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What is KPO?

By A. B. Kelsey
Updated May 16, 2024
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KPO, an acronym for knowledge processing outsourcing, is the outsourcing of information-related, knowledge-related, or judgment-related business services, usually to workers living in a different country. The type of services KPO firms offer requires employees who have great communication and analytical skills. The ideal KPO employee is college educated and well-trained, possessing a high degree of computer skills and English proficiency.

KPO firms are cropping up in countries that have vast numbers of people who are willing to work for lower pay rates than their counterparts in developed countries. India currently provides most of the KPO services, but the number of KPO firms in the Philippines is steadily growing. Countries such as China, Israel, Russia, Ireland, and the Czech Republic are also expected to have businesses offering KPO services in the future.

Proponents of the outsourcing trend claim that KPO has great potential for Information Technology (IT) and Information Technology Enabled Services (ITES) sectors. They also see KPO firms as a potential source for conducting a wide variety of intellectual research, including clinical, pharmaceutical, banking, legal, sales, and marketing. Other industries that might benefit from using a KPO firm are those who need various designers, animators, database developers, writers, and content developers.

There are several advantages to using KPO firms. By outsourcing non-core business activities, organizations will definitely save a great deal of money and time. Businesses can also gain more operational efficiencies because they can focus on the key growth areas of their industries instead of spending time and manpower on basic research and development.

Opponents of KPO policies argue that if the outsourcing trend continues, many millions of workers in the United States will lose their jobs. Moreover, businesses that use offshore KPO firms may risk the security and confidentiality of data and customer information. Businesses using KPO services may also find that they cannot receive high-quality results when the work is done at low-cost firms that hire low-paid employees.

KPO could be considered a high-end activity of the business process outsourcing (BPO) industry. There are several differences between the two, however. Where KPO is about intellectual and analytical processes completed by educated and trained employees, BPO is about standardized routine processes done by workers with minimal skills. Despite the growth of the KPO market, BPO firms will not yet go extinct. There is expected growth in the areas of basic data entry, data processing, bookkeeping, and technical support.

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Discussion Comments
By sweetPeas — On Jun 21, 2011

@BoniJ - Maybe it would be difficult to find American workers who would be willing to take the low-paying, unskilled or semi-skilled jobs that are now done in foreign countries. So, I think outsourcing of these kinds of jobs is maybe the best choice if the companies are to survive.

I do agree with you on the KPO firms in foreign countries that are hiring their own people to do quite high skilled work. I would think that there are definitely enough Americans to fill these jobs. A compromise on wages and benefits would probably be fair.

By BoniJ — On Jun 21, 2011

If outsourcing continues to expand, I think the government should sanction businesses through higher taxes, or something, to discourage the expansion of outsourcing. I think most of the jobs belong in the U.S. If they can't find Americans who will work for lower wages, then they will have to raise wages. Americans have been good to these companies, and they need to return something to Americans - like jobs!

I have the same feelings about using KPO services to provide U.S. companies with research,legal, sales, writing etc.

I would imagine that the lower pay that companies will pay KPO workers will attract lower skilled workers to do fairly sophisticated work. In addition to having minimal skills for the work, they may not have a real command of the English language. It takes years to become fluent in another language.

By anon140642 — On Jan 08, 2011

Basically KPO is a small organization that provides

knowledge, full information and skills.

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