The digital economy today can be easily considered the knowledge economy. Information industry leaders create knowledge by finding meaning and context in information. The process of continuously creating and disseminating this information is known as knowledge processing. Knowledge Process Outsourcing is, simply put, outsourcing of information-driven knowledge.
Businesses look at the variety of available information and data to deal with competitive challenges and make sustainable strategic decisions. This information is available from both internal and external sources and helps businesses find high-quality vendors capable of driving business strategies through analytics. With markets being highly competitive, organizations are rapidly moving to outsource all non-primary business activities to focus on core business areas of growth. On top of that, they stand to gain from the increased efficiencies and minimized costs. Outsourcing to places like India can benefit businesses by accessing domain-based processes and advanced analytical skills instead of the usual process expertise.
Managers have to identify third-party service providers who have a strong background in outsourcing. They must be able to derive synergies between practices from delivering on an organization’s KPO needs. To help vendor managers and executives analyze outsourcing parties based on expertise and experience, we’ll discuss the meaning of KPO, its types, advantages and some examples of KPO.
Knowledge Process Outsourcing refers to outsourcing information-related, core business activities. It has its application in operations and is a crucial requirement for creating valuable services and products. Organizations hire third-party vendors to outsource high-level tasks that require technical knowledge, skills and expertise. Contractors tasked with such information-related business activities need specialization and expertise in specific areas to efficiently collect, understand and apply data.
We see from KPO meaning that it’s different from Business Process Outsourcing (BPO). BPO creates and follows a process, while KPO provides services and a specialized knowledge set. Essentially, the former involves choosing highly efficient processes without experts and the latter offers specialists who can cater to the needs of complex topics by creating custom processes. The information processed by KPO is essential for an organization’s business. At the center lies data that’s the foundational element for the value chain of a brand. Apart from being data-driven, Knowledge Process Outsourcing is heavily complex. It includes identifying and collecting data points before mining them for actionable insights and is considered quite intense. The special skills and expertise that it demands are why many organizations often hire multiple outsourced employees or vendors.
Types Of KPO
Knowledge Process Outsourcing is an umbrella term for different types of activities. Since the services range from skilled labor to expertise, they can be further classified. Here are the four main types of KPO:
Data Analytics And Insights
Data analytics is the process of modeling, cleaning, examining and altering an organization’s data to segregate useful information. It helps organizations make sound strategic decisions by suggesting relevant and helpful conclusions. Analyzing supplier, customer, finance and employee data can help discover significant patterns that aid in making pre-calculated business decisions.
Market research lets businesses test waters through surveys conducted beforehand. It tells them whether a product or service will attract customers or not. Market research services offer vital information to organizations about economic shifts, competitors, demographics, customers’ spending patterns and current market trends.
Global Reporting And Performance Management
They help achieve increased productivity and operational excellence by providing performance measurement and efficient reporting across industries. Performance management ensures that a set of activities or outputs effectively and efficiently meet an organization’s goals. It can focus on the performance of an employee, department or the entire organization.
Data management refers to the practice of collecting, storing and using data efficiently, cost-effectively and securely. There are a broad range of practices, procedures, tasks and policies involved in digitally managing data in an organization. Stakeholders require robust business analytics and reporting. Data management does that by providing efficient solutions to integrate, store, retrieve and share data.
To succeed, vendor managers have to maintain flawless communication and strong KPO firm alignment. They have to use advanced business tools, such as business process management software, that are crucial for all the stages of KPO management.
Advantages Of KPO
Knowledge Process Outsourcing services are well-rounded and include experts who can offer their experiences for both businesses and their customers. Let’s look at some of the advantages of KPO:
The biggest advantage of KPO is probably the cost advantage. Organizations don’t have to set up separate infrastructures or bear operational costs for expert intervention or special tasks. Businesses can afford to price their products and services competitively and even save on tax.
Accessing And Sourcing Talent
Organizations get to work with the best. They get the opportunity to collaborate with skilled and knowledgeable professionals from different parts of the world. Managers can also choose to hire new talent or terminate contracts when needed. This flexibility allows them to stay within budget as they adapt to changes.
Better Resource Utilization
Organizations that outsource non-core activities save on resources and training as the third-party vendor gets the work done through their own employees. This means that organizations save a lot of money from recruitment costs, especially if these skills are highly technical. Furthermore, the resources saved by outsourcing a process can be utilized in streamlining other important processes.
Focus On Core Functions
Outsourcing non-primary functions allows businesses to focus their attention on improving efficiency and results to provide better value to customers and shareholders.
Disadvantages Of KPO
Top firms include data security and high-level quality management. Clients can also expect attention to detail and responsiveness as service-related offerings. However, the biggest challenge revolves around security.
Here are some of the disadvantages of KPO:
- There are risks associated with sharing data with a third party. Data can be lost, stolen or sold.
- Even if a vendor offers a list of services, they may not be good to collaborate with. Poor work culture and high employee turnover rates can see team members or team leaders often leave mid-project.
- A third-party vendor may not comply with data confidentiality and security norms, which can be a major risk for a business to deal with.
Managers must be cautious while making hiring decisions. HR departments have to be efficient in avoiding compliance issues. Vendor managers have to thoroughly research their prospective collaborators and work with established and reputed firms as much as possible.
Knowledge Process Outsourcing Examples
An organization usually utilizes KPO when looking for expertise and specialized knowledge that isn’t already available. They may also do so to lower costs or add value. Let’s look at some Knowledge Process Outsourcing examples:
- One example of KPO is a manufacturer who decides to acquire raw products, use various processes to add value to them and sell the final product for a higher price. They will need expertise and specific skills to add more value to the product and improve the efficiency of the production processes at the lowest possible cost. This will also help the business establish a competitive advantage.
- Another example of KPO is a B2B tech software development organization that needs to streamline its production line. It’ll need assistance from individuals or vendors who have the skills to streamline business processes and maximize profits without impacting quality.
- Venture capitalist organizations also need assistance from individuals with proper knowledge and skills to conduct investment research for time-sensitive and interesting new opportunities.
Utilizing a KPO is a faster and highly cost-effective way of acquiring knowledge and expertise when compared to hiring and training employees in-house. It provides agents with training and knowledge that delivers a support experience sooner. Managers aware of KPO meaning quite often utilize it for the sheer flexibility it offers in scaling up and down depending on the needs of the processes.
We’ve covered the fundamental aspects that can help managers and executives overcome the challenges in choosing the right vendor or partner for outsourcing. Since data valuable to the organization is on the line, they have to look for vendors with experience, expertise and advanced techniques well-suited for third-party collaborations. But first, managers have to know how to utilize process automation and outsourcing for individual and organizational growth.
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