The global Knowledge Process Outsourcing (KPO) market is projected to grow by 20% annually until 2030. This goes to show that more and more businesses are using KPO to grow, and you can too.
While KPO can make a marked difference in the way you operate your business, getting started can be a challenge. To help you with the process, we’ve put together this guide in which we will explain what KPO actually is and how it can benefit you. Plus, we will share real-life examples to inspire you.
Knowledge Process Outsourcing Explanation Made Simple
Knowledge Process Outsourcing (KPO) refers to delegating information-intensive business activities to external parties that need special expertise and advanced knowledge. Commonly outsourced services include data analysis, market research, and financial consulting.
The goal of these services is to give companies access to skills that may not be available in-house. Doing so allows them to focus on their core activities and reduce expenses at the same time.
When to Use KPO Services
- When you need specialized knowledge. Some projects may need the knowledge and expertise of someone who’s not on your internal team. For example, advanced data analysis or specific legal expertise.
- When you want to reduce expenses. You can save money while maintaining high quality by outsourcing to regions with lower labor costs.
- When you want to focus on core activities. Peripheral tasks can be outsourced to let your team concentrate on main business operations.
- When you need to scale operations. You want to scale your operations up or down but are unsure about hiring or letting go of full-time employees.
- When you want to innovate. Sometimes,a fresh pair of eyes can offer new perspectives.
Who Should Use KPO Services
- Small to Medium Enterprises (SMEs). To access expertise that would be too expensive to hire full-time.
- Large corporations. To streamline operations and focus on strategic activities by outsourcing non-core functions.
- Startups. To leverage specialized knowledge without the overhead costs of large teams.
- Industries with high technical requirements. To gain access to specific technical skills in industries like healthcare, engineering, and IT.
3 Key Components Of Knowledge Process Outsourcing
Knowing the key components of Knowledge Process Outsourcing (KPO) can help you maximize the benefits of this strategic approach.
A. Domain Expertise
One fundamental aspect of KPO is outsourcing tasks to professionals who are experts in specific industries like finance, law, engineering, or data science. This means they know all the industry-specific trends, best practices, and rules and regulations in their respective fields.
Thanks to their domain expertise, you no longer need to extensively train internal staff members to give the knowledge they need.
B. Specialized Skills
KPO capitalizes on specialized skills not typically found in company’s internal teams, like data analysis, market research, financial modeling, and legal research.
These specialized skills are important for tasks that go beyond routine processes and require high level of precision and analytical ability. So, by outsourcing these tasks, you can benefit without the overhead costs of hiring in-house specialists.
C. High-Value Tasks
KPO involves outsourcing high-value tasks critical to a company’s strategic operations. These tasks include market analysis, R&D, intellectual property research, and strategic consulting.
Outsourcing these tasks to experts let lets you achieve better results and focus your internal resources on core activities.
KPO vs BPO: What’s The Difference
Outsourcing is now a billion-dollar industry. Both KPO and Business Process Outsourcing (BPO) are outsourcing strategies, but they serve different purposes.
KPO focuses more on high-level tasks that only professionals with specialized knowledge and expertise can do. These tasks are usually analytical, knowledge-intensive, and project-specific. Common examples include market research, data analysis, and specific legal services.
Meanwhile, BPO services involve routine and operational tasks that don’t require advanced skills or knowledge. Most of the time, the main reason companies use these services is simply to cut down costs. BPO can cover both front-office services like customer support – which it’s best known for – and back-office functions like data entry and payroll.
| Comparison Basis | KPO | BPO |
| Purpose | Outsourcing specialized knowledge tasks | Outsourcing routine business tasks |
| Service | High-end services | Low-end services |
| Process | Requires in-depth understanding of tasks | Simple, repetitive tasks |
| Complexity | High-level complexity | Low to moderate complexity |
| Qualification | High domain knowledge | General knowledge |
What Knowledge Processes Are Usually Outsourced?
Familiarizing yourself with what knowledge process businesses usually outsource can help you identify where you might benefit from outsourcing as well.
I. Research and Development (R&D)
R&D requires very specific expertise and skills. KPO services connect you to a global talent pool who are experts in their respective fields. You can use their skills to speed up your development cycles, cut down on expenses, and focus internal resources on core activities.
This approach is especially useful for industries like pharmaceuticals, technology, and manufacturing because they’re expected to have constant, continuous progress.
II. Data Analytics and Business Intelligence
You need to deal with a large amount of information in data analytics and business intelligence. So you can outsource them to share the load and save time.
KPO offers actionable insights and help in tackling complex problems, including how to interpret large amounts of data at once. They also play a role in modeling, evaluating, and adjusting vital organizational data.
Additionally, you get access to advanced analytical tools and techniques that KPO providers use which might be too expensive, complicated, or simply time-consuming to develop internally.
III. Market Research and Analysis
Market research and analysis are the most commonly outsourced knowledge processes. In fact, in 2022, the analytics and market research segment had a 36.5% global market share, the highest among all segments.
These tasks require detailed insights into market trends, customer behavior, and competitive landscapes. They include conducting surveys, interviews, and data analysis to gather valuable market intelligence.
IV. Legal Process Outsourcing (LPO)
Legal process outsourcing involves delegating legal services to external providers. Services like legal research, contract management, compliance, and intellectual property management are some common examples.
LPO providers bring specialized knowledge and efficiency, using advanced legal technologies to streamline processes. This reduces costs and improves the quality and speed of legal work, helping you manage legal risks more effectively.
V. Financial and Accounting Services
Financial and accounting services include tasks like bookkeeping, payroll, and tax preparation. It can also cover financial analysis. These services are important in maintaining accurate financial records, complying with regulatory requirements, and making informed financial decisions.
Outsourcing frees up internal resources, enabling you to focus on strategic financial planning and other core activities for growth.
3 Real-Life Examples Of Knowledge Process Outsourcing
Wondering how KPO services are used in real life? Here are 3 outstanding examples to spark your creativity.
Shop Direct (Retail)
Shop Direct began as a catalog retailer in the UK over 80 years ago. They offer a wide range of products from shoes to sofas. In 2014, the company transitioned to a pure-play digital retailer as it aimed to provide a compelling online shopping experience.
Why Shop Direct Outsourced Knowledge Processes
Shop Direct needed to transform a large amount of customer data into actionable insights to replace the experience of a physical catalog with personalized online interactions. The challenge was to engage customers effectively, drive online sales, and enhance the customer journey – all in a digital format.
How They Did It
Shop Direct partnered with EXL to use its expertise in data analytics and retail. With its team of experts, EXL helped create a digital platform that analyzed website performance, sales, and customer behavior.
The team used analytics, machine learning, and propensity models to craft targeted messaging and develop customized strategies to reduce cart abandonment.
Result
The partnership with EXL generated an additional $23M and made Shop Direct the second-largest online retailer in the UK. It even won a Digital Transformation Pioneer Award at the 2017 Retail Week Tech.
In total, it received over 1.3 million website visits daily and delivered 49 million products annually, which means it achieved a 25x ROI on its investment with EXL.
Takeaway
By partnering with a KPO provider that’s knowledgeable in data analytics, you can successfully transition to digital platforms, personalize customer interactions, and significantly boost sales and market position.
Best Buy (Retail)
Best Buy is a leading multinational consumer electronics retailer. It also specializes in appliances and tech services. The company has headquarters in the United States and offers products and services both online and in its physical branches.
Why Best Buy Outsourced Knowledge Processes
Best Buy wanted to improve its business efficiency and flexibility in response to changing business needs. It had a long list of things to improve: IT operations, supply chain management, website features, customer call centers, and data analytics.
How They Did It
In 2004, Best Buy outsourced its IT operations to Accenture. Accenture’s strategic plan was to overhaul the company’s IT systems, launch data-driven projects to improve customer interactions and business efficiency and train over 600 Best Buy employees.
Result
Best Buy successfully transformed its IT operations, improved customer experience, and expanded its digital and technology teams. The partnership with Accenture led to significant technological advancements and operational improvements. In fact, in 2020, another partnership between the 2 was announced, evidence of how effective Accenture’s KPO services were for Best Buy.
Takeaway
Strategic partnerships with KPO providers can drive business efficiency, innovation, and talent development. Over time, this improves business operations and creates a better experience for customers.
Gaming Device Manufacturer (Gaming)
The case subject is an unnamed US-based provider of innovative gaming devices and accessories for gaming consoles and PCs.
Why It Outsourced Knowledge Processes
The company faced high backlogs because of slow adaptation to global success, inconsistent customer journeys, and a high false-positive gaming device returns rate. It also suffered from slow scalability to specific seasonality.
How They Did It
The company partnered with Conectys for scalable multilingual and multicultural outsourcing solutions. Conectys implemented user process redesign, customer satisfaction tracking, user experience testing, and knowledge base creation. They provided Level 1 and Level 2 technical support and real-time data analytics.
Result
Conectys reduced web-form/email response time to under 4 hours, cleared a 2,000-ticket backlog in 60 days, implemented real-time NPS, FCR, and CES tracking, and decreased the false-positive RMA rate by 70%. This improved the overall customer experience and operational efficiency.
Takeaway
Scalable and flexible KPO solutions can effectively address high backlogs, improve customer experiences, and enhance operational efficiency in the technology and gaming sectors.
10 Benefits Of Knowledge Process Outsourcing
In the fast-paced, competitive business world, leveraging Knowledge Process Outsourcing (KPO) offers numerous advantages that can take your company to new heights.
1. Access to Specialized Talent
KPO services let you tap into highly skilled professionals who are experts in specific domains, like data analytics, legal services, and market research. It fills the knowledge gaps so you can efficiently improve the quality of your deliverables. This means you can achieve top-quality results without needing to invest in full-time specialists.
2. Improved Cost Efficiency
While KPO services can be more expensive than traditional BPO, they still offer major savings compared to hiring in-house experts for complex problem-solving. Plus, outsourcing to regions with lower labor costs reduces overall expenses. This enables you to allocate resources more effectively.
3. Access to Advanced Technology
KPO providers have advanced technological capabilities and infrastructure that might be costly for you to develop independently. You can use this latest tech stack without having to spend a lot of money upfront. This is particularly helpful if you’re thinking of using cutting-edge technology to improve your products and services.
4. Increased Scalability and Flexibility
KPO services give you the flexibility to scale your operations up or down based on your needs. This lets you efficiently manage any fluctuations in your regular workload.
Not to mention, the ability to adjust your staff numbers accordingly can also help you handle economic downturns or seize growth opportunities. With this, you can stay on top of market changes and always one step ahead of the competition.
5. Improved Work Efficiency
You free up your in-house staff when you outsource complex and specialized tasks. This improves overall work efficiency and lets you allocate time and resources better. With the extra time available, your business can grow more while still maintaining high operational standards.
6. Maintain Strategic Focus
Once work becomes more efficient, your staff, particularly management, can now focus on your core business functions. Internal teams can also concentrate on big-picture strategies and initiatives for greater business success. This focus on strategic growth can keep you not just competitive but also primed for innovation.
7. Enhanced Risk Mitigation
Leaving knowledge processes up to the experts can help you manage business risks more effectively. KPO firms have extensive experience and insights into specific markets and can give you valuable analysis and recommendations.
This expertise lets you make informed decisions and reduces the potential for costly mistakes while strengthening overall business strategy. For example, the Banking, Financial Services and Insurance (BFSI) segment dominated the KPO market with a revenue share of 32.8% in 2022 because of its sensitive nature and need for expert handling, which KPO services provide.
8. Better Resource Utilization
KPO helps you make better use of your resources by freeing up your internal teams to focus on more important tasks. This smart allocation boosts productivity and efficiency as you can get more done with your current workforce while outsourcing specialized tasks to experts.
9. Greater Tax Benefits
Depending on where you outsource, you can also benefit from various tax incentives. These benefits make KPO an attractive option if you’re looking to maximize your financial advantages. By strategically choosing outsourcing destinations, you can improve your bottom line through tax savings.
10. Global Market Expansion
The global KPO market size was valued at USD 56.73 billion in 2023 and is projected to reach over USD 147.27 billion by 2030 at a CAGR of 14.6%. Asia Pacific, particularly India, China, and the Philippines, leads the global KPO market becuase of its large pool of skilled professionals.
This growing surge proves that businesses have been increasingly reliant on KPO services to achieve success. After all, with KPO, you can tap into new markets and gain valuable insights into different regions around the world. For example, knowing how to handle cultural nuances, regulatory requirements, and consumer behavior makes it easier to expand globally.
9 KPO Challenges + Solutions
Knowledge Process Outsourcing (KPO) can present several challenges, but when you prepare yourself for these hurdles and implement effective solutions, the benefits can be significant.
Challenge 1: Communication Barriers
One of the major challenges in KPO is communication barriers. This can be because of differences in language, culture, and time zones. Over time, barriers can cause misunderstandings, delays, and frustration among team members. Not only can it hinder the progress of projects, but it can also negatively impact the quality of the work delivered.
Solution:
Implement structured communication protocols and tools. Regular meetings, clear documentation, and the use of collaboration platforms can help improve communications within the team. Providing cultural training and language support can also improve team camaraderie and help with cross-cultural communication.
Better yet, you can source talent from an agency like Genius that already prioritizes this. We specialize in sourcing the best talent from the Philippines and Latin America. Our strict vetting process also includes evaluating language proficiency and cultural fit – setting a strong foundation for effective communication right from the start.
Challenge 2: Quality Control Issues
Maintaining consistent quality standards in teams where members are oceans away from you can be difficult. After all, without direct oversight, verifying that all outsourced tasks meet your company’s expectations and standards isn’t easy.
Solution:
Establish clear service level agreements (SLAs) and quality benchmarks. Regular audits, performance reviews, and feedback loops will help maintain high standards. Training and continuous improvement initiatives can also ensure that your chosen KPO provider meets your quality expectations.
Challenge 3: Data Security Risks
Sharing sensitive data with third-party providers inherently carries security risks. A data breach can cause significant financial loss and reputational damage. Protecting the confidentiality and integrity of your data is a major concern when outsourcing knowledge processes.
Solution:
Choose KPO providers with robust data security measures. This includes encryption, access controls, and regular security audits. Clear agreements on data handling and compliance with regulatory standards can protect your sensitive information.
Challenge 4: Employee Resistance
One common issue that companies experience when using outsourcing services for the first time is resistance from current employees. This may be because of fears of job loss or feeling undervalued. Either way, it can create a hostile work environment and reduce overall productivity.
Solution:
Be transparent with your employees about why you’re outsourcing and how it will benefit not just the company, but also them. Regularly reassure them about job security, if you must. Providing new opportunities can also help ease the transition and improve morale.
Challenge 5: Dependency on Vendors
Over-reliance on external providers can be risky. Even if you have a reliable KPO provider, any disruption from their side can still negatively affect your business. This type of relationship can also limit your flexibility and control over the tasks you’re outsourcing.
Solution:
Diversify your KPO partnerships to avoid over-dependency on a single provider. Make sure you have contingency plans. It would also help to have a comfortable level of in-house expertise to manage critical functions if the worst comes to worst.
Challenge 6: Hidden Costs
Outsourcing can sometimes have hidden costs, like those related to managing the relationship, additional training, or unforeseen service charges. These unexpected expenses can diminish the financial benefits of KPO.
Solution:
Conduct a thorough cost-benefit analysis before entering into a KPO agreement. Clearly outline all potential costs in the contract and monitor expenses regularly. Transparency and regular reviews can help manage and mitigate hidden costs.
Challenge 7: Regulatory Compliance Complexities
Operating across different regions means navigating various regulatory landscapes. Ensuring compliance with diverse laws and regulations can be complex and resource-intensive.
Solution:
Work with KPO providers that have strong compliance frameworks and a track record of adhering to regulatory requirements. Regular audits and updates on regulatory changes will help maintain compliance and avoid legal pitfalls.
Challenge 8: High Employee Turnover Rates
Outsourcing companies, including KPOs, can have high turnover rates. This can disrupt project continuity and affect the quality of their output. Also, constantly changing teams can lead to knowledge loss and inconsistencies.
Solution:
Choose providers with good employee retention rates and strong human resource practices. Establish clear onboarding and training programs to quickly integrate new team members. Regular communication and relationship-building activities can also help stabilize teams.
Challenge 9: Maintaining Quality Across Locations
Keeping quality consistent across different locations can be challenging. Outsourced tasks might not always meet the desired quality levels, causing customer dissatisfaction and potential business loss.
Solution:
Set up stringent quality control processes and regular evaluations. Establish clear performance metrics and make sure that the KPO provider understands your quality expectations.
8 Steps on How To Get Started With Knowledge Process Outsourcing
While you can use KPO services to transform your business operations and drive growth, it requires careful planning and execution. Here’s a step-by-step guide to help you get started.
Step 1: Optimize Your Knowledge Management Processes
An organized knowledge base fosters efficient information sharing and keeps your KPO providers focused on your company’s mission, vision, and values.
Start by refining your internal knowledge management systems. Use software that can centralize important documents like contracts, service level agreements, and historical performance data. This will help you access critical information easily and allow your KPO partners to align their strategies with your organizational goals.
Step 2: Define Your Rationale for Outsourcing
It helps to know why you want to outsource certain processes in the first place. Determine if outsourcing is really the path for you and if KPO complements your strategic objectives. Compare your business’s current performance against your goals and assess your capacity for internal changes.
By understanding your rationale, you can avoid steering your company away from its vision. This will also help you choose a KPO that supports your long-term goals rather than just serving as a temporary fix for internal issues.
Step 3: Prioritize Domains and Tasks to Outsource
Identify which tasks would benefit the most if they were outsourced. You can prioritize the areas where you’re losing money, struggling to meet goals, or seeing significant growth potential. Start with a slow rollout, outsourcing tasks in phases to manage the transition smoothly.
Doing it in phases not only helps your team adapt better to changes but also lets you evaluate the impact of outsourcing before scaling up. This helps you maintain control over core functions while benefiting from specialized external expertise.
Step 4: Identify KPO Candidates
The best way to find the best KPO providers for you is to evaluate them in all aspects relevant to your business: where they excel, what services they offer, and how they performed in the past.
Look for providers with proven success in your industry and a solid reputation for delivering quality services. Check their cost structures and contract terms. Make sure they meet your legal, regulatory, and operational standards to minimize risks and maximize the benefits of outsourcing.
Step 5: Set Terms and Manage KPO Relationships
Once you’ve chosen a KPO provider, establish clear engagement terms. At this point, you should also define data governance, risk management protocols, and communication channels. Regularly track performance and maintain open lines of communication to address any issues promptly.
Remember, it’s important to treat your KPO providers as an extension of your team. This means keeping them in the loop when it comes to your strategic decisions. Doing this enhances their performance and fosters a collaborative partnership at the same time.
Step 6: Use Continuous Change Management and Knowledge Management
Prepare your team for procedural changes by implementing ongoing change management practices. Inform them of upcoming changes, explain the rationale, and collaboratively create a transition plan. Continuously document new insights and trends uncovered by your KPO providers to maintain a robust knowledge base.
Effective change management minimizes disruption and helps your team adapt to new processes smoothly, maximizing the benefits of KPO.
Step 7: Establish Robust Service Level Agreements (SLAs)
Create detailed SLAs to set clear expectations for service quality, turnaround times, and performance metrics. SLAs are important for maintaining accountability and making sure your KPO providers meet the agreed-upon standards and contribute positively to your business objectives.
SLAs should outline the responsibilities of both parties and provide a framework for monitoring and evaluating the KPO provider’s performance. Regular reviews and adjustments to the SLAs help maintain high standards and address any emerging issues promptly.
Step 8: Monitor Performance and Drive Continuous Improvement
Continuously monitor the performance of your KPO provider against the SLAs and other key performance indicators. Use feedback mechanisms for ongoing communication and improvements. Encourage your providers to adopt new technologies and best practices to enhance their service quality and effectiveness.
Regular audits and performance reviews help you stay on top of the outsourcing arrangement and make sure it continues to deliver value to your business. This commitment to continuous improvement drives long-term success and maximizes the benefits of KPO.
Conclusion
Knowledge Process Outsourcing (KPO) offers businesses access to specialized skills and advanced technologies that drive growth and innovation. By using KPO services, companies can focus on core activities, enhance operational efficiency, and stay competitive in their respective markets.
However, finding the right KPO provider is crucial to get the most out of it. As a leader in outsourcing solutions, Genius connects you with the top 1% of professionals who are best at knowledge-intensive tasks. With our free interviews, one-time fee, and 6-month talent guarantee, you can get the expertise you need to achieve your business objectives without taking unnecessary risks.
Get in touch with Genius today to learn how our tailored KPO services can take your business to the next level.
FAQs
Which is better, KPO or BPO?
KPO and BPO both serve different functions, which means one isn’t inherently better than the other. If you need high-level processes, go for KPO, but if you’re only trying to do more routine tasks or save more money, go for BPO.
How can businesses choose the right KPO provider for their specific needs?
Businesses can choose the right KPO provider for their needs by defining their objectives, evaluating their expertise and experience, assessing their capabilities, and checking their cost structures.
Do KPO services impact company culture and employee morale?
It’s natural for KPO services to impact company culture and employee morale in the beginning. For instance, you may encounter some resistance from existing employees. That said, by fostering a collaborative, transparent, and encouraging environment, you can make the transition smoother.
