KPO vs BPO: Difference between KPO and BPO

With the global outsourcing sector showing steady growth, despite the looming slowdown, there have been many KPO and BPO units coming up especially in the developing nations. For a layman, both seem one and the same thing but in reality there is profound difference in KPO and BPO. Let us first define both the terms.

What is BPO?
Business Process Outsourcing or BPO is outsourcing of some of the business functions to a third party in order to save money. It usually consists of the back office or front office operations. While front office services are related to client interaction and customer support, back office services are related to finance and HR. If outsourcing is done to a company situated outside the parent company's country, it is known as offshore outsourcing.

What is KPO?
Knowledge Process Outsourcing or KPO is a subset of BPO. KPO involves outsourcing of core functions which may or may not give cost benefit to the parent company but surely helps in value addition. The processes which are outsourced to KPOs are usually more specialized and knowledge based as compared to BPOs. Services included in KPO are related to R&D, Capital and insurance market services, legal services, biotechnology, animation and design, etc. are the usual activities that are outsourced to KPOs. LPO or Legal Process Outsourcing is special type of KPO dealing with legal services.

Difference between BPO and KPO, which one is better?
As we saw earlier, BPOs usually deal with fringe business activities such as customer care, finance and HR and at the same time, the USP of a BPO is their being cost effective. Companies usually outsource such processes to BPOs which are not directly linked to its value chain. And the motive behind such outsourcing is directly linked to cost reduction. On the other hand, highly specialised and knowledge based services are outsourced to KPOs. These activities are directly related to core offering of parent company. The motive behind such outsourcing is not only to reduce cost but to get specialised solutions for which availing in-house resources might be tough.
The difference in BPOs and KPOs can also be judged by the way they hire people. While basic education may be enough for you to get a BPO job but a KPO job requires you to be competent in a particular field. Also, the training provided by the KPOs is more rigorous and sector specific. So if you are a 'Jack of all trades', KPOs may not be the right choice for you.
Even businesses outsourcing their services to KPOs do a more extensive research before giving a contract to a particular KPO, as a good KPO can be the differentiating factor between a good market offering and a bad one.
So if you compare the functionalities and expertise involved, KPOs are far better than BPOs, but both of them help businesses to streamline their operations and making them cost effective.

Why KPOs are emerging at a rapid pace now?
1) Lack of highly qualified professionals in developed countries.
2) BPOs are shifting further east to Philippines and Bangladesh, thus India is exploring KPOs as the next big thing for them.
3) As the US Government is taking steps to reduce outsourcing, BPO will get hit the most, unlike skill based KPOs.

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  1. This post will definitely help many people who don't know the difference between BPO and KPO.

    Akshat Sethi

  2. wow , I am a part of an outsourcing company (for about 9months, i guess hehe) but I never know that there is KPO and BPO , so thank you for this. It really gives me a better understanding and more knowledge about outsourcing ;)

  3. i have now understood each principle hidden on those outsourcing types. thanks for solving my problem!

  4. Vry vividly explained.. Thank u fr the details.

  5. the way you differentiate kpo & bpo it is really great now i understand clearly ,so thanks for your post