Outsourcing is a strategic approach where businesses contract third-party service providers to handle specific tasks or services. This practice includes both business process outsourcing (BPO) and knowledge process outsourcing (KPO), two prevalent models that companies use to enhance efficiency and cut costs. BPO typically involves delegating non-core business functions, such as customer service or data entry, to a third-party provider.
In contrast, KPO focuses on outsourcing high-value tasks that require specialized knowledge and expertise, such as financial analysis or market research. By leveraging outsourcing, companies can concentrate on their core functions, thereby improving overall performance and gaining a competitive edge.
BPO vs KPO: Understanding Their Fundamental Differences
Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) are the two most common types of business outsourcing solutions that companies use today as modern ways to improve business activities. Hence, the choice between hiring BPO vs KPO services has been constantly on the rise for years now. However, how does a firm really choose between the two, given their unique forms, perks, and goals?
BPO call center services manage processes on behalf of clients, whereas KPO call centers focus on tasks requiring specialized knowledge and data handling, providing scalability options for businesses.
In this guide, we’ll walk you through the basics of BPO and KPO, the various types under each, their main contrasts, and why you should look into hiring outsourcing services in the Philippines.
What is Business Process Outsourcing?
BPO refers to the method of hiring a third-party service provider to perform certain business processes on your behalf. BPO employees primarily handle non-core, routine tasks that require basic computer and communication skills, making them easier to train and less specialized than KPO employees. In essence, a BPO firm takes charge or owns such tasks, including healthcare BPO outsourcing, to help the client improve functions, save on labor costs, and gain access to skilled staff. While BPO focuses on low-level procedures and peripheral operations, KPO focuses on knowledge, information, and high-level processes.
How does BPO work?
Hiring BPO services and the reasons behind it vary from one business to another. Also, the type, size, and age of a business affect the decision to make when choosing between BPO vs KPO. Back office outsourcing and front office outsourcing, which include customer-related services, are two types of BPO services that businesses can consider.
Startups and small firms may need to outsource their back- and front-office tasks due to their limited in-house resources. On the other hand, large firms may choose to hire BPOs if they find it to be cheaper and more efficient in the long run.
How does it differ from KPO?
KPO requires high-level domain expertise and a deeper understanding of the industry as compared to BPO, which mainly relies on a set of processes and rules.
Legal process outsourcing (LPO) is a specific type of KPO service that allows lawyers to utilize their judgment and expertise to manage legal issues rather than following a rigid set of pre-established processes.
Types of BPO
Based on a firm’s business needs, the kind of BPO service it must hire may be unique and should be tailored to achieve its goals. Often, business functions that are outsourced are grouped into two:
- Front office, which includes customer support, marketing, and other client-facing tasks; and
- Back office, which refers to core business aspects such as payroll, billing, and data entry. This includes both offline data entry, which involves creating documents and spreadsheets, and online data entry, which involves updating website data, catalogs, and databases.
What is KPO?
KPO, on the other hand, centers mainly on knowledge-based tasks and functions. Data analysis is a key function within KPO, enabling businesses to manage and interpret complex data sets. Often, these are data-driven, needing an in-depth process to gather, manage, analyze, and present objective business insights. Further, firms hire workers from third parties who have core areas of expertise in business research services to perform certain tasks. Data analytics plays a critical role in enabling businesses to achieve intelligent reporting and improve their operational efficiency by leveraging the expertise of third-party service providers.
Types of KPO
The KPO services that outsourcing firms offer vary based on their level of expertise and the complexity of the business needs. Medical coding is a specific type of KPO service, along with business research legal process, that requires skilled professionals who understand billing codes within the healthcare industry. Nonetheless, the most common examples include these:
- Digital marketing
- Creative design
- Web design
- Engineering design
- Legal services
Engineering BPO outsourcing is another specialized category within business process outsourcing that focuses on civil, structural, and mechanical engineering fields.
BPO vs. KPO: What’s the Difference?
Gauging the value of BPO vs KPO on your business can be quite a tough process to go through. Key differences separate BPO from KPO, highlighting the varying complexities, service scopes, and skill requirements. Choosing the best service that suits your business needs well will not only impact how you complete tasks; it will also affect the long-term goals and results you’ll reap. Here are some differences between BPO and KPO.
Scope and Focus
BPO often follows a set of processes and rules. BPO tasks are simpler and less complex duties that do not necessarily require advanced qualifications. In addition, it focuses on low-level processes and business tasks. It aims to provide services like customer care, technical support, and sales, among others. BPO deals with routine tasks, ensuring consistency and efficiency, while KPO handles more complex, high-level decision-making that requires specialized expertise and analytical skills.
On the other hand, KPO highlights the knowledge, expertise, and judgment of the hired staff. With this, it takes charge of tasks that require in-depth skills and complex analysis, such as legal services and market research, to name a few.
Complexity
While BPO is deemed less complex, it’s also driven by volumes and needs outsourced staff to have expertise in the process. Hence, this type requires a low level of coordination and collaboration. BPO services are volume-driven, focusing on handling large quantities of tasks efficiently, whereas KPO services are insight-driven, emphasizing the generation of valuable insights from specialized knowledge.
As compared to BPO, KPO is more complex in that it entails extensive knowledge and requires workers in this field to have expertise and experience. This complexity necessitates a technologically advanced system to manage the intricate tasks involved. Thus, KPO is insight-driven and needs a fairly high level of coordination and collaboration.
Staff
BPO firms hire workers who mainly have strong communication skills and basic computer knowledge. Good communication skills are crucial for BPO employees due to the high attrition rates and the nature of the job, which distinguishes them from KPO roles. This powers the requirement of having expertise in processes to excel in BPO.
To compare, KPO workers have intensive skill sets and professional qualifications. Most of the time, they are hired for their specialized knowledge, as the nature of their services is more comprehensive and needs-focused.
Process
Often, BPOs set fixed routines and pre-defined targets for their workers. This is so they can easily measure and deliver what’s expected of them. It is crucial that these processes are carried out in a consistent and efficient manner to ensure that operations adhere to predetermined standards, maintaining effectiveness and reliability.
In contrast, those working in KPO provide a more insight-based type of work, letting them report directly to the client in most cases. Hence, the kinds of tasks under KPO require ample knowledge of the business.
Benefits of Outsourcing
Outsourcing offers numerous advantages, including cost savings, enhanced efficiency, and access to specialized skills and expertise. By outsourcing non-core functions, such as the services that a company outsources, companies can significantly reduce labor costs and allocate resources to more strategic areas of the business. Additionally, outsourcing allows businesses to tap into the expertise and advanced resources of third-party providers, leading to improved efficiency.
For instance, a company might outsource its IT functions to a provider with specialized knowledge in cloud computing or cybersecurity. In the context of BPO vs KPO, outsourcing helps companies determine the best approach for their needs. BPO services, such as customer service or technical support, can be efficiently managed by third-party providers, while KPO services, like research and development or financial analysis, require more specialized expertise.
Challenges of Outsourcing
Despite its benefits, outsourcing comes with challenges that companies must navigate. One significant challenge is the potential loss of control over outsourced processes. When a company outsources a function, it may have less oversight over the quality of work or data security. Another challenge is the risk of communication breakdowns between the company and the third-party provider.
To mitigate these issues, it’s crucial to select a reputable and reliable service provider and establish clear communication channels. In the BPO industry, high employee turnover rates can impact service quality, while in the KPO industry, finding third-party providers with the necessary specialized knowledge and expertise can be challenging. Addressing these challenges requires careful planning and ongoing management.
BPO Market Size
According to Grand View Research, the global BPO market size was valued at USD 245.9 billion in 2021. Financial BPO outsourcing is a specialized category within the BPO market that focuses on providing essential financial services such as bookkeeping, accounting, and financial analysis. Apart from that, it’s also seen to expand with a compound annual growth rate of 9.1% from 2022 to 2030.
This key data can be referred to the rising number of firms looking to reduce the costs of conducting business, access global resources to provide world-class services, and keep on meeting the ever-growing market demands.
To sum it up, what factors drive the BPO market and its continuous growth? Some of these include:
- Focus on improving business efficiency
- Efforts to decrease business costs
- Continuous change in business dynamics by highlighting core business strengths
Reasons to Outsource to the Philippines
The benefits of outsourcing top services that every firm or sector encounters may vary. Nearshore BPO, while offering proximity and cultural alignment, also faces challenges such as high attrition rates and opposition from labor unions and politicians. Nevertheless, there are still a lot of common reasons why you should choose to hire BPO companies in the Philippines. To help you make the right decision, here’s a brief list of reasons to ponder:
1. Access to Skilled Pros
BPO vs KPO solutions offer businesses the flexibility and access to industry experience and skilled talent, minus the extra hassle involved in recruiting, training, and onboarding new hires. KPO providers are essential for handling complex business activities that require advanced skills and technology.
2. Higher Profit
One of the most common perks of hiring outsourcing services is being able to reduce costs in labor, process management, and other core business functions. Specifically, outsourcing payroll processing can significantly enhance overall business efficiency by freeing up internal resources and allowing managers to focus on critical projects and workflows.
3. Usage of the Latest Tech
While large firms have the means to afford software programs, IT tools, and other technology needed to complete tasks, the same thing might not apply to small businesses and startups. A technologically advanced system is crucial in Knowledge Process Outsourcing (KPO) to manage intricate tasks that demand specialized skills and expertise. BPOs and KPOs become greatly helpful in filling these gaps without requiring contracting firms to spend a huge deal of money.
4. 24/7 Staffing
With the support that this sector receives from the government and employers, it’s safe to say that the country is geared for a 24/7 work setup. BPO call centers play a crucial role in providing 24/7 staffing, ensuring continuous support for clients. Graveyard shifts, rotating shifts, and weekend schedules are common in Philippine BPOs and KPOs to cover the US hours and cater to foreign clients.
5. Topnotch Work Ethic
Filipinos are well-known for their excellence, integrity, loyalty, and value-driven work mindset. Good communication skills are crucial in the BPO industry, where effective interaction with clients and customers is essential. They’re also friendly workers, making them ideal as sole and team players. Apart from those, clients prefer working with BPOs and KPOs in the country due to a culture match, given the workers’ can-do attitude and positive outlook on work and in life.
6. Strong State Support
Since the BPO and KPO sectors provide great value to the economic growth of the country, the Philippine government ensures strong support to the industry. Despite challenges from labor unions and political groups in the UK and the US advocating to retain jobs and preserve local employment opportunities, the Philippine government continues to bolster the sector. This is through a few efforts such as tax and non-tax incentives; a voucher system from the TESDA to support funding for call center training; and partnerships with colleges to create BPO-focused learning modules to prepare future BPO workers.
Work with the Top BPO Firm in the Philippines
Now that you’re well aware of the top reasons you should outsource to the Philippines and the main contrasts between BPO vs KPO, it’s time for you to take time making a decision for your business needs. Whether you’ll hire BPO or KPO solutions, make sure to consider the main factors that can impact your short- and long-term goals to drive business success. After all, hiring outsourced services must help you improve the business’ bottom line and bring in the desired results for your firm.
Fortunately, the country’s leading BPO firm goes on to provide topnotch services to global clients across various sectors. These services are tailored to meet the specific needs of each client company, ensuring that both general processes and specialized knowledge are handled effectively. And you can be one of the wise businesses that took the opportunity to work with a trusted service provider such as Outsource Philippines. Our business process outsourcing solutions are designed to empower businesses to focus more on their core tasks while our team of experts handles the rest of their tasks and other business functions on their behalf.
Hire Outsource Philippines’ BPO Solutions
Outsource Philippines has almost 20 years of business experience and counting. BPO providers play a crucial role in offering outsourcing solutions by contracting out various business functions to third-party service providers, categorizing them into back-office and front-office outsourcing activities. We treat our clients as partners toward shared goals, steady growth, and business success. We don’t stop at bringing world-class services to our partners; instead, we work as reliable advisors that they can trust and maintain strong relationships with in the long run.
Sounds like something you want for your firm? Contact us today to see how we can work together and get a free quote on any of our trusted outsourcing services, or just inquire to know more.
