The Key Differences Between BPO and KPO

The offshoring and outsourcing industry in the Philippines frequently use the business terms Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO). In spite of its popularity however, understanding the two concepts can be a little tricky. This is especially for companies who are new to the outsourcing and offshoring scene. We’ve rounded up some of the important […]

The offshoring and outsourcing industry in the Philippines frequently use the business terms Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO). In spite of its popularity however, understanding the two concepts can be a little tricky. This is especially for companies who are new to the outsourcing and offshoring scene. We’ve rounded up some of the important facts to remember about the two concepts to simplify what KPOs and BPOs are really all about.

1. KPO and BPO are not exactly the same.

BPO is the general term for the outsourcing of business functions to a provider outside the company to cut costs. These functions are usually back or front office services related to IT, client interaction, customer supporthuman resources, and finance. KPO, on the other hand, is considered as a part of the BPO industry. But it involves outsourcing of core functions that require specialized skills and knowledge. Some functions include animation, design, research and development, digital marketing, and legal services.

2. Cost reduction motivates BPOs, while specialized solutions motivate KPOs.

BPO is more focused on finding cost-efficient business solutions. Its the reason why most outsourced tasks are those that are not directly linked to a company’s value chain. KPO requires greater expenditure compared to BPO because of the lack of professionals in certain sectors within developed countries.

3. Hiring employees for KPOs can be more challenging than BPOs.

BPO firms can easily hire employees with basic education. KPO firms on the other hand need to spend more time and effort in recruiting talent. This is because functions outsourced by KPOs require specialized skills, experience, and knowledge. Recruiting talent for this form of outsourcing could be considered challenging.

Because of BPO and KPO’s key differences and requirements, it is imperative for investors and companies looking to outsource or offshore services in the Philippines to perform due diligence before choosing any service provider. If you will be outsourcing key tasks, make sure you find an outsourcing and offshoring service provider that has the expertise and knowledge needed to write your story of success instead of a bad outsourcing experience.

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