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The Key Differences Between BPO and KPO

Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) are two business terms (also considered popular buzzwords in the past) frequently used and encountered in the offshoring and outsourcing industry in the Philippines. In spite of its popularity, however, understanding the two concepts can be a little tricky, especially for companies who are new to the outsourcing and offshoring scene. We've rounded up some of the important facts to remember about the two concepts to simplify and clarify what KPO and BPO are really all about.

1. KPO and BPO are not exactly the same.

1. KPO and BPO are not exactly the same.
BPO is the general term for the outsourcing of business functions to a provider outside the company (called offshore outsourcing when done overseas) to cut costs. These functions are usually back office or front office services usually related to IT, client interaction and customer support, human resources, and finance. KPO, on the other hand, could be considered as a part of BPO, but it involves outsourcing of core functions that require specialized skills and knowledge. Some functions include animation, design, research and development, digital marketing, and legal services.

2. BPO is motivated by cost reduction, while KPO is motivated by finding specialized solutions.
BPO is more focused on finding cost-efficient business solutions, that's why most of the tasks being outsourced are those that are not directly linked to a company's value chain. KPO can require greater expenditure compared to BPO because it is mostly driven by the lack of professionals in certain sectors within developed countries.

3. Hiring employees for KPOs can be more challenging than BPOs.
BPO firms can easily hire employees with basic education, whereas KPO firms need to spend more time and effort in recruiting talent. Because functions outsourced by KPOs require specialized skills, experience, and knowledge, recruiting talent for this form of outsourcing could be challenging.

Because of BPO and KPO's key differences and requirements, it is imperative for investors and companies looking to outsource or offshore services in the Philippines to perform due diligence before choosing any service provider. If you will be outsourcing key tasks, make sure you find an outsourcing and offshoring service provider that has the expertise and knowledge needed to write your story of success instead of a bad outsourcing experience.

Image source: Outpro UK

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