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The Business Process Outsourcing (BPO) industry is projected to grow by roughly 9.1% globally between 2022 and 2030. All industries inside the BPO service sector, including Knowledge Process Outsourcing (KPO), will see substantial developments and enhancements soon.
India, for example, has seen its KPO industry grow by over 45% within the last five years.
In consequence, it’s vital for employers to explore the advantages of KPO and understand how they will gain from it.
In this text, we’ll explore 11 vital ways KPO can assist your organization, its three potential risks, and a few key differences between KPO and BPO. We’ll also take a have a look at among the top KPO corporations on the earth.
Table of Contents
Let’s go.
11 vital advantages of KPO
Knowledge Process Outsourcing (KPO) is a form of outsourcing that focuses on high-level and knowledge-based services. In KPO, businesses outsource their core, information-related tasks like business operations, funds, etc., to a third-party agent, company, or freelancer.
This process has several advantages, a few of which include:
1. Access to specialized talent
KPO is a knowledge-based industry that relies on the sphere expertise of people. KPO jobs have very specific requirements which will include solid IT skills, domain knowledge, previous work experience, and high-level decision-making skills
So once you select knowledge process outsourcing corporations, you’ll have access to among the most expert and highly-trained professionals out there.
For instance, should you hire a KPO accountant, they’ll have already got sufficient experience coping with various financial needs like tax processing, payroll, etc., and be well-equipped to cater to your needs. In contrast, your in-house talent may not have that sort of expertise.
2. Substantially lower operational costs
Implementing a KPO strategy into your enterprise processes can assist you to save or lower costs in various ways. Here’s how:
For instance, it’s cheaper to outsource financial services or human resources to outsourcing corporations in low-income offshore countries and save costs while availing high-quality talent.
As an example, the typical salary of a project manager in Latest York is USD 138,000/year while that of a project manager in Vietnam is USD 19,864/yr.
Furthermore, you’ll also save on operational costs. A KPO service provider will normally work from a distant location in your country or offshore. So that you’ll also save costs on the infrastructure, resources, training, and technologies you’d have to speculate in otherwise.
3. Access to advanced technology
Since knowledge process outsourcing primarily focuses on domain expertise, most KPO solutions have access to the newest technology and software tools utilized in the sphere.
By extension, hiring a talented employee through a KPO process gives you access to those technologies to your company’s needs.
For instance, should you hire a KPO service provider with expertise in data analytics or data management, they’ll have access to the newest technology and tools like Google Analytics, Microsoft Power BI, etc. Not only will this offer you a competitive advantage, but it surely’s also cheaper than subscribing to those technologies and training employees for it.
4. 24-hour operations
For those who’ve outsourced your enterprise to an offshore KPO, you get an added advantage of 24-hour support in your core processes resulting from the time difference between your locations.
For instance, once you outsource core processes like product development or recruitment, you possibly can give any relevant instructions to the KPO teams during your work hours. Once the outsourced team signs in, they will immediately implement these edits and proceed work while saving useful time. This quickens processes like recruitment and employment.
Similarly, should you’re using a KPO team for project development, a 24-hour support would also help discover bugs at an early stage.
5. Access to global markets
Probably the most inherent benefits of outsourcing knowledge processes to different countries is that it gives you access to capture global markets and audiences.
For instance, outsourcing locations like Romania, Hungary, or Bulgaria offer easy accessibility to most of central Europe. Additionally they share convenient time zones with the UK. In consequence, outsourcers can gain access to international markets through these vendors, and study the market before establishing shop there.
6. Improved work efficiency
Outsourcing high-level processes in a single area of your enterprise can ultimately improve your organization’s operational efficiency as a complete.
KPO corporations are highly efficient and focused on improving and optimizing core functions in a company. So once you outsource to the KPO sector, you’ll have optimized productivity in vital processes, leaving you more time, money, human resources, and other resources to speculate elsewhere in your enterprise.
7. Increased scalability and suppleness
Probably the most vital advantages of hiring KPO corporations is that they’re highly flexible by way of their outsourcing services and contract lengths.
For instance, you possibly can start with a small budget and a limited variety of services out of your vendor. As time progresses, you possibly can scale up and increase your budget. Alternatively, you too can cut down on the services should you’re not satisfied with the standard or produce other financial reasons.
8. Optimized and evolved core competencies
Knowledge process outsourcing corporations often only hire highly expert individuals with specialized knowledge. So should you partner with considered one of these corporations, it’s an awesome opportunity to judge your current company processes and search for any skill gaps.
You too can have the outsourced employees alter your high-level processes or optimize them for optimum profitability. For instance, you possibly can have an outsourced IT project manager review the present project plan and make any needed changes in response to client requirements.
9. Higher resource utilization
In BPO, outsourcing non-core activities allow managers and employees more capability to concentrate on any core business function. Similarly, businesses can utilize KPO solutions to outsource important (core) processes to specialized vendors.
This frees up more capability and time so that you can recruit employees for other vital functions.
For instance, you possibly can outsource your core activities like tax processing or financial services to a 3rd party service provider. This fashion, you won’t must construct an in-house accounting team and profit from the seller’s expertise.
Outsourcing to a KPO company will even reduce the prevailing workload in your employees, positively affecting their productivity.
10. Greater tax advantages
For those who’re outsourcing to an offshore KPO firm, you turn out to be eligible for lower tax rates depending on the situation of the firm. Furthermore, many developing countries offer great tax advantages to rent employees from their local talent.
For instance, the UAE and Germany have considered one of the best corporate tax rates on the earth, at 55% and 29.9% as of 2023. Nevertheless, businesses in these countries can outsource a few of their processes to developing nations like India, Vietnam, or Malaysia to avail of tax advantages.
BPO corporations in India (including KPO firms) are exempt from the 18% Goods & Services Tax (GST). So corporations outsourcing here pays minimal tax while accessing the high-quality talent and expert labor.
11. Improved risk mitigation
Partnering with a KPO firm allows individuals experienced of their field to handle the operations of processes you will not be specialized in. Simply put, KPO providers are higher equipped to discover potential risks in your enterprise activities after which escalate them for resolution.
This fashion, you’ll even be higher prepared for any risks with minimal loss.
For instance, you won’t be spending anything on infrastructure or resources to scale up. So if the business enterprise does go under, you possibly can minimize your loss and won’t must worry about locked resources in failed ventures.
Discover more about offshore outsourcing here!
Speaking of risks, let’s understand some potential disadvantages of KPO to further prevent them in your future projects.
3 potential risks of data process outsourcing
KPO is an in-demand industry with lots of potential for development. Nevertheless, it also has its fair proportion of potential risks that outsourcers must find out about before considering KPO vendors.
Listed here are three key risks of data process outsourcing:
1. Lack of operational control
Since KPOs involve highly expert professionals, they could want more operational independence. Nevertheless, it’s natural to feel skeptical about directly handing over your confidential data to a brand new company. So that you’ll wish to be within the find out about all processes.
You possibly can start by hiring trustworthy and competent people. For instance, should you hire a KPO project manager, it’s essential be certain that they’ve the best skills and know-how to undertake vital business decisions with proper communication along with your in-house team.
Then you definately can initially ask the project manager to seek the advice of you for vital decision making. When you’re confident of their skills, you possibly can hand over the operations to your KPO manager.
2. Data security issues
Certain KPO roles like lawyers, accountants, or IT consultants require you to share your organization’s vital data with the outsourced agent. In such cases, you run the chance of information security breaches or mental property violations.
So what might be done?
To start out with, be certain that you’re hiring the best KPO vendors. Be certain that to envision their client testimonials regarding their data security protocols. You too can map out your security requirements in a contract along with your KPO providers.
3. Communication barriers
Most sorts of outsourced business processes, including KPOs, potentially run the chance of facing communication barriers with their outsourcing partners. This might be resulting from a difference in time zones, language barriers, cultural barriers, or problems resulting from web connectivity.
Regardless of the case, these communication barriers can eventually affect vital business processes and cause delays within the decision-making process. So it’s vital to define your communication channels like Gmail, Slack, etc. to make sure proper coordination between teams. It is best to also set standard communication procedures, including the hours of communication, hierarchy, etc.
Next, let’s take a have a look at some common forms of KPO services.
Essentially the most common forms of KPO services
Knowledge Process Outsourcing encompasses several different industries with its umbrella. While all of those are information-related services, they generally vary of their level of complexity.
Some common forms of KPO services are:
- Business operations: Management consulting services, technology, HR, brand, marketing, communications, knowledge, business development, etc.
- Investment banking: Financial research for investment banks, brokerage houses, financial institutions, etc.
- Legal Process Outsourcing (LPO): Accounts payable, litigation research, drafting contracts, patent services, etc.
- Research and development (R&D): Market research, customer evaluation, etc.
- Supply chain or value chain management: Purchasing, manufacturing, inventory management, demand planning, etc.
- Medical & healthcare: Market research, managing healthcare provider’s bills and submitting them to insurance firms, etc.
- Data evaluation and interpretation: Analyzing supplier, customer, finance and worker data.
Now, let’s understand some key differences between KPO and BPO.
KPO vs. BPO: What’s the difference?
Business Process Outsourcing (BPO) is a broad field that refers to corporations outsourcing non-core business processes, like customer support or data entry, to a third-party agency in the identical country or abroad.
Knowledge Process Outsourcing (KPO) is the outsourcing of core knowledge-intensive activities to a third-party vendor or freelancers. These activities are inclined to be data-driven and infrequently encompass the technique of gathering, managing, analyzing, and delivering market research and objective insights into businesses. KPO is taken into account to be a subset of BPO.
Now let’s look ar the opposite differences between the 2::
- Purpose: KPO requires expertise in knowledge, while the BPO industry requires expertise in the method.
- Scope of tasks: KPO focuses on complex, core processes while BPO deals with simpler, surface-level (non-core) tasks.
- Level of autonomy: KPO providers normally have full autonomy over their decisions, while BPO vendors are inclined to follow the directions offered by host corporations.
- Level of experience: KPO employees are highly expert professionals with expertise of their fields. However, BPO hires employees with basic education, strong communication skills, and general computer knowledge.
Final thoughts
Knowledge Process Outsourcing (KPO) is an awesome means to acquire useful insights into your core business processes. Employers can profit from the innumerable benefits of KPO, including cost-effective labor, increased efficiency, and risk mitigation.
So make sure that you understand how KPO can factor into your enterprise processes and make full use of its benefits.
