Outsourcing and peripheral business functions’ popularity is increasing day by day. All sizes of companies prefer outsourcing to cut down costs and earn maximum profits. But the question is: BPO vs. KPO which is better for your business?
As per a survey, 49% of executive outsource BPO services to get new capabilities access, and 46% implement BPO in their operating and business strategy. On the other hand, the global KPO market size will hit around $309.16 billion by 2032. That means both are crucial for running a business.
That’s why, before making a final decision, you need to focus on the key BPO vs KPO services factors that you explore from this note. So, without more talk, let’s get started!
What is Business Process Outsourcing (BPO)?
Business Process Outsourcing or BPO stands for a method or function of hiring out third-party vendors for different business-related operations. Its target is to optimize and streamline several business tasks like data entry, payroll processing, customer support, and others.
Suppose you run a manufacturing plant, and to promote your products, you need a marketing team. For this, you can set up an in-house team which will be expensive for a start-up business. In that case, you can outsource from a business service provider and fulfill your marketing goal.
After going through BPO concepts, let’s look at KPO outsourcing details in the next section!
What is Knowledge Process Outsourcing (KPO)
Knowledge Process Outsourcing (KPO) refers to outsourcing knowledge and information-related activities to other organizations. KPO firms offer advanced and highly expert tech support. For example, investment research, market research, data analytics, media process outsourcing, and more.
However, KPO business services usually demand high prices compared to BPO. KPO service providers or personnel have in-depth technological knowledge, judgment quality, and matter subject experience.
Now, it’s time to focus on BPO and KPO services’ core differences so that you can easily make a decision.
What are the Key Differences Between BPO vs. KPO?
As you already noticed, BPO involves operational tasks, handles the execution of standardized processes, and follows established protocols. On the other hand, KPO involves expertise and knowledge expertise services that require analytical skills.
Here, we’ve highlighted key differences between the two business process services.
| Key Points for Comparison | BPO | KPO |
| Definition | Refers to outsourcing non-primary or execution activities i.e., accounting. | Indicates to hire out skilled personnel to perform critical thinking activities, i.e., legal research. |
| Focus point | Low level or operational processes | Strategic decision-making and knowledge-sharing |
| Basics | Done work applying rules | Done work through judgment and critical thinking |
| Service provider | Completed by any size of companies | Completed by larger and specialized companies |
| Complexity level | Less complex | High complex |
| Requirement | Function or process expertise | Analytical and critical thinking expertise |
| Business driving role | Volume driven by reducing costs | Insights driven by reducing technical errors |
| Collaboration | Low | High |
| Communication | Good communication skills | Highly professional and qualified one’s |
| Examples | Health & wellness, accounting, etc. | Intellectual property management, investments, etc. |
By going through this table, you will be able to understand basic working procedures and how they provide services. However, to decide BPO vs. KPO which is better, check out the next section for in-depth details.
Types of business services provided
The key difference between BPO and KPO lies in their outsourcing service types. First of all, BPO is broken down into three types, such as:
- On-shore or domestic BPO: As an eCommerce business owner, if you outsource one or more business services to a third-party vendor within the same country, it is called on-shore BPO—for example, Human resources (HR).
- Nearshore BPO: When an organization or company outsources services to other neighboring country companies, it is called nearshore BPO, i.e., health and wellness and more.
- Off-shore BPO: If you outsource business process services from foreign countries, a company that has different time zones and culture is known as off-shore BPO—for example, Software and Technology, and others.
KPO types depend on different activities, such as:
- Data analytics: It involves modeling, examining, cleaning, and altering processes of an organization’s data. Organizations can make strategic decisions through this helpful information.
- Market research: By outsourcing KPO, you will get insights about your product or service and get an idea that attracts consumers most.
- Reporting and performance management: With KPO, you will get business-related reports that help you gain more productivity and operation excellence.
- Data management: It refers to data collecting, storing, and using to ensure security and cost-effective operations.
The nature of the working process
Business Process Outsourcing or BPO is a volume-driven focus on repetitive and transactional tasks whose main target is cost arbitrage. Optimizing non-primary or non-core processes helps the company earn more profits and reduce extra costs. Its working process nature is easily defined and executed.
On the contrary, Knowledge process outsourcing KPO focuses on more analytical tasks that require specialized concerns and domain knowledge. KPO business service providers are project managers, technical data analysts, medical assistants, and others.
Value Creation in Business
BPO vs KPO services cost depends on their operational tasks and value creation in business. BPO focuses on business cost savings and increases efficiency. It also improves your routine tasks and brings distinct meaning by saving time like client organizations.
Afterward, KPO focuses beyond cost savings and creates value via specialized analytics, expertise, and experience. KPO service providers deliver strategic brand guidelines, high-value insights, and more.
The level of complexity
BPO services are straightforward and perform routine tasks and workflows which generally doesn’t need critical thinking or analytical knowledge. For example, retail and eCommerce.
On the contrary, KPO services are more complex and require problem-solving skills, subject matter expertise, and analytical thinking. KPO business service providers conduct research, operate analytical tasks, and more.
Required service expertise and experience
The BPO industry or company has years of experience, expertise, and client reviews. Suppose, by hiring a BPO call center, you get trained recruits, well-researched processes, and many others in one company.
However, KPO services require expert vendors in your niche market, like accounting, law, supply chain, and others. All these sectors deal with confidential tasks.
Required skill
BPO employees are good at communication and have essential computer knowledge. These employees easily deal with routine processes and have experience, too.
KPO service providers must have decision-making, programming, and relevant field skills.
Required employee qualifications
BPO employees must have client-focused or consumer dealing experience because the sector is transactional in nature. Also, they have correct use of English, patience, good listening, a clear view of marketing trends, and others.
On the other hand, KPO employees require business niche-related detailed knowledge and expertise. Service providers must have statistical expertise, raw data analysis and processing, project management skills, and more.
Conclusion
Almost all sizes of industries outsource BPO and KPO to improve their productivity, reduce risks, and earn profits. We hope after going through several factors, you will finalize BPO vs KPO which is better for your business.
All the best!