BPO introduction

Business process outsourcing (BPO) is a subset of outsourcing that involves

the contracting of the operations and responsibilities of a specific business process to a third-
party service provider. Originally, this was associated with manufacturing firms, such as Coca-
Cola that outsourced large segments of its supply chain.[1]
BPO is typically categorized into back office outsourcing, which includes internal business
functions such as human resources or finance and accounting, and front office outsourcing,
which includes customer-related services such as contact centre (customer care) services.[2]
BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is
contracted to a company's neighbouring (or nearby) country is called nearshore outsourcing.
Often the business processes are information technology-based, and are referred to as ITES-
BPO, where ITES stands for Information Technology Enabled Service.[3] Knowledge process
outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of
business process outsourcing industry.

Benefits[edit]
The main advantage of any BPO is the way in which it helps increase a company's flexibility. In
early 2000s BPO was all about cost efficiency, which allowed a certain level of flexibility at the
time. Due to technological advances and changes in the industry (specifically the move to more
service-based rather than product-based contracts), companies who choose to outsource their
back-office increasingly look for time flexibility and direct quality control.[4] Business process
outsourcing enhances the flexibility of an organization in different ways:

 Most services provided by BPO vendors are offered on a fee-for-service basis, using
business models such as Remote In-Sourcing or similar software development and
outsourcing models.[5][6] This can help a company to become more flexible by
transforming fixed into variable costs.[7] A variable cost structure helps a company
responding to changes in required capacity and does not require a company to invest
in assets, thereby making the company more flexible.[8]
 Another way in which BPO contributes to a company’s flexibility is that a company is
able to focus on its core competencies, without being burdened by the demands of
bureaucratic restraints.[9] Key employees are herewith released from performing non-
core or administrative processes and can invest more time and energy in building the
firm’s core businesses.[10] The key lies in knowing which of the main value drivers to
focus on – customer intimacy, product leadership, or operational excellence.
Focusing more on one of these drivers may help a company create a competitive
edge.[11]
 A third way in which BPO increases organizational flexibility is by increasing the
speed of business processes. Supply chain management with the effective use of
supply chain partners and business process outsourcing increases the speed of
several business processes, such as the throughout in the case of a manufacturing
company.[12]
 Finally, flexibility is seen as a stage in the organizational life cycle: A company can
maintain growth goals while avoiding standard business bottlenecks.[13] BPO
therefore allows firms to retain their entrepreneurial speed and agility, which they
would otherwise sacrifice in order to become efficient as they expanded. It avoids a
premature internal transition from its informal entrepreneurial phase to a more
bureaucratic mode of operation.[14]
 A company may be able to grow at a faster pace as it will be less constrained by
large capital expenditures for people or equipment that may take years to amortize,
may become outdated or turn out to be a poor match for the company over time.
Although the above-mentioned arguments favour the view that BPO increases the flexibility of
organizations, management needs to be careful with the implementation of it as there are issues,
which work against these advantages. Among problems, which arise in practice are: A failure to
meet service levels, unclear contractual issues, changing requirements and unforeseen charges,
and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to
be considered before a company decides to engage in business process outsourcing.[15]
A further issue is that in many cases there is little that differentiates the BPO providers other than
size. They often provide similar services, have similar geographic footprints, leverage similar
technology stacks, and have similar Quality Improvement approaches.[16]

Threats[edit]
Risk is the major drawback with business process outsourcing. Outsourcing of an information
system, for example, can cause security risks both from a communication and from a privacy
perspective. For example, security of North American or European company data is more difficult
to maintain when accessed or controlled in other countries. From a knowledge perspective, a
changing attitude in employees, underestimation of running costs and the major risk of losing
independence, outsourcing leads to a different relationship between an organization and its
contractor.[17][18]
Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to
manage outsourcing in a structured way, maximising positive outcome, minimising risks and
avoiding any threats, a business continuity management model is set up. This model consists of
a set of steps, to successfully identify, manage and control the business processes that are, or
can be outsourced.[19]
Analytic hierarchy process is a framework of BPO focused on identifying potential outsourceable
information systems.[20] L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting
problems companies face, ranging from unclear contract formatting, to a lack of understanding of
technical IT processes.[21]

Technological pressures[edit]
Industry analysts have identified robotic process automation software as a potential threat to the
industry[22][23] and speculate as to the likely long term impact.[24] In the short term, however, there is
likely to be little impact as existing contracts run their course: it is only reasonable to expect
demand for cost efficiency and innovation to result in transformative changes at the point of
contract renewals. With the average length of a BPO contract being 5 years or more[25] - and
many contracts being longer - this hypothesis will take some time to play out.
On the other hand, an academic study by the London School of Economics was at pains to
counter the so-called "myth" that robotic process automation will bring back many jobs from
offshore.[26] One possible argument behind such an assertion is that new technology provides
new opportunities for increased quality, reliability, scalability and cost control, thus enabling BPO
providers to increasingly compete on an outcomes-based model rather than competing on cost
alone. With the core offering potentially changing from a "lift and shift" approach based on fixed
costs to a more qualitative, service-based and outcomes-based model, there is perhaps a new
opportunity to grow the BPO industry with a new offering.

India BPO promotion scheme[edit]

The Digital India programme introduced the India BPO Promotion Scheme (IBPS) with the aim of
boosting employment opportunities in Tier 2 and Tier 3 cities of India, as well as rural areas. This
initiative, a crucial component of Prime Minister Narendra Modi's Digital India Programme,
incentivizes the establishment of 48,300 BPO/ITES seats across the country.[3] The Software
Technology Parks of India (STPI), operating under the Ministry of Electronics and Information
Technology, serves as the pivotal agency overseeing this scheme.[9][10][11]
Visakhapatnam, in particular, has emerged as a noteworthy contributor to the India BPO
Promotion Scheme (IBPS), generating an impressive 10,000 employment opportunities. The
state of Andhra Pradesh secured 13,792 out of the 48,300 seats allocated for the entire country,
emphasising its significant role in this nationwide endeavour. Pulsus Group, a prominent player
in the scheme, secured an impressive 4,095 IBPS seats out of the total allocation, surpassing
154 companies spanning 93 cities. Their substantial investment of Rs. 440 crore has not only led
to the creation of 5,000 jobs in Visakhapatnam but has also included 4,000 women employees,
[12]
a commendable stride towards gender diversity. Additionally, their remarkable contribution
resulted in the acquisition of Rs. 41 crore in viability gap funding. Gedela Srinubabu, the CEO
of Pulsus, expressed immense pride in their significant role in the success of the India BPO
Promotion Scheme (IBPS), highlighting that this achievement adds to their track record of
creating 25,000 jobs over 15 years, with 5,000 stemming from IBPS alone. Minister Rajeev
Chandrasekhar commended Pulsus remarkable accomplishment and expressed aspirations to
expand the programme into Tier 2 and Tier 3 cities, as well as rural areas, ultimately shaping the
digital landscape of India. Arvind Kumar, the Director General of STPI, lauded the company's
outstanding contribution to women's employment, underscoring their pivotal role in fostering
gender inclusivity.

The modern-day internet was a game changer for businesses of all kinds – as
was the idea of digital transformation that followed.
Organizations were given a tool that enabled them to transition from activities,
processes, and capabilities with an analog backbone to activities, processes,
and capabilities with a digital one.
Paper documents? Filing cabinets? In-person communication? It could all
become digital.
The issue was – and still is for many organizations – actually transitioning to a
digital backbone successfully. Years and years’ worth of documents need to be
scanned. Data needs to be entered into various systems. Time-sensitive mail
needs to be delivered to the correct departments and employees.
That’s where BPO services come in. The rise of the digital era resulted in
organizations transitioning from outsourcing call center services to outsourcing
services for IT, accounting, transcription, translation, mailroom
management, AP processing, claims management, and many other critical (and
increasingly digital) processes.
Ultimately, this helped businesses gain a competitive advantage, reduce costs,
and improve customer service simultaneously.
KPO introduction

Knowledge process outsourcing (KPO) describes the outsourcing of core information-related

business activities[1] which are competitively important or form an integral part of a
company's value chain.[2] KPO requires advanced analytical and technical skills as well as a high
degree of specialist expertise.[3][4]
Reasons behind KPO include an increase in specialized knowledge and expertise,[1] additional
value creation,[3] the potential for cost reductions, and a shortage of skilled labor.[1] Regions which
are particularly prominent in knowledge process outsourcing include India, Sri Lanka, and
Eastern Europe, especially Poland, Romania, and the Baltic States.
KPO is a continuation of business process outsourcing, yet with rather more of business
complexity. To be successful in knowledge process outsourcing, a lot of guide is required
from interorganizational system.[5]

Types[edit]
Types of KPO Services
Some common example of KPO outsourcing domains include:

 Financial consultants
 Research and development (R&D)
 Business operations (management consulting)
 Technical analysis
 Investments
 Legal
 Medical & healthcare
 Data analysis and interpretation

Importance[edit]
The developing rivalry has brought about shorter time to market cycles, and clients are getting to
be more demanding regarding quality. This has constrained the firms to give operational
proficiency and increase the value of their products and services. The customer can launch an
item quicker and get to the market immediately. A company can lessen the complexities included
in overseeing and constantly constructing information in an extensive pool of human resources.[7]
Businesses are constantly in search of reliable KPO service providers who have the ability to
drive the best business strategy by analyzing the available data and information in a specific
case.

Risks and benefits[edit]

Benefits[8]

 Cost reduction
 Shortage of skilled employees
 Provides many graduates at very low cost
 High end services are provided at a lower cost to decrease unemployment and
benefit their economy
  Provide flexibility in terms of HRM & time management
Risks[8]

 Security- Classified information about the company can be lost

 Key talent retention
 The character of the employee and the quality of the work cannot be assured
 KPO is time consuming and cannot provide a quick fix to the company seeking
immediate results.
 Lack of communication between partners due to legal, language and cultural barriers
can lead to complications
 Quality of Personnel and Work Cannot Be Guaranteed
 Shortage of Skilled Employees
 Reduction in Communication due to Language barrier
 Inability to protect company's intellect property

Differentiation from BPO[edit]

A KPO firm requires considerably more skilled personnel than a BPO firm. Experts working in
KPO keep on learning and accomplished professionals can power their aptitude to produce more
income for the KPO firm.[9] The main difference between a KPO firm and a BPO firm is that in a
KPO firm, the customer is included amid the whole execution process.[7]

Origin of the term[edit]

Ashish Gupta, ex-COO of Evalueserve and co-founder & CEO of Benori Knowledge has often
been credited with coining the term. Gupta, an alumnus of the Indian Institute of Technology
Delhi, is also a Founder & Trustee of Ashoka University and Plaksha University, and serves on
the boards of various companies. Published authors have credited him for coining the term in
their works.[10]

In India[edit]
India has a large number of post-graduates, PhDs and MBAs who are involved in KPO. The
Indian National Association of Software and Service Companies (NASSCOM) estimated the total
market size of the KPO sector in India in 2006 to be $1.5 billion.[11] The year before, 2005, it had
been $1.3 billion, with Evalueserve predicting that by 2010 it would be some $10 to $15 billion.
[12]
The Indian government was predicting that by 2010 India would have 15% of the global KPO
market.[13] However, the global financial crisis, coupled with domestic economic problems such as
the IPO of Reliance Power in 2009, caused people to re-evaluate these predictions, incurring
worries that India's IT, BPO, and KPO sectors — which by then, combined, were $8.4 billion
in export revenues — would be greatly affected by these factors.[14] The worldwide KPO industry
is expected to reach about US $17 billion by 2015, of which US $12 billion would be outsourced
to India. Furthermore, the Indian KPO area is likewise anticipated that it will utilize more than 2,
50,000 KPO experts by 2015.[15]

Challenges[edit]
The KPO area has considerable measure of potential development in India. India confronts
various efforts by securing itself as a worldwide KPO pioneer. The real test in setting up a KPO
will be to obtain skilled employees. KPO organizations include high risk and confidentiality and
the greater part of the work would be outsourced from the US. The area likewise obliges larger
amount of control, confidentiality and enhanced risk management.[16] Moreover, legal language
and cultural barriers can result in genuine issues. Both organizations need to appreciate each
other's corporate and national societies and find common helpful approaches to create
successful participation.
Key Differences Between KPO and BPO

Knowledge Process Outsourcing (KPO) and Business Process Outsourcing (BPO) are
two distinct categories of outsourcing services that organizations use to streamline
their operations, reduce costs, and focus on core competencies. While both involve
delegating tasks to external service providers, there are significant differences
between them in terms of the nature of work, skills required, and the value they bring
to a business. In this comparison, we will explore these differences in detail.

1. Nature of Work:
 BPO (Business Process Outsourcing): BPO primarily involves
outsourcing routine, repetitive, and operational tasks. These tasks are
often rule-based, transactional, and require relatively low-level skills.
Common BPO processes include customer support, data entry,
telemarketing, order processing, and payroll management.
 KPO (Knowledge Process Outsourcing): KPO, on the other hand,
involves outsourcing higher-value and knowledge-intensive tasks.
These tasks require specialized skills, expertise, and domain knowledge.
KPO encompasses activities such as research and analytics, market
research, data analysis, legal services, and financial analysis.
2. Skill Requirements:
 BPO: BPO jobs typically require basic to intermediate skills. The focus is
on efficiency, accuracy, and process adherence. Employees in BPO roles
are often trained for specific tasks and follow predefined procedures.
Language and communication skills are essential for roles involving
customer support or telemarketing.
 KPO: KPO jobs demand advanced skills and expertise. Employees in
KPO roles need in-depth knowledge in their respective fields, critical
thinking, problem-solving abilities, and analytical skills. For example, a
financial analyst in a KPO may need a strong understanding of financial
markets and data analysis techniques.
3. Value Addition:
 BPO: BPO primarily focuses on cost reduction and operational
efficiency. Organizations use BPO services to handle non-core
functions, enabling them to free up resources, reduce overheads, and
concentrate on their core competencies. BPO can lead to significant
cost savings, but it may not necessarily contribute to strategic decision-
making.
 KPO: KPO offers a higher level of value addition. It not only helps in
reducing costs but also provides organizations with valuable insights,
expertise, and strategic support. KPO providers assist in critical
 decision-making, research, and analysis, thereby contributing directly to
an organization's strategic goals and competitiveness.
4. Examples:
 BPO: Examples of BPO services include call centers, data entry, HR
outsourcing, and accounts payable processing. These services focus on
the efficient execution of standardized processes.
 KPO: KPO services include legal research, financial analysis, business
intelligence, pharmaceutical research, and market research. These
services involve knowledge-based tasks that require specialized
expertise.
5. Focus on Outsourcing:
 BPO: BPO is typically associated with outsourcing back-office and front-
office processes that are not part of an organization's core functions.
 KPO: KPO, on the other hand, involves outsourcing tasks that require
in-depth knowledge and expertise, often associated with an
organization's core competencies.

In conclusion, BPO and KPO serve different purposes and have distinct
characteristics. BPO is more focused on cost reduction and operational efficiency
through the outsourcing of routine tasks, while KPO emphasizes knowledge-based
tasks that provide strategic value to an organization. The choice between BPO and
KPO depends on an organization's specific needs, goals, and the nature of the tasks
it wishes to outsource