BPO vs. KPO: Which Outsourcing is Best for Your Business?

Nowadays, outsourcing is utilized by almost every industry, sector, and multinational company across the globe, particularly because of how it enables businesses to save costs and focus on their core functions. Outsourcing means contracting with a third-party service provider, whether in the same country or another, with respect to operations and responsibilities of certain business processes such as customer service, lead generation, IT services, or data entry services, among others. Its two distinct models, BPO vs. KPO, has their own unique characteristics and benefits.

Outsourcing to the Philippines

The Philippines has maintained its position as one of the best outsourcing destinations in the world in the past decade. Its continued success can be attributed to the many advantages it offers to investors and clients, including cost efficiency, high English proficiency, a highly skilled and flexible workforce, cultural compatibility, and many more. 

Moreover, outsourcing business processes is not limited to multi-billion-dollar companies; small and medium-sized enterprises can also benefit from the country’s attractive outsourcing climate.

While Business Process Outsourcing and Knowledge Process Outsourcing are related to the business activities of an organization, both are not entirely the same. As one who owns a business and is looking to outsource some of your business functions, you must understand the differences of BPO vs. KPO before you dive in.

Business Process Outsourcing

Business Process Outsourcing is the contracting of non-primary business functions and activities to a third-party service provider that offers services as an extension of the client’s company. Several organizations opt to outsource teams that consist of individuals who are innovative thinkers, excellent troubleshooters, outstanding communicators, and overall reliable to meet the job requirements. A third-party service provider can help you source top-notch talent and build a solid team for your business needs.

Business process outsourcing can be divided into the following types based on location:

• Offshore Outsourcing – When the service provider is located outside of the company’s country of operation.
• Onshore Outsourcing – When the service provider operates within the same country as the contractor, albeit located in a different city or state.
• Nearshore Outsourcing – When the service provider is located in a neighboring country.

A BPO company specializes in the following services:

Back-Office Support

These include direct and indirect procurement, collection, receivables, transportation administration, logistics and dispatch, as well as check, credit, and debit card processing. Outsourcing back-office functions to a BPO company can significantly enhance efficiency and cost-effectiveness for businesses. 

By leveraging the specialized expertise and scalable resources of BPO providers, companies can streamline operations, reduce costs associated with in-house staffing and infrastructure, and improve overall efficiency. Additionally, BPOs can easily adjust their services to meet fluctuating business needs, ensuring flexibility and avoiding the overhead of hiring and firing permanent staff.

Customer Service

This covers a business’s voicemail services, customer support, email services, appointment schedules, telemarketing, surveys, payment processing, order processing, quality assurance, warranty administration, and other customer feedback.

BPOs can play a crucial role in improving the customer experience by providing dedicated customer service teams, often with multilingual capabilities. This ensures that customers receive timely and effective support, regardless of their location or language. Furthermore, outsourcing customer service allows for round-the-clock support, ensuring that customers always have access to assistance. By analyzing customer interactions, BPOs can also provide valuable insights for businesses to improve their products and services.

Finance and Accounting Services

These include auditing, general accounting, billing services, accounts payable, receivables, and regulatory compliance. Outsourcing finance and accounting functions to a BPO company can help businesses ensure compliance with complex regulations, reduce the risk of errors, and improve accuracy. BPO providers often have experienced accountants and auditors who can handle complex financial tasks efficiently and accurately. Additionally, outsourcing these functions can help businesses reduce costs associated with hiring and training in-house staff.

IT Services

These technical support functions include application development and testing, implementation services, and IT helpdesk. By outsourcing IT services to a BPO company, businesses can gain access to skilled IT professionals with expertise in various technologies. This ensures that businesses have the support they need to maintain their IT infrastructure and stay up-to-date with the latest technology trends. 

Outsourcing IT services can also be a cost-effective solution for businesses, as it eliminates the need for significant upfront investments in hardware, software, and in-house staff. By focusing on their core competencies and avoiding the distractions of managing IT operations, businesses can improve their overall efficiency and productivity.

Knowledge Process Outsourcing

Knowledge Process Outsourcing is considered a subset of BPO. However, KPO services are more specialized and knowledge-based than BPO. These services are focused on performing core functions that will increase the company’s value. The main difference between the two is that Knowledge Process Outsourcing involves knowledge-related work that requires advanced analytical and technical skills. Furthermore, KPO provides operational efficiency and helps businesses meet customers’ demand for high-quality services, thus adding strategic value to their products and services.

Here are the Subsets of Knowledge Process Outsourcing:

Legal Process Outsourcing

LPO involves a wide variety of higher-level legal work, including legal research, patent applications, and agreements. Some LPO firms even advise clients.

Research Process Outsourcing

RPO companies specialize in and perform research and analysis functions that support businesses, marketing firms, investment, and biotech.

A KPO company specializes in the following services:

Banking, Securities, and Insurance

This service involves stock process tracking, financial modeling, and detailed company analysis and profiling, among others. Research-related activities done by this sector fall under the preview of investment research.

Data Management, Search, and Analytics

Key data analytics services such as customer analysis, retail analysis, and supply chain analysis provided by KPO companies are crucial in helping clients gain a better understanding of business issues and develop effective solutions. KPO companies provide information regarding the market, customers, competition, products, and services to industries like telecom, banking, and FMCG (Fast-Moving Consumer Goods).

Engineering Design

This involves activities that range from design to production and maintenance. KPO companies perform design works using computer-aided design (CAD) and advanced engineering methods. Some sectors that benefit from this service are automotive, aerospace, utilities, as well as construction or industrial machinery.

Market Research and Competitive Intelligence

High-end research done by KPO companies includes reports, presentation preparation, customer and industrial surveys, data analysis through statistical tools and techniques, and more.

Remote Education and Publishing

This service mostly benefits educational institutions, government agencies, publishing houses, information aggregators, and corporations.

Benefits of BPO and KPO

As the demand for outsourcing services continues to increase, you should be aware of the benefits of BPO vs. KPO can bring to your business.

Better Results in Non-Core Areas

Professional BPO and KPO companies are specialized in their areas and are experts in managing non-core functions such as billing, data entry, accounting, or data analytics.

Increased Focus on Core Business Functions

Outsourcing will allow you to focus on growing your business instead of worrying about countless administrative tasks, data processing services, and customer service or support.

Improved Operational Efficiency

By outsourcing some of your business functions, you can save time, increase productivity, and improve accuracy while your partner oversees all the processes and tasks. This will vary which outsourcing model you choose between BPO vs. KPO.

Access to Competitive Technology

New technology can be quite costly and risky. By outsourcing, your BPO or KPO partner, which has the latest available technology, can help you keep pace with cutting-edge innovations and solutions.

Cost-Effectiveness

Cost is one of the top reasons why businesses outsource some of their functions to a third-party service provider. For instance, outsourcing to the Philippines will allow you to save at least 60% on business costs and expenses as your BPO or KPO partner will shoulder costs like infrastructure, recruitment, taxes, and more. 

BPO vs. KPO: Which is Best for Your Business?

Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) are valuable tools for businesses seeking to optimize operations and reduce costs. While KPO often involves more specialized tasks requiring advanced degrees and extensive experience, BPO services can also provide significant benefits, particularly for businesses that need to scale operations or handle routine tasks.

The best outsourcing option for your business depends on your specific needs and goals. If you require specialized expertise for high-value tasks, KPO may be the better choice. However, if you need to scale operations or handle routine tasks efficiently and cost-effectively, BPO can be a valuable option.

Want to learn more? Contact us today, and let us help you with your business needs.