BPO vs KPO: Which is Better for Your Business?

Last updated on 

November 24, 2021

by

The VA Reviewer
BPO vs KPO

KEY POINTS

  • Business process outsourcing (BPO) is a term that refers to the outsourcing of business processes. 
  • BPO is described as outsourcing non-primary activities to a third-party service provider to lower costs while increasing productivity and efficiency. BPO stands for business process and function outsourcing.
  • Knowledge Process Outsourcing (KPO) is a subsegment of business process outsourcing (BPO) in which operations, including knowledge-related activity, are outsourced to a third party. 
  • There is a thin boundary between BPO and KPO, which we have covered in-depth in this post.

Outsourcing is now used by almost all sectors, multinational corporations, and industries. It is essentially the use of a third-party service provider for a variety of services and solutions. 

Marketing, operations, human resources, technical support, customer service, and other services are available. Companies use KPO and BPO to outsource these functions to save money, time, and staffing.

While BPO and KPO are related to an organization’s business activities, they are not the same. 

BPO stands for Business Processing Outsourcing, whereas KPO stands for Knowledge Processing Outsourcing. 

KPO services, considered a subset of BPO, are more specialized and knowledge-based than BPO services.

BPO vs. KPO: What is BPO?

Business process outsourcing (BPO) refers to outsourcing non-primary activities to a third-party service provider to reduce company costs while increasing productivity and efficiency. 

BPO activities include call centers, human resource training and recruitment, technical support, and so on. 

The following are the different types of BPO:

  • On-shore BPO refers to the outsourcing of business operations to another company within the same country.
  • Outsourcing business activities to a company in a neighboring nation is known as nearshore BPO.
  • Outsourcing business activities to a company based outside of the country is known as offshore BPO.

A BPO can manage an organization’s front-end and back-end activities.

BPOs offer a variety of services, including:

Back-Office Transactions

Direct and indirect procurement, collection, receivables, transportation administration, logistics, and dispatch, as well as check, credit, and debit card processing, are all examples of these services.

Customer Service

It includes voicemail, customer service, email, appointment scheduling, telemarketing, surveys, payment processing, order processing, quality assurance, warranty administration, and other customer feedback forms.

Finance And Accounting Services

Auditing, general accounting, billing services, accounts payable, receivables, and regulatory compliance are some of these services.

Human Resource Services

Hiring and recruitment, payroll services, healthcare administration, worker training, insurance processing, and retirement benefits are all covered under one umbrella.

IT And Software Operations

Application development and testing, implementation services, and an IT helpdesk are examples of technical support functions.

Advantages of BPO

  • Cost reduction. 
  • Higher Efficiency
  • Focus on core business functions
  • Global expansion

Disadvantages of BPO

  • Overdependence on the BPO company
  • Security Issues
  • Unforeseen or hidden costs
  • Communication problems

Summary:

  • Business Processing Outsourcing is a type of outsourcing in which a company hires a third-party service provider to handle one or more business tasks.
  • For back office and front office activities, businesses hire BPO vendors.
  • BPO has various advantages, including lower prices, worldwide expansion, and increased efficiency, but it also has some disadvantages, including security concerns, hidden costs, and overdependence.

BPO vs. KPO: What is KPO?

Knowledge Process Outsourcing (KPO) refers to transferring or assigning knowledge and processes related to the process to another company using highly skilled personnel. 

The company hires other outsourcing companies to fulfill its requirements, whether in the same country or overseas. The main goal of this is to reduce the company’s costs. 

It performs a task requiring a high level of skill and in-depth knowledge, expertise, and interpretation power.

KPO firms perform high-level tasks that necessitate the use of highly skilled personnel. It is a more advanced version of BPO. 

These firms can hire people that are trained for jobs where decision-making is an essential component. KPO requires in-depth knowledge, domain expertise, judgment, and interpretation power on the workers, who must apply their ability to make decisions in specific situations.

The KPO company offers the following services:

Banking, Securities, And Insurance

This service includes, among other things, stock process tracking, financial modeling, and detailed company analysis and profiling. This sector’s research activities fall under the umbrella of investment research.

Data Management, Search, And Analytics

KPO companies’ key data analytics services, such as customer analysis, retail analysis, and supply chain analysis, are critical in assisting clients in understanding business issues and developing practical solutions. 

KPO firms provide information about the market, customers, competition, products, and services to industries such as telecommunications, banking, and fast-moving consumer goods (FMCG) (Fast-Moving Consumer Goods).

Engineering Design

It includes everything from design to production and maintenance. KPO firms use computer-aided design (CAD) and advanced engineering methods to complete design tasks. Automotive, aerospace, utilities, construction, and industrial machinery, are among the industries that benefit from this service.

Market Research And Competitive Intelligence

KPO companies conduct high-end research, which includes reports, presentation preparation, customer and industrial surveys, data analysis using statistical tools and techniques, and more.

Remote Education And Publishing

This service primarily benefits educational institutions, government agencies, publishing houses, information aggregators, and businesses.

Advantages of KPO

  • Cost-Effectiveness
  • Access to the highly skilled talents
  • Focus on core functions
  • Improved resource utilization

Summary: 

  • Knowledge process outsourcing (KPO) is the practice of contracting out knowledge-based work to qualified subject matter experts.
  • Companies use KPO when they need specialized knowledge and expertise and have a skilled professional shortage on staff.
  • Companies consider KPO to get a highly skilled workforce at a lower cost.

BPO vs. KPO: Key Differences

  • BPO is an abbreviation for business process outsourcing, whereas KPO is an abbreviation for knowledge process outsourcing.
  • The outsourcing of a business’s peripheral functions to an external firm to reduce costs and boost efficiency is BPO. In contrast, the tasks connected to knowledge and information are outsourced to third-party service providers, according to KPO.
  • Human resources, customer service, technical assistance, technical solutions, finance, and accounting services are all services provided by BPO. Investment research activities, market research activities, data analytics, business research services, and legal process outsourcing are among the website services and services given by KPO.
  • The difference between BPO and KPO is that BPO is based on rules, whereas KPO is based on judgment.
  • Staff with good communication skills is necessary for BPO, whereas qualified professional staff is essential for KPO.
  • BPOs concentrate on low-level processes, whereas KPOs concentrate on high-level functions.
  • BPO requires less coordination and collaboration, but KPO involves a lot of coordination and cooperation.
  • BPO is more straightforward; however, KPO is more complicated.
  • Process expertise is required for BPO, whereas knowledge expertise is needed for KPO.
  • BPO is motivated by volume, whereas insights drive KPO.
  • BPO is based on cost arbitrage, whereas KPO is based on knowledge arbitrage.
  • BPO processes are pre-defined, whereas KPO requires business application and understanding.

The Verdict: BPO vs. KPO: Which is Better for Your Business?

Outsourcing is used in a variety of industries. 

Outsourcing entails contracting with a third-party service provider to deliver a variety of services and solutions. 

Marketing, operations, human resources, technical support, and customer service are just a few of the services available. Companies utilize KPO and BPO to outsource certain functions to save money, time, and people.

BPO refers to outsourcing non-primary activities to a third-party service provider to reduce company costs and increase productivity and efficiency. 

In contrast, KPO refers to outsourcing highly skilled personnel to transfer or assign knowledge plus process-related processes to another company. BPO services include human resource activities, customer care activities, technical support, technical solutions, finance and accounting services, etc. 

Investment research act activities, market research activities, data analytics, business research services, and legal process outsourcing are among the website services and services provided by KPO.

Companies must choose between KPOs and BPOs based on their needs.

Working in a B2B environment separates KPO from BPO. The company’s goal in hiring BPO is cost arbitrage, whereas KPO focuses on knowledge arbitrage. 

KPO is a more advanced form of BPO. However, BPO is becoming obsolete, and these outsourcing organizations are now offering both KPO and BPO services to businesses.

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