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Business process outsourcing (BPO) and knowledge process outsourcing (KPO) both allow a company to outsource certain services to a different organization to save costs, focus on core responsibilities, and take advantage of advanced skills. BPO focuses on tasks, ranging from manufacturing products to providing customer care. By contrast, KPO involves the application of training and expertise to research, data analysis, and other information-based activities. The key difference between BPO and KPO is that one focuses on completion of tasks, while the other involves the analysis and collection of data.
Companies can use BPO and KPO for a variety of reasons. While outsourcing is commonly associated with moving business functions overseas, it is possible to use a domestic firm. A small manufacturer might, for example, rely on a larger company to produce components for its products. The larger company may be able to produce parts more cheaply and reliably, allowing the small company to focus on the actual assembly of products.
In BPO and KPO, companies can contract directly with a company they want to work with, or rely on a third party intermediary to locate the most appropriate firm. BPO can include manufacturing, back office tasks like managing benefits plans, and other processes. Personnel in a firm that offers BPO receive appropriate industry training and may work on projects for several different companies, depending on the structure of their organization. This can make them less expensive, as they aren't exclusively employed by just one firm.
KPO firms can offer research, data analysis, and other skills that require expertise and familiarity with complex systems. Companies using BPO and KPO may need highly trained personnel for activities like risk analysis, and it can be less costly to work with them through KPO specialists. KPO can also include the creation and maintenance of detailed records to create a clear paper trail in the event of questions about decision-making processes.
The use of BPO and KPO can shift over time in response to a company's changing needs. Some companies may find it useful to maintain flexible on-call staff to assist with projects as needed, for instance, while others may want to establish a permanent relationship with a BPO or KPO provider. The best option depends on the company and the market conditions. Companies can negotiate pricing with a provider on the basis of the types of services needed and the level of skill required.