What is Knowledge Process Outsourcing (KPO)? Types,Advantages,disadvantages

Globalization has brought forth different versions of the modernized and technologically advanced world in the economy. Hence, a business is always seeking ways through which it can minimize their processes concerning costs but, at the same time, stay focused on core competencies. The best practice that has emerged through the past decades is that of outsourcing. Although Business Process Outsourcing is an industry in itself, the pace at which this kind of outsourcing is gathering steam these days is Knowledge Process Outsourcing, particularly in areas and industries driven more by high-level expertise and specialized knowledge than run-of-the-mill operations.

This article discusses what KPO is, its working dynamics, why businesses have a tendency to outsource their KPO, the differences in KPO services, their advantages and disadvantages, compares it with BPO, and finally takes a look at Top 10 KPO Companies of India.

1. What is Knowledge Process Outsourcing (KPO)?

In simple words, KPO means knowledge process outsourcing, transferring high-value knowledge work or services from an enterprise to other third-party services outside their organization. Typically, in general, what makes their model vary from others regarding various outsourcing models is their preference of less complex processes in routine work or repetitive jobs.

KPO businesses outsource work of decision-making, creativity, and problem-solving to third-party service providers usually engaged in research, data analysis, intellectual property, legal services, finance, and the likes. In the context of KPO, work that used to be involved merely by the basic knowledge of procedures now must extend into how to analyze, interpret, and come up with insights from data. Therefore, the traditional targets of the providers regarding KPO are highly skilled professionals, such as analysts, scientists, lawyers, and engineers.

2. How Does KPO Work?

KPO works through outsourcing a systematic model wherein the organization transfers knowledge-intensive processes or tasks to external vendors. They specialize in handling such tasks efficiently. This is how KPO works.

Tasks Identification: Business enterprises first identify tasks requiring specific knowledge but not requiring handling within the enterprise. These may include research activities, legal documentation, market research, financial analysis, and so on.

Vendor Selection: The next thing that companies would do is the selection of a proper KPO service provider with enough expertise and skilled people who can carry out the above assignments. In selecting the vendor, companies would scrutinize the credentials, experience, and technical capabilities of the vendors.

Knowledge Transfer: The service provider is transferred with the knowledge and processes of the client company, usually in the form of workshops, training sessions, or joint meetings. This is the most critical phase to ensure that the provider understands the details of the tasks to be managed.

Execution and Monitoring: The KPO service provider executes work based on specifications received. Business units establish communication channels and monitor the process to meet quality and performance standards.

Analysis and Reporting: Depending upon the nature of work outsourced, the KPO service provider may provide information, reports, or analysis to the client for informed decision-making.

3. Why Outsource KPO?

There are a number of reasons why business wants to outsource knowledge-intensive processes to third-party service providers:

1. a) Cost Savings

Outsourcing of KPO services to low-labour-cost countries is extremely cost-effective. This is very attractive for businesses based in developed economies as it helps to save on wages paid for highly specialized jobs.

1. b) Access to Specific Expertise

KPO service providers usually engage specialized staff in areas like research, finance, law, health care, and engineering. This way, it enables the firms to obtain this expertise without binding the experts to full-time employee positions.

1. c) Concentrate on Core Competency

It may focus on some of the core competency work of business while outsourcing some intricate tasks; in this way, a competitive edge will be created through less burden of non-core work and thus lead to innovations and growth.

1. d) Scalability

Outsourcing KPO enables companies to scale up their operations fast. The scope of services can be changed with business needs. This saves time in recruiting or training new employees within the company.

1. e) Time Zone Advantage

The advantage of time zones when outsourcing to a country allows 24/7 operations. Businesses can, therefore, complete time-sensitive projects much faster since work can continue day and night.

4. Types of KPO Services

KPO offers every form of service. There exist different varieties, such as the most trendy forms.

1. a) Market Research and Analysis

Market research is one of the chief functions carried out by a business just so that it might determine its industry’s favorites together with the competitors’ move. KPO offers services that help firms strategize their decisions by furnishing the gathering, analysis, as well as interpretation of data.

1. b) Financial research and analysis

Financial institutions and companies usually outsource financial analysis, portfolio management, accounting services, and risk assessment to KPO service providers. It requires specialized knowledge in financial markets, accounting standards, and risk management.

1. c) Legal Process Outsourcing (LPO)

Legal firms and corporations usually outsource legal research, document review, drafting contracts, and intellectual property management to KPO service providers having experience in law and regulations.

1. d) Healthcare KPO

Healthcare companies seek KPO services in healthcare such as: Medical research analysis of clinical data Medical billing and coding Compliance with regulatory requirements Outsource these services to the correct service providers, and healthcare companies can concentrate on healing patients.

1. e) Engineering and Design Services

Manufacturing and construction firms, along with IT companies can outsource their engineering work. The service providers offer technical expertise in this respect.

1. f) Intellectual Property (IP) Services

This includes patent research, trademark search, and IP portfolio management. Many businesses outsource IP-related tasks to KPO providers that specialize in intellectual property law and technical domains.

1. g) Content Development and Research

Companies that look forward to increasing their content output often approach KPO providers for research-based content development. This includes activities like technical writing, content creation, report generation, and white papers.

1. h) Human Resources and Recruitment

While BPO outsource any kind of HR operations, KPO specializes in the most expert functions of HR, such as recruitment for a specific position, talent analytics, employee training, and compensation analysis.

 

5. Advantages of Knowledge Process Outsourcing
6. a) Cost Savings

The in-house teams are no longer needed to be large as in the case of offshoring, which decreases the recruitment, training, salaries, and operational costs. These savings can then be used for other strategic business initiatives.

1. b) Access to Expertise

KPO providers bring deep expertise in specific domains, so that the businesses can benefit from a higher level of proficiency than they might be able to develop internally.

1. c) Improved Efficiency and Focus

Outsourcing knowledge-driven processes can help the company focus on strategic objectives and innovation rather than getting buried in research and analysis tasks.

1. d) Flexibility and Scalability

KPO services allow flexibility in the scale of operations. A company can rapidly adjust the scope of work without the need to hire or lay off staff members, thereby ensuring that the resources are optimized.

1. e) Innovation and Competitive Edge

Outsourcing R&D or other knowledge-intensive activities can be a means of harnessing new ideas and perspectives that enable a company to stay ahead of the curve.

6. Disadvantages of Knowledge Process Outsourcing

Although the advantages are considerable, there are also potential downsides to consider:

1. a) Quality Concerns

One of the difficult issues in KPO concerns maintaining quality when all things are outsourced to external agencies. Poor results and unmet expectations often appear with misunderstandings in transferring the knowledge or failure of clear communication.

1. b) Threats of Security

Outsourcing involves sharing confidential corporate information, which becomes the prime threat of security failure of the service provider has failed to develop sufficient security against breach of data.

1. c) Dependence on external Vendors

This has resulted in over-reliance on KPO providers with issues of losing control of the critical business processes. The workforce, quality standards, or pricing by the provider can cause an impact on operations.

1. d) Cultural and Language Barriers

Offshore locations bring in language and cultural differences. Miscommunication or issues related to the task execution may arise because the workforce of the KPO provider is not proficient in the client’s language.

1. e) Intellectual Property Risks

Outsourcing knowledge-based processes, especially research and product development, carries a risk of intellectual property theft or mismanagement.

7. KPO vs. BPO

KPO and BPO are two outsourcing models and the following is the difference:

Nature of Work: BPO comprises routine and repetitive jobs like data entry, customer care services, and call centers. In other words, KPO is work that is knowledge-intensive in nature and requires intelligence.

Skill Level: BPO is basically a type of work that needs elementary education, whereas KPO is the performance of the similar work with a greater amount of specialization in an identified area.

Complexity: KPO is complex since it is performed using the cognitive skills, problem-solving skills, and creativity, whereas BPO is a simple standard job.

Cost: BPO is costlier than KPO, as KPO requires much higher skill set to get jobs done.

8. Top 10 KPO Companies in India

India is becoming the world destination for KPO, due to availability of a huge pool of talent, lower cost, and specialization in varied fields. Let us now check out the list of the top 10 KPO companies in India.

1. Tata Consultancy Services (TCS).

TCS offers a complete range of KPO services in diversified domains from financial analysis, research, and data analytics to gathering various types of clients from several industries.

1. Wipro

Wipro is offering KPO services with streams like health care, legal, finance, and research. They are also involved in high-end knowledge processes.

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Infosys mainly focuses on great emphasis on KPO services in all domains-related to legal services, financial research, and engineering design.

1.  

Genpact is one of the leading companies providing KPO services. In KPO, some of the integrated services offered include business analytics, risk management, and financial reporting.

1. Cognizant

This company is keenly involved in KPO which deals directly with market research, business analytics, and decision making in a data-driven fashion.

1. EXL Service.

Finance, health care, analytics, and insurance rank high with EXL for KPO services.

• HCL Technologies

HCL offers KPO service in all fields: engineering, IT research, finance, and supply chain management.

• Sitel Group

Sitel Group is the largest service provider in the KPO industry. It specializes in customer experience management as well as business research.

1. Mu Sigma

Mu Sigma is an analytics and decision sciences leader providing high-value KPO services for data analysis and business intelligence.

1. Quatrro

Quatrro specialized in subcontracting complicated jobs such as account, financial analysis, and survey about the market.

Summary

Knowledge Process Outsourcing is outsourcing high-value knowledge-intensive tasks, which need specialized expertise and decision-making. They include market research, financial analysis, legal services, and data analytics. KPO is unlike BPO, where most tasks are routine and repetitive. KPO demands skilled professionals with a niche domain expertise. A company goes for KPO when they need to reduce costs, access expert knowledge, enhance efficiency, and concentrate core business activities. Some of the KPO services also practiced include market research, financial analysis, legal process outsourcing, intellectual property management, health-care services, and engineering design among many others. Disadvantages include cost savings, scalability, and innovativeness; some of the drawbacks include poor quality delivery, security threats, and dependency on service providers. Countries that outsource KPO are Indian countries, so there are firms such as Tata Consultancy Services, Wipro, and Infosys. Most specialized services are provided to nearly all industries. KPO differs from BPO because it requires much experience; thus, it is with complicated processes that can make the business more competitive on the market. However, this business faces the following problems: intellectual property theft, cultural differences, and communication barriers. Although with the above risks, the KPO still remains the preferred option of an enterprise to choose so as to optimize operations competitively.

Conclusion

Knowledge Process Outsourcing or KPO is an outsourcing business that focuses on knowledge-based tasks that need special kind of expertise. Such business tasks can be outsourced third-party vendors that save company costs, avail expert know-how, and increase the company’s scale with ease and convenience. Nevertheless, there were also concerns with quality control, risk of hacking third-party data and cultural shock.

In fact, despite all this, KPO is booming as fast as it was sometime back, mainly because there is an enormous pool of talent to be found in the markets of India and some other countries. Provided proper strategies, businesses may apply KPO for achieving efficiencies and promoting innovation to ensure business edge.

Frequently Asked Question

1. What does KPO mean?

KPO is the third stage of outsourcing core knowledge-intensive undertakings such as market research, financial analysis, legal services, and case management with respect to intellectual property to experts.

2. Difference KPO with BPO

KPO works on knowledge-oriented work like data analysis or legal research, while BPO involves mundane work like customer support or data entry that does not require much knowledge.

3. Why outsourcing KPO by companies?

KPO is outsourced by an organization to lower costs, use specialized skills, gain operation efficiency, and focus on the core competencies that will enable these organizations to innovate and to remain competitive.

4. What are the benefits associated with KPO?

It is true that they include reduced costs, access to specialized expertise, scalability, efficiency, and innovation that lead to advantage in the competition.

5. What are the various KPO risks?

KPO risks include problems of quality control, issues about the security of data, dependency on third-party vendors, and offshore sourcing that possesses problems due to different cultures or communications.