- The outsourced is the external agency that agrees to perform specific business functions.
- The outsourcer is the company that hires the external agency to carry out certain tasks.
- The service provider is the agency or individual who actually performs the assigned work.
Definitions [2]
Explain the following term/concept.
KPO
Knowledge Process Outsourcing (KPO) refers to the outsourcing of functions related to knowledge and information to the third-party service providers. It is a subset of BPO. KPO requires advanced analytical and technical skills as well as high degree of specialist expertise. It allows both core and non-core activities.
Definition: Business Process Outsourcing
According to Gartner, "Business Process Outsourcing is the delegation of one or more IT enabled business processes to a third party that owns, administers and manages the business process according to a defined set of matrics".
Key Points
Key Points: Concept of Outsourcing
- Outsourcing means contracting certain business functions or processes to an external agency or third party.
- It helps companies use the expertise and specialised services of outside service providers.
- Outsourcing services are usually cheaper as specialised firms operate on a large scale.
- It allows companies to focus on their core activities, thereby improving efficiency.
- In outsourcing, there are mainly three parties involved – the outsourcer (company), the outsource (vendor), and the service provider.
Key Points: Knowledge Process Outsourcing (KPO)
- Knowledge Process Outsourcing (KPO) means outsourcing high-level knowledge work to external experts to improve quality, efficiency, and reduce costs.
- It is the higher-end of BPO and focuses on knowledge expertise rather than routine process work.
- In KPO, there is no fixed procedure to solve problems; experts develop their own methods and solutions.
- It mainly covers non-core but specialised activities such as research, data analysis, legal services, and consultancy.
- KPO requires highly skilled professionals with proper knowledge, experience, and analytical abilities.
- India has become successful in KPO due to cost advantages, skilled workforce, and operational efficiency.
Difference Between BPO and KPO
| Basis of Difference | BPO | KPO |
|---|---|---|
| Level of Expertise | Low level of industry or domain expertise | High level of industry or domain expertise |
| Nature of Process | Repeatable processes, require quick learning | Non-repeatable processes, require regular learning |
| Client Involvement | Low involvement with clients | High involvement with clients |
| Workforce | Large workforce, can go up to thousands | Smaller workforce with tighter teams |
| Billing Rates | Low hourly billing rates | High hourly billing rates |
Key Points: Parties Involved in Outsourcing
Key Points: Advantages and Disadvantages of Outsourcing
Advantages of Outsourcing
- To the Outsourcer: Focus on core activities, cost reduction, less investment, and access to expert services.
- To the Outsourced: Earning income, expanding client network, and better use of expertise and experience.
- To the Service Provider: Better monitoring of performance and clear understanding of process costs.
Disadvantages of Outsourcing
- To the Outsourcer: Risk of high fees and leakage of business secrets.
- To the Outsourced: Uncertain repeat business and responsibility for maintaining quality standards.
- To the Service Provider: Need to train employees and manage additional responsibilities.
Key Points: Business Process Outsourcing (BPO)
- Business Process Outsourcing (BPO) means transferring certain business processes to an external agency for better efficiency and management.
- It usually involves outsourcing non-core activities, such as security, housekeeping, payroll, or customer support.
- The outsourced agency is generally a third-party firm, though sometimes a company may create its own captive unit to handle such processes.
- The external agency manages the day-to-day operations of the outsourced function according to agreed terms and standards.
- The service provider performs the work on a contractual basis and charges a fixed fee for the services rendered.
Key Points: Legal Process Outsourcing
- Legal Process Outsourcing (LPO) means outsourcing legal work of a company to specialised law firms.
- Business firms outsource legal matters because they may not have expertise in all types of laws.
- LPO covers areas such as labour laws, taxation, corporate laws, funding laws, and marketing laws.
- Companies hire specialised law firms for tasks like patent registration, trademark protection, and intellectual property rights (IPR) matters.
- LPO is becoming popular because legal compliance is complex and companies cannot afford to violate laws.
