Outsourcing peripheral and routine business functions means hiring a third-party service provider to handle responsibilities and operations associated with these processes. In addition to saving time, workforce and cost, it also adds value to the business.
The business process outsourcing vs knowledge process outsourcing or ‘BPO vs KPO’ debate quite commonly arises while analyzing the value each holds for an organization. And when it comes to value, money is not the only factor for a business. Elements like research and development play a vital role in a business’ growth. With that in mind, we’ll discuss the difference between BPO and KPO to help you understand what to look at while making strategic decisions.
BPO vs KPO: Definition
To understand the difference between BPO and KPO, we have to know what they actually are. Misconceptions like ‘not having cost-benefit counts as a loss’ or ‘a BPO is just a call center’ are too common. To clarify the differences, let’s first discuss in brief what each of them is:
Business process outsourcing (BPO) refers to outsourcing non-primary activities. A third-party contractor or service provider is hired to look after specific processes and functions. Through outsourcing of processes, an organization can increase productivity and efficiency and decrease costs of the business.
A BPO can handle both front- and back-end operations. Some of its activities include customer care, human resources, technical support and solutions, website, accounting and finance services. If outsourcing is done to a firm in the same country, it’s on-shore BPO and for a firm overseas, it’s offshore BPO. Over the years, BPO has gained a lot of importance due to its contribution to better processes and functions.
Knowledge process outsourcing (KPO) is a means of value addition and refers to the outsourcing of a business’s core functions. It’s a subset of BPO that may or may not hold cost benefits for an organization. Processes that require highly skilled personnel with knowledge of the industry and its processes are outsourced to provide solutions.
KPO requires thorough knowledge, expertise and analytical skills as it is more specialized compared to BPO. Research activities related to investment and market, data analytics and business research services are all KPO activities. Legal Process Outsourcing or LPO is a subset of KPO that deals specifically with legal services.
Business process outsourcing and knowledge process outsourcing are the two major outsourcing services that are considered by almost every business today. As the tendency to outsource continues to grow, we see more of the BPO vs KPO debate.
Now that we have discussed the definition and meaning of each, let’s look at the key differences between BPO and KPO.
KPO And BPO Difference
BPO vs KPO is a topic that’s in vogue and may stay for quite some time. Distinctly understanding the KPO and BPO difference can help managers significantly boost productivity by improving business functions and processes. Here are 10 key differences between BPO and KPO:
- The main difference between BPO and KPO is that BPO deals with outsourcing peripheral operations and processes of a business to an external organization with the aim to minimize costs and boost efficiency, while KPO relates to outsourced knowledge and information to third-party service providers.
- BPO activities include HR support, data entry, customer support and accounting. Activities under KPO mainly include research support along with analytics and legal support.
- An important KPO and BPO difference is that BPO is based on rules that have already been established, whereas KPO is based on sound judgment and expertise in a field or industry. This plays a crucial role while making decisions on outsourcing.
- KPO has to hire employees who have in-depth expertise and high qualifications, but BPO requires basic competence and skills for processes.
- Tasks under BPO are predefined, while KPO tasks require studying the business to develop a solid understanding of it.
- KPO is insight-driven, while BPO is volume-driven.
- BPO is dependent on cost arbitrage, while KPO depends on knowledge arbitrage.
- Unlike BPO, coordination and collaboration are quite high in KPO.
- BPO doesn’t focus on low-level processes as KPO does.
- A significant KPO and BPO difference is that KPO tasks are way more complex than tasks under BPO.
Businesses opt for such outsourcing techniques to achieve results of high quality and overall cost-effective operations. The answer to the question ’KPO vs BPO: which is better?’ comes down to what tasks a business needs help with. The difference between BPO and KPO are laid out to assist managers in realizing the right move for growth.
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