Everything You Need to Know About Knowledge Process Outsourcing (KPO)

Last updated on 

November 24, 2021

by

The VA Reviewer
Everything You Need to Know About Knowledge Process Outsourcing

Knowledge process outsourcing (KPO) is a type of outsourcing. A different company or subsidiary within the same organization (based offshore to save on taxes or other resources) performs knowledge and information-related work to save money and resources.

KEY POINTS

  • 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.
  • Ideally, businesses turn to KPO to obtain a highly skilled workforce at a lower cost.

Role of KPO

According to Peter Drucker, an Austrian-born American management consultant, educator, and author, “Do what you do the best. Outsource the rest.”

In the current situation, his remark is worth millions of dollars. To believe, consider the fact that the global outsourcing market was worth $85.6 billion in 2018. 

However, its contribution varies significantly from year to year. Nonetheless, America and Europe have consistently emerged as the dominant players in this trade. Why?

Its answer underlies its significant role, which is performed through machine learning today. This kind of outsourcing defines a dimension of skillful masters. 

Being related to high-level tasks, it requires advanced degree holders to administer high-level jobs. These tasks can be allocated to an organization or its subsidiary or a virtual assistant in different locations. 

In all, it’s a discipline involving more specialized, analytical, and knowledge-based work.

The question here is why you need a KPO, which is a subset of BPO.

The overhead costs, as well as the costs of training and hiring professionals, are excessive. To avoid such charges, many astute business owners choose to outsource knowledge processing services. 

They hire third parties with expertise to overcome challenges, which frequently impedes evaluation and thorough analysis. 

Therefore, these intellectual tasks result in many turning points and business intelligence. It is how they effortlessly overcome inflation and operational challenges.

In-depth Definition of Knowledge Process Outsourcing (KPO)

Knowledge Process Outsourcing (KPO) is the process of hiring experts and providing services in a specific field to fill positions that typically require highly specialized skills.

Examples of KPO business:

  • Accounting
  • Banking and finance
  • Insurance market services
  • Account preparation
  • Healthcare services
  • Computer-aided simulation
  • Animation
  • Design
  • Content creation
  • Engineering design and development

KPO differs from business process outsourcing (BPO), handing over labor and other operational tasks to a third party to save money. Although KPO is a subset of BPO, it entails significantly more specialized, analytical, and knowledge-based labor.

Companies that use KPO seek highly educated and competent personnel without incurring the costs of training and developing those workers to complete one-time or particular tasks that are not part of their regular operations. 

A corporation can swiftly add specialists in specialized sectors through KPO to raise competitiveness and increase earnings or do particular jobs. It is not necessary to engage full-time subject matter experts internally.

KPO services

KPOs assist companies in data-driven knowledge-based activities that include the method of gathering, managing, analyzing, and delivering objective insights into businesses.

A diverse set of KPO solutions is required to meet the needs of various industry segments, such as:

  • Financial consultants
  • Research and development 
  • Business operations (management consulting)
  • Technical analysis
  • Investments
  • Legal
  • Medical & healthcare
  • Data analysis and interpretation

In general, this subset of virtual assistance provides the following services:

  • Research: Data mining is required to understand the nuts and bolts of business operations. Eventually, the entrepreneurs receive precise and concise responses to their most pressing needs.
  • Reporting: Reporting implies bringing what you have observed to the attention of others. It adheres to the research to achieve excellence in productivity and operations.
  • Analysis: As the name implies, this discipline necessitates streamlining abilities and comprehension of buying/purchasing/performing patterns. The organization develops actionable strategies to overcome roadblocks and opportunities to use the best and most affordable technology.
  • Management: This is the final stage of the information identification process. The KPOs extract, transform and load viable data in an efficient manner for robust data warehousing.

Why Knowledge Process Outsourcing?

Companies use KPO when they need specialized knowledge and expertise but do not have an in-house knowledge base or skills. 

Companies that outsource KPO, on the other hand, typically do so to cut costs by hiring skilled workers earning lower wages in another location rather than hiring one directly as an employee. 

Ideally, businesses turn to KPO to obtain a highly skilled workforce at a lower cost.

A manufacturer, for example, may use raw materials, add value to those materials through various processes, and then sell the result as a finished product. The company may turn to KPO to determine how to improve efficiency in its manufacturing process so that it can deliver maximum value at the lowest total cost possible. The outcome of KPO may also assist the company in gaining a competitive advantage.

KPO Growth

In 2020, the KPO sector was expected to grow from $ 12 billion to $ 1.1 trillion. Several other reports emphasize the rising demand for KPO services. 

According to Market Insights Reports, the Knowledge Process Outsourcing (KPO) market is expected to grow at a breakneck pace by 2025. 

Accenture, EXL Services, Genpact, McKinsey and Company, Moody’s Investors Service, Mphasis, RR Donnelley & Sons Company, Wipro Limited, and HCL are the key players mentioned in the report.

Analytics & Market Research, Engineering & Design, Financial Process Outsourcing, Legal Process Outsourcing, Publishing Outsourcing, Research & Development Outsourcing, and Others are the product types. 

The market is segmented by application into BFSI, Healthcare, IT & Telecom, Manufacturing, Pharmaceutical, Retail, and others. The report is divided into regions: the United States, Europe, China, Japan, Southeast Asia, India, and Central and South America.

Pros and Cons of Knowledge Process Outsourcing

Pros of KPO

KPO can assist businesses in lowering operational or production costs by developing new processes or improving efficiency. KPO also fills the need for skilled employees in a specific field. KPO also allows existing employees, including management, to focus on other tasks, increasing efficiency, and productivity.

Because of the flexibility that comes with KPO, a company can quickly increase or decrease staff. 

For example, if the economy worsens, a company can quickly reduce its KPO staff to save money. 

In contrast, a company can soon hire specialized personnel to increase profits or revenue. KPO assists a company in becoming more agile and adapting to changes in its industry and competitive landscape.

Cons of KPO

To establish a successful operation, implementing KPO can be time- and resource-intensive. Furthermore, communication can be a source of concern and difficulty due to legal, linguistic, and cultural barriers. 

Another disadvantage is that existing employees may feel threatened by hiring outsourced workers and believe their jobs are in jeopardy. 

Furthermore, because KPOs investigate staffing, the organization loses control over recruitment. As a result, it fails to map each employee’s performance and efficiency. As a result, it may be overcharged.

Should You Consider KPO in your Business?

To establish a successful operation, implementing KPO can be time- and resource-intensive. Furthermore, communication can be a source of concern and difficulty due to legal, linguistic, and cultural barriers. 

Another disadvantage is that existing employees may feel threatened by hiring outsourced workers and believe their jobs are in jeopardy.

Ideally, it is a low-cost solution for cutting costs associated with training and upgrading any organization’s think tanks.

KPOs are the most sought-after outsourcing solution for maximizing time savings. This priceless time can be used to improve the efficiency of core areas.

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