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.
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 that it offers to investors and clients, which include cost efficiency, high English proficiency, a highly skilled and flexible workforce, cultural compatibility, and many more. Moreover, outsourcing business processes is not only limited to multi-billion-dollar companies as small and medium-sized enterprises also stand to 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 between the two 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 which offers services that function as an extension of the client’s company. Several organizations opt to outsource teams which consist of individuals who are innovative thinkers, excellent troubleshooters, outstanding communicators, and overall reliable to meet the job requirements—and a third-party service provider can help you source topnotch talent and build a solid team for your business needs.
Business Process Outsourcing can be divided into the following types based on location:
- Offshore – provider is located outside of the company’s own country
- Onshore – provider operates within the same country as the contractor, albeit located in a different city or state
- Nearshore – provider is located in a neighboring country
A BPO company specializes in the following services:
These include direct and indirect procurement, collection, receivables, transportation administration, logistics and dispatch, as well as check, credit, and debit card processing.
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.
Finance and Accounting Services
These include auditing, general accounting, billing services, accounts payable, receivables, and regulatory compliance.
Human Resource Services
These cover hiring and recruitment, payroll services, healthcare administration, workforce training, insurance processing, and retirement benefits.
IT and Software Operations
These technical support functions include application development and testing, implementation services, and IT helpdesk.
Source: Jointly International
Knowledge Process Outsourcing
Knowledge Process Outsourcing is considered to be a subset of BPO. However, KPO services are more specialized and knowledge-based than those of BPO. These are a set of services focused to perform core functions which 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.
Subsets of Knowledge Process Outsourcing
Legal Process Outsourcing
LPO involves a huge variety of higher-level legal work which includes legal research, patent applications, and legal 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).
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.
Source: Express Journal
Benefits of BPO and KPO
As the demand for outsourcing services continues to increase, you should be aware of the benefits it 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 BPO or KPO partner oversees all the processes and tasks.
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 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.
Which is Best for your Business?
In terms of expertise, Knowledge Process Outsourcing has the upper hand. People who work under KPO companies are mostly degree holders and have had definite experience in field research. On the other hand, Business Process Outsourcing does not necessarily provide the same level of expertise despite being able to offer jobs for undergrads and high school graduates. Choosing the right outsourcing option depends entirely on the industry associated with your business. Service providers now even offer both BPO and KPO services simultaneously to companies if the need arises, as both are beneficial in terms of growth and efficiency.
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