Difference Between BPO vs KPO
When companies need to outsource some of their non-core business activities to any third-party service providers, they employ either of the two outsourcing methods – BPO or KPO. In the case of BPO, the service providers carry out simple and straightforward activities on behalf of the clients. On the other hand, in the case of KPO, the service providers are involved in managing information and taking low-level decisions on behalf of the clients. In other words, a KPO is similar to a BPO, only that the former is employed when a company requires high-level expertise. This article will discuss the key differences and similarities between BPO vs KPO in more detail.
What is BPO?
A BPO (Business Process Outsourcing) is an outsourcing method wherein a client company contracts out a plain vanilla function or process to a third-party service provider. In a BPO, the service provider needs to carry out the outsourced activity in a pre-defined way. Basically, the executor needs to ensure that the procedures are followed in a consistent and efficient manner.
A BPO can be further classified into front office and back office outsourcing. In a front office outsourcing, the third-part service provider handles customer-related services, such as contact or call center services. On the other hand, in back-office outsourcing, the service provider needs to handle internal business functions, such as finance, accounting, or human resources. Typically, BPO handles activities like human resources, customer care help desk, website services, finance and accounting services, technical support, etc.
What is KPO?
A KPO (Knowledge Process Outsourcing) is an outsourcing method wherein a client company contracts out important business-related activities to a third-party service provider. Basically, a KPO can be considered to be an extension of BPO, wherein the service provider needs to handle a more complex and technologically advanced system as it needs to take some low-level decisions on behalf of the client. A KPO can be a separate organization or a division of the parent company located in different geographies as a cost-saving measure.
As already mentioned, a KPO personnel needs to have process-specific advanced technical and analytical skills. In other words, the person should have in-depth knowledge of the process along with domain expertise as he/ she will be often required to make decisions on several low-level issues arising out of the process. Typically, KPO handles activities like market research activities, investment research activities, business research services, data analytics, legal process outsourcing, etc.
Head To Head Comparison Between BPO vs KPO (Infographics)
Below is the top 8 difference between BPO vs KPO:
Similarities Between BPO vs KPO
Despite all the key differences mentioned in the previous section, there are several similarities between BPO and KPO in terms of their benefits. Some of the most common benefits are:
- Cost savings: The third-party service providers usually have a robust process. They take extra effort to further improve their processes through process re-engineering and the use of the latest technologies. In this way, outsourced solutions bring down administrative, staffing, training, and other costs that reduce the client company.
- Focus on core business functions: Both BPO and KPO allow the client company to shift the focus of their manpower from non-core business activities to core business activities. In this way, the client company can improve its productivity and earn higher profits.
- Improve non-core functions: The personnel from BPO and KPO are especially skilled in their field of work, and they can handle all the non-core functions in an efficient and far more effective way. Their objective is to deliver best-in-class service to the client company.
Key Summary
The key points of the article are as follows:
- BPO is the outsourcing of non-core business activities to a third-party service provider to minimise cost and increase productivity. On the other hand, KPO is outsourcing knowledge and process-related functions to a third-party service provider to leverage the expertise of the highly skilled KPO personnel.
- Some of the most BPO functions include human resources, customer care-related activities, finance and accounting services, technical support, website services, etc., while KPO offers more skill-based functions like market research activities, investment research activities, business research services, data analytics, legal process outsourcing, etc.
- In outsourcing processes, the non-core activities are handled by a specialist third party. In this way, the client companies improve their operational efficiency by saving time, improving accuracy, and increasing productivity.
- The BPOs and KPOs often update their technological solutions that help the client companies keep pace with the latest innovations without any major capital cost. The outsourced solutions also reduce operational costs for the client company.
BPO vs KPO Comparison Table
Below is the 7 topmost comparison between BPO vs KPO
|
Head |
BPO |
KPO |
| Definition | It is the outsourcing of peripheral activities of a company to a third-party service provider. | It is the outsourcing of knowledge- and information-related activities to a third-party service provider. |
| Activities | The activities are often based on set processes and rules. The employees need to carry out repetitive tasks with set targets. | The activities involve judgment, knowledge, and domain expertise. The employees need to provide insights, forecasts, etc., to the client. |
| Degree of complexity | It is less complex and is driven by volumes. | It is a more complex process that requires dealing with information for low-level decisions. |
| Expertise | The person should have a sound understanding of the given process. | The personnel needs to be an expert in a particular domain. |
| Arbitrage | It purely depends on cost arbitrage. | It depends on knowledge arbitrage besides cost. |
| Co-ordination | It is low in BPO. | It is high in KPO. |
| Skill level | It hires employees with basic education, computer knowledge, and strong communication skills. | It hires employees who are highly qualified and possess advanced technical skills. |
| Focus area | It focuses on low-level process | It focuses on high-level processes. |
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