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Table of Contents
Introduction
Procurement heads and operations directors are under a lot of pressure to do more with the resources they have at their disposal. Between finding specialized talent, dealing with headcount constraints, and the ever-growing cost of maintaining an expert in-house team with a high capacity for analytical work, companies are being pushed to take a strong look at which parts of their business are most feasible to keep in-house and which can reasonably be outsourced.
When it comes to bringing efficiency to routine tasks, BPO has people covered, but KPO is a strong option for companies that need to scale highly specialized work without facing the daunting task of building an entirely new in-house department from scratch. Today, we’re taking a look at what KPO is, how it’s best used, and which risks you need to keep in mind. Let’s jump in.
Key takeaways
- KPO vs BPO: BPO handles high-volume, repetitive tasks. KPO handles tasks that require expertise and high levels of judgement.
- Compliance and data security: Since KPOs often deal with sensitive work and data, it’s important for KPO providers to be SOC 2 Type II certified, GDPR-compliant, HIPAA-compliant (with BAAs), and/or explicitly defined IP ownership agreements in master service agreements.
- Fixed vs variable costs: KPO allows businesses to convert the fixed cost of an in-house specialist into something more flexible and scalable.
What is knowledge process outsourcing (KPO)?
Knowledge process outsourcing (KPO) is the business practice of contracting out knowledge-intensive work to an external vendor. These providers have deep expertise in the subject matter at hand and employ teams of highly trained and credentialed agents. KPO is usually well-suited to complex and knowledge-heavy business functions like data interpretation, patent processing, predictive modeling, or regulatory analysis.
The Evolution from BPO to KPO
BPO is intended to provide greater efficiency by taking the repetitive, routine business functions off an in-house team’s plate to accomplish them with greater efficiency, all while allowing the in-house team to reinvest time and money to focus on core competencies.
KPO takes the same core idea but applies it to knowledge work. As with BPO, KPO takes over functions that are not feasible for most companies to develop in-house, but which are essential for its continued health and growth. By contracting skilled and qualified professionals based in lower-cost markets, companies can leverage the benefits of a team of analysts, researchers, legal professionals, and more, but at a more affordable cost and in a more sustainable setup.
KPO, as a modern concept, is made possible by the growing number of university-educated specialists all over the world and enabled by modern tech that allows for easy remote collaboration, communication, and document sharing, combined with the maturation of data security standards to a point where sharing sensitive information across borders becomes much more manageable and secure.
If large-scale legal work, consistent market surveillance, or managing IP portfolios in various jurisdictions are not in your core competencies but are a part of your business — or need to be part of it in the future — KPO is often the most practical decision for making that happen.
KPO vs BPO: Key distinctions for operations leaders
Process Complexity and Decision Making
BPO functions are meant to operate within a fixed framework, given parameters that are well-defined and repeatable. Agents operating in a BPO context aren’t defining the rules or making massive judgment calls, they’re usually following specified protocols and workflows to achieve results.
KPO, on the other hand, goes past executing existing plans, requiring KPO professionals to synthesize something new from potentially messy and confusing datasets, informing high-level decisions, sometimes worth millions of dollars. Simply put, KPO tasks are hard to script, requiring both a fair amount of expertise and personal judgement. For these reasons, KPO success should be measured by the accuracy of the analytics and the quality of the outputs, not just their turnaround time.
Talent Acquisition and Specialized Skill Sets
When it comes to recruiting, BPOs usually shoot for volume, since the tasks are usually more scriptable and the number of agents available affects their potential for scalability. For KPO, since the talent pool is narrower, recruiting is more about precision, searching for highly credentialed professionals in specific fields. Well-run KPO partners are able to get both precision and scale by maintaining a pre-vetted talent pool on hand in locations that have a surplus of specialists, beyond the local demand of the area. This strategy allows KPO partners to deploy experts more quickly than a client’s in-house team.
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Core Pillars of KPO Services
Financial Research and Investment Analysis
KPO partners can provide an outsourced research team to supplement your finance team. Without needing to hire a full team of in-house analysts, companies are able to leverage the talents of specialists to accomplish tasks like:
- Analyzing investment opportunities
- Assessing risks
- Building financial models
- Creating detailed reports for boards and committees
Since the information being handled in these tasks is so valuable and sensitive, SOC 2 certification is crucial for financial KPO partners.
Data Analytics and Business Intelligence
By outsourcing data science functions, companies can gain access to valuable and actionable information. KPOs can comb through mountains of raw and potentially fragmented data and use it to come to meaningful conclusions, make predictions, gather customer insights, and provide data-backed recommendations for optimizing company operations.
Legal Process Outsourcing (LPO)
LPO allows companies to outsource important legal work that doesn’t have to involve their own legal team. LPO is useful for tasks like:
- Combing through litigation documents
- Managing compliance-based paperwork
- Researching relevant case law
- Reviewing contracts
Since legal work most often deals in sensitive information, LPO has strict compliance requirements, so it’s important to remember that mishandling of this information can carry severe legal consequences for both the LPO and the vendor. A breach of PHI or PII can yield substantial fines or even prison time, so companies should approach LPO with respect and diligence.
Research and Development (R&D)
KPO providers can perform R&D tasks to help your team research existing patents, comb through scientific articles, or even manage clinical trial data. Because a lot of this work takes place pre-patent, it’s crucial to work with a provider you trust. If IP produced in this type of engagement is leaked, it’s all too easy for a competitor to reap the rewards.
Strategic Advantages of Knowledge Process Outsourcing
Access to Global Talent Pools
The best KPOs offer businesses a more financially and logistically feasible option to work with expert specialists, like researchers, legal experts, financial experts, and data scientists. While these experts are highly sought-after, they can be hard to find locally depending on your market. KPOs allow companies to work with these specialists by sourcing talent in areas where it is more saturated and less costly.
Significant Reductions in Operational Overhead
An in-house analytical team has high fixed costs that are very difficult to reduce, including everything from compensating rare talent at the market rate to infrastructure, equipment, and software. KPO effectively turns a large amount of those fixed costs into variable costs, allowing companies to scale their usage up and down for extra flexibility in capital allocation.
Enhanced Focus on Core Competencies
With the aid of KPO, internal teams have much more freedom to concentrate their efforts on what they do best, putting more funds and attention toward the work that they’re known for, and that might require more intentionally cultivated client relationships or carefully crafted strategies based on institutional knowledge. This allows the best in-house employees to keep focus on the things that only they can tackle, without the distraction of complex tasks outside of their specialty.
Selecting a KPO partner for enterprise scale
Assessing Domain Expertise and Credentialing
KPO partners from different industries require different qualifications. When researching a potential KPO partner, it’s vital to ensure that they have all of the relevant certifications and credentials for the work you ask them to do. KPOs doing legal work should be bar-certified and approved for the relevant jurisdictions. Financial research should preferably be done by KPOs with CFA designations. And data analysts are much more effective when they have experience and expertise with the specific data infrastructure your company uses.
At the end of the day, it’s crucial for companies to check the work of prospective KPO partners, requesting sample deliverables and documentation of their methodology, as well as asking for proof of any certifications or credentials.
Data Security and IP Protection Protocols
One of the most important things to consider when making your selection is data security. The minimum you ought to require from your KPO provider is:
- SOC 2 Type II certification: This confirms that an independent auditor regularly checks that your vendor’s security systems are compliant and operational
- GDPR-compliant data handling documentation: If any of the data you share with your vendor is related to people in the EU, GDPR compliance is mandatory. GDPR governs how personal data is handled securely. If not in place, you could be exposing your company to legal trouble.
- HIPAA Business Associate Agreements (BAAs): For any work related to healthcare and personal health information (PHI). Healthcare-related KPOs must also use BAAs to ensure that they are legally responsible for the secure handling of the data they use. Without a BAA, your business could be on the hook for their actions, liability-wise.
- Defined IP ownership language: When KPO teams produce anything through research, legal work, or analysis on your business’s behalf, your ownership of this IP needs to be explicitly spelled out in the master service agreement.
Want to learn more about how KPO can benefit your company’s productivity? Get in touch with Global Response today to see how an expert team can help you scale smartly!
