a business function to a third party service provider, you can avail substantial benefits in terms of reduced operational and business costs.
- When you outsource your work to another vendor, you save on the time and resources needed to build an in-house team for the same tasks.
- You’ll also save on infrastructure and daily operational costs since the outsourced team will likely work remotely or from another location.
Moreover, in the case of offshore outsourcing, companies can look out for vendors in major BPO hubs like India, Malaysia, Vietnam, or the Philippines. These countries offer attractive tax benefits to outsourcers and have lower living expenses (salary ranges) when compared to the US or the UK.
2. Access to a global talent pool
Outsourcing provides a unique opportunity to access competitive, global recruitment pools through BPO and KPO firms. Moreover, by choosing a reputable vendor, you access some of the best resources in the area at a fraction of the cost.
For instance, if you choose an Indian accounting firm with a good reputation, you’ll have some of the best finance professionals review your company’s accounts and advise on the necessary processes.
In contrast, you’d have to invest quite a lot of time and resources to hire an in-house accounting team by yourself, verify their credentials, and train them on your processes.
3. Improved work quality and efficiency
Depending on whether you choose BPO or KPO outsourcing, your business may notice significant improvements in both your non-core and core business processes.
For instance, if you outsource your accounting and payroll processing tasks, your managers will have more capacity to focus on the project pipelines. Conversely, if you outsource customer service, your employees can focus on other workflows.
Not to mention, your outsourced tasks will be handled by experts that are trained professionals. So your company is likely to see increased productivity and work efficiency across functions.
4. Better scalability
BPO and KPO call centers are built around a highly flexible business model. So it’s extremely convenient to outsource your business to these firms according to your company’s needs and budget.
For instance, you can start out by outsourcing on a smaller budget with limited tasks. Once you’re happy with your service provider, you can scale up and increase your outsourcing budget.
This also works the other way round! If at any point you feel like you need to scale back outsourced business due to a financial crunch or other reasons, you can simply discuss it with your BPO or KPO provider and do so.
5. Enhanced employee productivity
One of the most important benefits of BPO and KPO outsourcing is that it helps to lower the workload of your in-house employees. This helps your outsourced team and in-house employees focus on what they do best without overworking themselves.
And you can further boost the efficiency of your in-house and outsourced teams by using advanced tools like Time Doctor!
Time Doctor is a powerful employee time tracking and productivity management software that is used by large corporations like Ericsson and Verizon and small business owners like Thrive Market. It offers a range of features that can be used to your benefit to boost productivity across the board.
Here are some of Time Doctor’s features:
- Accurately track time across various tools and applications using the manual or automatic time tracking modes.
- Generate daily, weekly, or monthly productivity reports to gain actionable insights into your outsourced team’s workflows.
- Check which employees are present, absent, partially late, or late using attendance reports.
- Process payroll and automate batch payments for outsourced teams.
And while you’re at it, why not sign up for the Time Doctor 14-day free trial to get started today?
6. Access to advanced, innovative technology
Investing in the latest technology for your business can be expensive. Not to mention, some technologies may have a bit of a learning curve and require extensive training.
The good news is that you can get easy access to these technologies when you outsource your business to a KPO firm. Plus, you also save the time and resources you’d have to invest otherwise in training in-house staff.
For example, if you hire a data analyst through KPO, they’ll have accessible technologies like Google Analytics, Microsoft Power BI, etc.
Instead of having to subscribe for these tools (which can be expensive) and then training employees on how to use them, you can simply let the KPO team manage your workflows.
BPO and KPO are often considered to be two peas in a pod. They’re quite unique and targeted services, but share a lot of common features.
So whether you outsource your business activities to a BPO or KPO firm, remember to use this guide to properly understand your business needs and make a well-informed decision.
In either case, you’re sure to benefit from the reduced costs, improved productivity, and so much more!
Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.