Did you know why 70% of companies hire outsourcing companies for data solutions? Deloitte’s 2022 report has discovered that it powers their decision-making mechanism. Knowledge Process Outsourcing (KPOs) are behind this success.
So, are you curious to learn what the KPO is? Let’s introduce you to this outsourcing concept.
What is Knowledge Process Outsourcing (KPO)?
Knowledge Process Outsourcing is an expanded form of KPO, which is related to contracting with a third-party professional (which can be a company or qualified specialists). According to the contract, service-seeking businesses delegate high-level or knowledge-intensive tasks to the outsourcing company. Unlike business process outsourcing, KPOs delve into complex logical processes. These processes require expertise in advanced analytical skills, domain expertise, and decision-making capabilities. The data-driven solutions, for instance, data mining, analysis, cleansing, scraping, and predictive models, need technical qualification with hands-on experience. KPOs acquire talents to provide these solutions that not all outsourcing companies are able to provide.
Key Areas of KPO
Here come the digital solutions that are actually complex and need KPOs to assist in addressing complexities involved.
1. Data Mining: Data mining technically represents the practice of extracting valuable insights from large datasets. If the volume of data is large or scalable, it requires tools. KPOs deploy AI- and ML-powered tools to deal with big data.
2. Data Analysis: The insights require someone to understand it. Its comprehensibility reveals untapped trends and patterns for machine learning and business decisions.
3. Cleansing Datasets or Files: It typically is the practice of data hygiene, which is about combing out imperfections, such as dupes, typos, missing details, formatting issues, abbreviations, obsolete data, etc. This practice helps in fixing databases and making them ready-to-use.
4. Extracting Datasets from Websites: It’s like drawing insightful datasets from websites and digital sources to address business problems, like price data extraction for competitive price fixing, and doing market research.
5. Predictive Analytics: This is also a type of assessment that ends up in forecasting future trends, customer behaviour, and business outcomes.
Benefits of Knowledge Process Outsourcing in the AI-Driven Era
Now that you’ve learnt what KPOs and their key areas are, let’s show you how many benefits of knowledge process outsourcing.
1. Access to Advanced Expertise
KPOs are knowledge discovery centres where advanced tools and techniques are used by upskilled specialists. With the advent of AGI, machine learning, and data science, these outsourcing entities stay equipped with cutting-edge tools and technologies with technical experts.
2. Cost Efficiency
By delegating intelligence and analysis-based tasks, beneficiary businesses save all money that might be invested in hiring, training, and retaining highly skilled professionals as in-house teams. So, this practice saves up to 30-40% money in operations by delegating logical tasks to a third-party.
3. Concentrate on Main Functions
By delegating non-core, yet crucial, intelligence-based tasks to KPOs, businesses derive precious time to foster better opportunities and innovation and, hence, improve revenues. It’s like contracting with an outsourcing company for pricing data scraping to optimize your own pricing strategy.
4. Gain Flexibility to Scale Up or Down
Let’s take a case where a retail company finds a reliable source to scale up its sales data processing. Simultaneously, it focuses on how to increase sales without splitting its attention & sources on data processing. So, KPO services assist in embracing market changes and demand fluctuations.
5. Improved Data Quality and Accuracy
Gartner 2021 reported that bad data quality leads to compromising on an average of $12.9 million annually. The knowledge process outsourcing services providing companies invest in advanced AI & ML tools to ensure the ingestion of clean records in the data pipelines for analysis.
6. Faster Processing for Insights
The AI-driven automation and expertise can help in reaching out to insights and business solutions faster. The swift decisions help in making insightful decisions timely.
7. Evolve New Ideas & Execute
Do you think a logistics company can itself process data and mine solutions while managing time and deliveries equally well? Perhaps it can do. With an outsourcing partner, it derives sufficient time to optimise route planning and hence, reduce delivery times. Back office operations like dealing with data often require attention to details, which is a lengthy process. So, companies prefer saving time and resources while leaving scope for innovation and competition.
Real-World Examples of KPO
1. Finance
Frauds, especially credit card scams, are pervasive, which a bank can reduce by 25%. With an outsourcing company in place, it can find genuine loan applicants. The partner company can do credit risk analysis using AI, which eventually prevents a hefty loss.
2. Manufacturing
Use Case: A manufacturing company can foresee when its equipment is going to break down. Some of the qualified analysts can study its previous records and maintenance records for predictive maintenance analysis. Ultimately, the result will decrease downtime, which can be up to 30% plus millions in maintenance cost.
Disadvantages of Knowledge Process Outsourcing (KPO)
As benefits, you cannot ignore the demerits of KPOs.
1. Data Security and Privacy Risks
Sharing sensitive datasets with a third party can be threatening. It can expose your sensitive customer details, which is actually evaluated as a breach or compliance issue.
2. Loss of Control
With sharing of critical details, you may lose your control over data quality, timeliness, and decision-making. And these problems or inaccuracies lead to a big question over the KPO services providers.
3. Dependency on External Providers
Dependency can be dangerous. Let’s say you rely on an outsourcing partner for pricing details to be scraped from your competitors’ websites. A sudden change in its costs, a shutdown, or any other issue can end up in a considerable downturn.
5. Hidden Costs
Despite being cost-effective, KPOs can impose additional charges in the name of contract management, communication, tools premium, and transition. These uninformed costs can cause a major loss.
6. Quality and Consistency Issues
How is it if you don’t get expected quality after outsourcing? Sometimes, the gap in skills and inability to understand exactly what you require may lead to quality issues.
7. Communication and Cultural Barriers
Time zones differ from country to country. Hiring an offshore KPO company may arise conflicts in smooth interactions & exchanging concerns, timely deliveries, and cultural misunderstandings.
8. Intellectual Property (IP) Risks
Many compliance issues are observed in the case of outsourcing, especially in data and technology. Handing over knowledge-intensive tasks can expose sensitive data to scammers, and even the incidents of IP theft or misuse can breach the confidentiality agreements.
Disadvantages of Knowledge Process Outsourcing (KPO)
As benefits, you cannot ignore the demerits of KPOs.
1. Data Security and Privacy Risks
Sharing sensitive datasets with a third party can be threatening. It can expose your sensitive customer details, which is actually evaluated as a breach or compliance issue.
2. Loss of Control
With sharing of critical details, you may lose your control over data quality, timeliness, and decision-making. And these problems or inaccuracies lead to a big question over the KPO services providers.
3. Dependency on External Providers
Dependency can be dangerous. Let’s say you rely on an outsourcing partner for pricing details to be scraped from your competitors’ websites. A sudden change in its costs, a shutdown, or any other issue can end up in a considerable downturn.
4. Hidden Costs
Despite being cost-effective, KPOs can impose additional charges in the name of contract management, communication, tools premium, and transition. These uninformed costs can cause a major loss.
5. Quality and Consistency Issues
How is it if you don’t get expected quality after outsourcing? Sometimes, the gap in skills and inability to understand exactly what you require may lead to quality issues.
6. Communication and Cultural Barriers
Time zones differ from country to country. Hiring an offshore KPO company may arise conflicts in smooth interactions & exchanging concerns, timely deliveries, and cultural misunderstandings.
7. Intellectual Property (IP) Risks
Many compliance issues are observed in the case of outsourcing, especially in data and technology. Handing over knowledge-intensive tasks can expose sensitive data to scammers, and even the incidents of IP theft or misuse can breach the confidentiality agreements.
8. Limited Customisation
KPOs deal with diverse clientele. They evolve standardised workflows and processes, which may not be fully helpful in achieving unique requirements. Moreover, they use standardized tools, which fail to meet custom requirements.
9. Resistance to Change
Many a time, KPOs face the problem of employees’ resistance to change. It can be like embracing new technologies and automation, which evokes the fear of losing jobs or proactive control over critical processes.
Mitigating the Disadvantages
The aforesaid challenges can be addressed by aligning these solutions:
1. Conduct Due Diligence: Sign a contract with a reputed KPO company with excellent reviews, customer experience, strong security measures, and domain expertise.
2. Implement Robust Contracts: The contract, which is called a Service Level Agreement (SLA), should clearly state what measures to be adopted for confidentiality, data in transit, IP protection, etc.
3. Maintain Oversight: Despite being in the hands of an outsourcer, the quality of work and its progress must be regularly monitored.
4. Invest in Communication: The tools to collaborate, like Google worksheets, and communication channels via applications like Cliq, Zoom, etc., should be in practice.
5. Adopt Hybrid Models: Instead of handing over full control, you can share a part of the service and keep it blended with in-house expertise. This is how proactive control and flexibility can be managed.
How Does Knowledge Process Outsourcing (KPO) Work?
KPOs are like knowledge factories where high-level intelligence-based tasks are delegated to specialised service providers. Here is how a KPO works:
1. Identifying Needs: Firstly, the process is understood so that specialised knowledge, expertise, and advanced technology can be aligned accordingly.
2. Selecting a KPO Provider: Companies keenly observe security measures, compliance with regulations, and previous experiences with customers. This observation helps in evaluating and then selecting a KPO provider.
3. Defining Scope and Objectives: Once everything appears favourable, the business and KPO company further move ahead to discuss the scope of work, deliverables, timeliness, and key performance indicators (KPIs).
4. Data Sharing and Integration: Once the SLA is signed, wherein the terms of use are outlined, the beneficiary company starts sharing relevant data, often in encrypted forms or on cloud-based platforms.
5. Execution of Tasks: Finally, the workflow for data mining, predictive analysis, or data hygiene-like tasks begins with the help of advanced tools, technologies, and expertise.
6. Collaboration and Communication: In parallel, the communication continues on a regular basis to discover updates on aligned tasks, work progress, and resolution. For it, video conferencing on Google Meet or Zoom can be harnessed.
7. Delivery of Insights and Solutions: The entire workflow is over with the delivery of insights into market trends, customer analysis, or data processing—whatever is aligned or agreed upon.
8. Feedback and Iteration: After deliveries, the customer expectations and experience are discovered to get better in efficiency, optimisation, or whatever over time, if required.
Conclusion
In the era of AI and digital transformation, KPO has become a strategic enabler for businesses seeking to harness the power of data. By outsourcing knowledge-intensive tasks like data mining, analysis, and predictive modelling, companies can achieve cost efficiency, scalability, and innovation while staying competitive in a rapidly evolving landscape. As AI continues to advance, KPO will play an even more critical role in driving data-driven decision-making and business success.
Source:https://www.eminenture.com/blog/what-are-knowledge-process-outsourcing-kpo-its-benefits/