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.