Knowledge Process Outsourcing (KPO) involves outsourcing core business activities and highly specialized knowledge related work to third-party professionals. Many businesses today select KPO to access benefits like cost savings and enhancements to the corporate’s efficiency.
So, what’s KPO, and will it’s right for your corporation?
In this text, we’ll explain what KPO is and describe a number of several types of KPO services. We’ll also provide some advantages and downsides of KPO and explain how KPO differs from BPO. Lastly, we’ll answer some FAQs.
Let’s begin.
Table of Contents
What’s KPO?
KPO involves outsourcing of core, information-heavy business processes to third-party service providers. Businesses contract work to KPO service providers whose staff have advanced education and expertise in specialized areas. It allows businesses to access a bigger talent pool of specialists and to leverage lower labor prices.
For instance, the owner of a producing business can hire consultants through KPO to investigate their production process and funds. The consultants may give expert advice on improving the efficiency of the manufacturing process and help the business lower production costs and maximize its competitive advantage.
The staff that perform the knowledge process, like lawyers, accountants, data analysts, etc., might be employed by a third-party company. Alternatively, they could possibly be freelancers hired by the corporate on a contract basis.
So, where are you able to find such a third-party vendor?
As well as to picking a KPO company or freelancer domestically, you too can select:
- Offshoring: Contracting work to a third-party individual or company in a far-away country, often to leverage lower labor prices for a similar skill set in developing countries.
- Nearshoring: Contracting work to a third-party individual or company in a close-by country outside of your individual country.
To know what KPO looks like in practice, let’s have a look at some several types of KPO services.
6 common examples of KPO services
KPO is an umbrella term covering many various sorts of services.
Below are six examples of several types of KPO services and the way they may help businesses:
1. Data analytics and interpretation
KPO corporations offer cutting-edge knowledge and processes to gather and analyze data for your corporation. They’ll then provide actionable insight which you could use to enhance your corporation.
For instance, a KPO company can perform data evaluation to find out the efficacy of your supply chain when it comes to aspects like:
- Procurement.
- Shipping and transportation management.
- Inventory management.
Their actionable insights can show you how to make your supply chain more efficient and profitable.
2. Market research
Market research, also generally known as business research, can provide firms with in-depth knowledge about:
- Customer experience, demographics, and wishes.
- Changes out there.
- Potential unexplored markets and verticals (market niches).
The KPO research process includes surveying techniques, statistics, and analytics of the above aspects to show you how to higher understand your customers and grow your corporation.
3. Financial consulting
Financial process outsourcing often involves complex processes that a finance-related KPO service provider can deliver.
Corporate finance consultants can analyze your assets, income, and expenses. They’ll give you a financial statement suited to your corporation goals.
Investment research also falls under this category. You possibly can work with an investment consultant to get advice on managing your assets and investments.
Other financial KPO services can include:
- Complex accounting and payroll processes.
- Financial modeling.
- Valuation (estimating the worth of assets).
4. Management consulting
This information process involves the service provider auditing the client’s current business procedures, making recommendations, and forming a method for improvement.
In response to Forbes, the work of a management consultant falls into three categories:
- Objective Evaluation: Providing unbiased, in-depth research, evaluation, and advice in regards to the business’s operations.
- Functional Expertise: Providing guidance on mergers, leadership, reorganization, human resource management, risk management, etc.
- Project Management: Helping business leaders execute projects and measure their success.
5. Advanced data entry and management
Data management specialists can arrange efficient systems for storing, retrieving, and sharing data. They can even show you how to establish reliable data capturing systems. This KPO function might be helpful in critical industries.
For instance, in healthcare, it will probably help:
- Capture client information accurately.
- Share and retrieve patient files.
- Keep track of patient accounts for invoicing.
6. Legal Process Outsourcing (LPO)
Businesses often outsource a legal process to a specialized LPO provider.
LPO can include services like:
- Drafting and reviewing contracts.
- E-discovery (collecting digital evidence for legal processes).
- Litigation support.
Each sort of KPO could have practical applications in numerous industries, including healthcare, engineering design, manufacturing, and more.
But how and why do businesses use KPO?
Let’s now explore how KPO solutions may help your corporation.
5 key advantages of KPO
Listed here are five significant benefits that KPO provides:
1. Improved efficiency
KPO may help improve efficiency in your corporation in several ways.
First, through advanced business processes evaluation, your outsourced, expert worker can show you how to understand if your organization is working optimally. You possibly can make changes to make sure every part flows easily, from procurement to sales and management tactics.
For instance, KPO specialists can work with a producing business to search for things like:
- Unnecessary waste of materials.
- Opportunities for extra training.
- Poorly organized spaces and systems.
- Lack of standardized processes.
- Issues with suppliers.
They’ll know methods to make recommendations for improvements to the manufacturing process from start to complete.
Meanwhile, you release your in-house staff and management team to handle their existing tasks without extra strain.
2. Higher results at a lower cost
KPO, especially when offshored, may help businesses reduce operational costs and improve profitability.
It’s because there’s an unlimited pool of qualified and expert professionals in countries with relatively low labor costs in comparison with countries like the USA and the UK.
You possibly can hire an experienced offshore team to handle a knowledge process at a fraction of what it could cost in your individual country.
For instance, a financial analyst’s average monthly salary within the US is roughly $10,500. In India, a well-liked financial services outsourcing destination, the common is just about $520. Basically, the common salary in India is around 179% lower than within the US.
Nevertheless, even in case you outsource inside your individual country, KPO can prevent money.
Whenever you outsource to a 3rd party, they’re accountable for their employees and infrastructure. This implies you don’t need to pay for things like:
- Training.
- Equipment.
- Office space.
- Worker salaries.
You simply pay for the service itself, based on an outsourcing agreement.
Whenever you’re saving money and boosting efficiency, you furthermore mght increase your corporation’s overall profitability.
3. Increased access to qualified specialists
In the case of specialized knowledge in a specific field, it will probably be difficult to search out qualified experts. There could also be a scarcity of experts in search of employment in your region.
KPO permits you to find experts worldwide. It makes the method easier since you only need to search out a service provider who provides you with the qualified staff members you would like.
4. Ability to leverage up-to-date methods
KPO service providers are equipped with the most recent technology and methods. This allows you to sustain with industry breakthroughs, improving your competitive edge.
Moreover, you don’t need to sacrifice your money and time to research latest methods or purchase latest equipment.
5. Access to latest markets
Outsourced experts can show you how to discover latest markets to expand your corporation. Your KPO partners ought to be specialists in your industry and will subsequently possess knowledge where you’ve got blind spots.
Moreover, in case you decide to offshore your KPO, you may discover latest markets internationally that you simply otherwise wouldn’t have access to.
Nevertheless, like every outsourcing process, there are some risks related to KPO. Let’s have a look at some possible KPO disadvantages.
3 potential disadvantages of KPO
Listed here are three possible challenges you would encounter with KPO.
1. Security concerns
Since KPO concerns core business functions, the info involved might be extremely sensitive. Security risks may occur while you include a 3rd party in your corporation. The seller could share Mental Property (IP) or other proprietary information outside the corporate.
Within the case of offshoring, security protocols and IP laws may differ from country to country. That’s why offshore KPO service providers should be compliant with the offshoring regulations of the countries their clients reside in.
For instance, outsourcing corporations providing services to or from the European Union (EU) should be familiar and comply with EU outsourcing regulations. This is the reason it’s essential to properly research a KPO firm before forming a partnership.
To guard your corporation, you may take measures like:
- Ask the provider about their data security and compliance protocols.
- Check the KPO provider’s past client testimonials.
- Seek legal aid to attract up an airtight security clause in your outsourcing agreement.
2. Communication difficulties
Communication difficulties brought on by language barriers, time zone differences, and cultural differences are more common with offshore KPO. Nevertheless, even within the case of domestic outsourcing, communication difficulties can arise on account of dialects, accents, or work culture differences between each organizations.
Overcoming communication difficulties generally is a easy matter of selecting the correct outsourcing partner, ensuring language compatibility, and skilled synergy. It also helps to decide on the correct communication tools to convey information and progress.
You can too establish a robust agreement that explicitly lays out details like:
- Approved communication channels.
- Project timeframes.
- Expectations.
- Key Performance Indicators (KPIs).
This fashion, you may make sure that the KPO firm understands methods to communicate progress and problems effectively.
3. Quality control issues
One other potential issue in a KPO partnership is that chances are you’ll ultimately not be satisfied with the service you receive. This might be since you don’t have direct control over the outsourced company’s workflow.
Nevertheless, you may avoid such problems by:
- Understanding the KPO provider’s processes.
- Discussing how their work should mix with yours.
- Researching their repute.
- Defining explicit expectations in a Service Level Agreement.
Now, KPO is an outsourcing process, so chances are you’ll wonder the way it differs from Business Process Outsourcing (BPO).
Let’s now address this, and another commonly asked KPO questions.
3 FAQs about KPO
Listed here are some questions continuously asked about KPO:
1. How does KPO differ from BPO?
BPO refers to contracting any business process to a third-party service provider.
KPO is also known as a subset of BPO. Nevertheless, there are distinctions between these two types of outsourcing.
Basically, BPO services involve two varieties of non-core business processes:
- Back-office services: Processes that don’t involve customer interaction, equivalent to administrative tasks and data capturing.
- Front-office services: Processes like customer support and marketing that require the staff of the BPO company staff to interact directly with customers and clients, like customer support and marketing.
To learn more in regards to the ins and outs of BPO, you may read this text.
KPO jobs are likely to be more complex since they involve core business functions. The service providers may play a task in decision-making or advising.
A typical example of a BPO service is a BPO call center. BPO call center agents can take customer support calls, provide basic technical support, or make marketing calls. Compared, KPO call centers may handle more specialized subjects like advanced technical support and in-depth customer support.
Let’s have a look at them side-by-side:
| BPO | KPO | |
| Expertise | Executing Processes | Providing Knowledge |
|
Tasks involved |
Process-based front and back-end services. E.g., customer support, technical support, sales. |
Knowledge-based evaluation and research services. E.g., management consulting, financial consulting, market research, analytical services. |
| Qualification Requirements | Basic qualifications, good communication skills, basic computer skills. | Highly-specialized skilled qualifications and technical skills. |
| Driven By | High volume of labor at low price. | Quality of data, experience, and judgment. |
| Service Complexity | Low-complexity | High-complexity |
2. When should businesses consider KPO?
Business circumstances that will call for a KPO an answer include:
- Limited resources: When the knowledge process you require involves expensive overhead costs, you may outsource to an organization already investing in those resources.
- Insufficient expertise: When your organization doesn’t have enough expert employees to finish the knowledge process, you may outsource to experts without further burdening your in-house team.
3. What regions are particularly outstanding in KPO?
Different countries are likely to have reputations for various strengths regarding outsourcing. For instance, India is a well-liked destination for software development outsourcing. The Philippines is highly-regarded for its BPO sector and is growing in its KPO sector.
Listed here are another countries which might be well-known within the KPO industry:
Wrapping up
Outsourcing a core business process to a specialist third-party service provider can offer quite a few advantages. KPOs (Knowledge Process Outsourcers) can improve efficiency, increase profitability, in addition to provide access to technical knowledge and resources.
Nevertheless, there are also some obstacles to look out for. That’s why it’s crucial to thoroughly research providers and weigh the professionals and cons before diving right into a KPO partnership.
If you happen to’re considering KPO for your corporation operations, use this guide to show you how to make informed decisions.
