KPO VS. BPO

The dividing line between KPO and BPO is still very faded; some experts say that KPO is not different from BPO. It is only a kind of BPO. Says Karnik, “Broadly, KPO is a subset of BPO. It just occupies the higher end of the BPO spectrum.”

In fact, KPO owes its existence to BPO. It is its natural progression. After reaping the benefits of outsourcing low-end processes to India, foreign companies are now trying their hands at outsourcing high-end processes to the country.

“KPO is the next step in the outsourcing pyramid. For instance, in a financial service BPO, data entry of invoices has been around for some time. But given the value-for-money Indian BPOs have shown, international companies are thinking, why not broaden the scope to include financial analysis?”

As in the words of Pavan Bagai, vice president EXL Service

“Imagine unsorted data going through a black box and coming out as useful information. In KPOs the black box is your mind. There is no pre-defined process to reach a conclusion.”

In BPOs there is a pre-defined way to solve a problem. BPOs will normally include transaction processing, setting up a bank account, selling an insurance policy, technical support, voice and email-based support.

The myth that Indian companies can only provide “software coolies” is soon changing to the reality of Indian companies being capable of almost anything, even rocket science!

India has a large pool of knowledge workers in various sectors ranging from Pharmacy, Medicine, Law, Biotechnology, Education & Training, Engineering, Analytics, Design & Animation, Research & Development, Paralegal Content and even Intelligence services that can be put to use in a KPO.

Low-end outsourcing services have an expected Cumulative Annual Growth Rate (CAGR) of 26% by 2010. In contrast, the global KPO market is poised for an expected CAGR of 46% by 2010. The following figure demonstrates the expected growth in the BPO and KPO markets over the next seven years.

It’s very evident from the about discussion that the KPOs are the next big thing about to happen in India.

But the way to becoming a strong KPO power is not very smooth. As KPO delivers high value to organizations by providing domain-based processes and business expertise rather than just process expertise.

These processes demand advanced analytical and specialized skill of knowledge workers that have domain experience to their credit. Therefore outsourcing of knowledge processes face more challenges than BPO (Business Process Outsourcing).

Some of the challenges involved in KPO will be maintaining higher quality standards, investment in KPO infrastructure, the lack of talent pool, requirement of higher level of control, confidentiality and enhanced risk management.

Comparing these challenges with the Indian IT and ITES service providers, it is not surprising that India has been ranked the most preferred KPO destination owing to the country’s large talent pool, quality IT training, friendly government policies and low labor costs.