Advantages of KPO and Difference between KPO & BPO: Accelerate Reengineering Benefits, Etc (For CBSE, ICSE, IAS, NET, NRA 2022)

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Advantages of KPO

Accelerate Reengineering Benefits

Reengineering aims for drastic improvements in critical measures of performance such as cost, service, quality and speed. But the need to increase efficiency comes into direct conflict with the need to invest in core business. As non-core internal functions are continually put on the back seat, systems become less reductive and less efficient. Therefore, by outsourcing a non-core function to a competent provider, the organization can realize the benefits of reengineering as an outsourcing benefit.

Access to Top Class Capabilities

Good and competent providers make extensive investments in technology, people, and methodologies. They acquire expertise by working with many clients facing similar challenges. This combination of specialization and expertise ensures the customers a competitive advantage and helps them avoid the cost of acquiring technology and training.

Cash Infusion

Outsourcing often involves the transfer of assets from customer to the provider. Equipment, vehicles, facilities, and licenses used in the current operations contain value and are sold to the vendor. The vendor uses these assets to provide services back to the client. Depending on value of the assets involved, the said sale may result in a significant cash payment to the customer. While selling these assets to the vendor, they are typically sold at book value. The book value normally is higher than the market value. In such cases, the difference between the two actually represents a credit line from the vendor to the client which is repaid in the form of price of the services over the life of the contract.

Optimal Use of Resources

Every organization has limitations to the resources available to it. Outsourcing allows an organization to redirect its resources, mostly human resources, from non-core activities toward activities which serve the core need of customer. The organizations can redirect these human assets or at least the staff slots they represent for greater value adding activities. People whose energies are currently focused on internal activities can now be focused externally — on the customer

Solution to Difficult Problems

Outsourcing is certainly one option for addressing the problem of managing difficult activities requiring core technical skills. It is essential to remember that outsourcing doesn՚t imply abdication of management responsibility nor does it work well as a solution to solve critical and suddenly erupting trouble of a company. Company can outsource only those difficult problems which it understands properly because if the organization doesn՚t understand its own requirements, it won՚t be able to communicate them to an outside provider.

Focus on Main Business

Outsourcing allows a company to focus on its core business by having operational non-core functions assumed by an outside expert. Freed from devoting energy to these non-core areas, the company can focus its resources on meeting its customers՚ needs.

Best Use of Financial Resources

There is large amount of competition within most organizations for capital funds. The senior management is always in a fix to decide where to invest the capital funds. It is often difficult to justify non-core capital investments when core areas directly related to producing a product or providing a service compete for the same money. In this context outsourcing can reduce the need to invest capital funds in non-core business functions. Outsourcing can improve certain financial measurements of the company by eliminating the need to show return on equity from capital investments in non-core areas.

Cost Reduction

Companies which attempt to do everything themselves generally incur higher research, development, marketing and deployment expenses, and all of these are passed on to the customer. The outsourcing can help a company to reduce its costs as an outside provider՚s lower cost structure, normally as a result of a greater economy of scale or other advantage based on specialization, reduces a company՚s operating costs and increases its competitive advantage.

Minimum Risk

Tremendous risks are associated with the investments made by the organizations. Markets, competition, financial conditions, Government Regulations and Technologies all change quickly. Further, it is very risky to keep up with these changes, especially those in which the next generation requires a significant investment.

Difference between KPO and BPO

Knowledge Processing Outsourcing industry is entirely different from Business processing outsourcing industry.

Difference Between KPO and BPO

Difference between KPO and BPO
Knowledge Processing OutsourcingBusiness processing


KPO require expertise having domain knowledge. It handles more dexterous work which requires experience.BPO industry is more about size, quantity and competence.
KPO requires highly knowledgeable employees in the area that is outsourced like lawyers, doctors, MBA and skilled engineers.BPO insist for labour and requires less skilled employees.
The salary of KPO employee is much higher than offered to the BPO. Employee of KPO are highly qualified.The salary of BPO employee is less than offered to the KPO employee.
KPO provides in-depth knowledge, expertise and analysis on complex areas like Legal Services, Business &Market Research, etc.BPO provides services like customer care, technical support through voice processes, tele-marketing, sales, etc.
KPO involves skill and expertise of knowledge workers with excellent educational background.Employees in BPO are not- so- qualified as it focuses on communication skills

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