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What Is the KPO Industry?

D. Nelson
D. Nelson

The Knowledge Process Outsourcing (KPO) industry describes all of the businesses to whom clients contract work. When the leader of an organization determines that he or she can benefit from research or data analysis, but may not have the financial resources to pay for in-house services, he or she can contract a third party, normally in another country, to perform these tasks. KPO industry businesses are most common in nations such as China and India, where wages are relatively low, a significant percentage of the population is educated, and there is little political or social unrest.

Any professional interested in acquiring knowledge regarding trends, market behaviors, and forecasts might use a KPO industry business. Market research firms, for example, can outsource research to third parties that specializes in conducting surveys. A professional who is starting up a business can use a KPO company to access information regarding a market he or she is thinking about entering. Large financial institutions, such as banks, take advantage of the KPO industry to learn about economic outlooks in various sectors and regions.

Businessman with a briefcase
Businessman with a briefcase

In the KPO industry, there are two primary categories, Management Information System (MIS) reporting and decision management. MIS reporting is the act of collecting data that allows professionals to understand how their organizations are operating. For example, a manufacturing executive might request MIS reporting that enables him or her to understand which products are helping an organization to generate the highest revenues.

Decision management describes research and analysis that help professionals to make informed decisions. Much decision management in the KPO industry is focused on forecasting. When a professional is getting ready to generate effective plans and budgets, for example, he or she might outsource to a KPO company to learn which products are expected to increase in sales and which are expected to decline.

Some commonly cited benefits of using KPO businesses are reduced costs and infrastructures that are less complex. By outsourcing knowledge processes to businesses in other countries, a client business can potentially can costs, since wages in another country can be significantly lower. For example, a trained business professional in the United States expects salaries that are well above those paid to trained professionals in a nation such as India, where the KPO industry is growing. Knowledge processes often require advanced software that needs to be implemented into established business systems. Outsourcing these processes enables an organization to alleviate this problem.

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