What is 'Knowledge Process Outsourcing - KPO'

Knowledge process outsourcing (KPO) is the outsourcing of core, information-related business activities, meaning that knowledge and information-related work is carried out by workers in a different company or by a subsidiary of the same organization. This subsidiary may be in the same country or in an offshore location to save costs or other resources. 

BREAKING DOWN 'Knowledge Process Outsourcing - KPO'

Knowledge process outsourcing (KPO) is the allocation of relatively high-level tasks, to an outside organization or a different group in a different geographic location. Examples of KPO include long-term jobs for intellectual, analytical and knowledgeable people within industries such as research and development, financial consultancy and services, business and technical analysis, and many others.

Knowledge Process Outsourcing (KPO) vs. Business Process Outsourcing (BPO) 

Business Process Outsourcing (BPO) is the outsourcing of work to a third party to save money. KPO is a subset of BPO, however, KPO involves more specialized and knowledge-based work. Additionally, there are more involved and nuanced reasons that a company might engage in KPO.

Reasons for Knowledge Process Outsourcing

Companies resort to KPO when they are looking for specialized knowledge and expertise, when they have a shortage of skilled professionals, and when they have the opportunity to reduce costs by hiring skilled workers earning lower wages in another location. In other words, companies do it when they feel they can improve their value chain

Companies are looking to take raw materials, add value to those materials through various processes, and then sell it as a final product. In order to create a competitive advantage, companies look to see how they can improve efficiency in their production process, so that they can deliver maximum value for the lowest possible total cost. Outsourcing core, information-related business activities is one way to do that. 

Knowledge Process Outsourcing: Pros and Cons

So, KPO is great for businesses that are looking to reduce the costs of their operations or products, that have a shortage of skilled employees in a particular field, or are looking to free up human capital to do other work.

KPO is difficult, though, for a couple of reasons. Security can be compromised, and classified or proprietary information can be lost. It may be difficult to retain talent in outsource positions. Companies cannot ensure the character of their employees, or the quality of their work. It can be time and resource-intensive to establish a successful KPO operation. And communication can be a concern and a challenge, due to legal, language and cultural barriers. 

 

RELATED TERMS
  1. Outsourcing

    Outsourcing is a practice used by different companies to reduce ...
  2. Business Process Outsourcing - ...

    Business Process Outsourcing (BPO) is a method of subcontracting ...
  3. Knowledge Engineering

    Knowledge engineering is a field of artificial intelligence (AI) ...
  4. Body of Knowledge - BOK

    Body of knowledge refers to the core teachings and skills that ...
  5. Cost Control

    Cost control is the practice of identifying and reducing business ...
  6. Globalization

    Globalization is the extension and integration of cross-border ...
Related Articles
  1. Small Business

    Times When Outsourcing Is A Good Fit For Your Company

    More and more companies are choosing to outsource. Here's a look at the costs and when it may be appropriate.
  2. Personal Finance

    Most Popular Outsourced Jobs

    The reasons behind outsourcing vary, and can create more efficient processes and products.
  3. Small Business

    How to Outsource Work: 2 Tips for Business Owners

    Small business owner can increase efficiency and profits by outsourcing routine functions such as bookkeeping and payroll.
  4. Managing Wealth

    How to Make Time for What Matters Most to You

    Time is valuable, don't waste it by being unaccountable or by not outsourcing when possible.
  5. Tech

    Small Endowment Money: A $100B Opportunity

    A shift to outsourced management among small endowments is providing billions in opportunities to capture assets.
  6. Small Business

    Who are ADP's Main Competitors?

    Explore ADP's primary competitors in its two major segments.
  7. Personal Finance

    Advance Your Career With a Finance Job Overseas

    Many finance jobs have moved overseas with outsourcing providing cost benefits. Find out why taking a job in a foreign country could be a good career move.
  8. Insights

    Understanding the Substitution Effect

    The substitution effect is an economic term used to describe consumer behavior relative to price or income changes.
  9. Personal Finance

    Consulting: Everybody's Doing It, Should You?

    Learn about whether or not consulting is right for you. Management consulting may be a good fit, but find out what to consider for this career.
RELATED FAQS
  1. When is outsourcing preferable to vertical integration?

    Deciding between outsourcing and vertical integration can be challenging. Understand the benefits of each to make the most ... Read Answer >>
  2. What's the difference between outsourcing and insourcing?

    Discover some of the major differences when deciding between outsourcing and insourcing for an organization. Learn how work ... Read Answer >>
  3. What did Warren Buffett mean when he said, “Diversification is protection against ...

    Learn what Warren Buffett meant when he stated that diversification is for ignorant investors and does not help those who ... Read Answer >>
Trading Center