The Strategic Importance of Knowledge Process Outsourcing for Businesses

Strategic Importance

Introduction to KPO

The key to making successful business decisions is being persistently driven by data.

However, the toll sorting through data can take on teams to comb through – the massive amount of data is unparalleled. Therefore, many companies choose a strategic partnership with knowledge process outsourcing agencies.

Although copious amounts of internet research are available about outsourcing processes and the industry, there are relatively few focused on Knowledge Process Outsourcing.

The outsourcing industry appeared first in the IT industry in the 1980s. And since then, the industry has seen spurts of growth globally, at a 50% growth rate each year. Before we go into how strategically essential KPOs are, let’s address the primary question – What is KPO?

What is KPO?

The practice of outsourcing high-value information-related business operations to third-party experts is known as Knowledge Process Outsourcing (KPO). Knowledge process outsourcing companies offer industry expertise and skills that help organize, facilitate and spearhead data-driven IT initiatives.

Essentially, KPO is a subset of the BPO industry. However, KPO is far more complex than BPO.

Risks & Benefits of KPO


The overriding factor that drives companies to seek out outsourcing processes is overall cost reduction. Labor costs are significantly lower overseas and thus inviting.

The knowledge-intensive nature of the IT industry, Analytics, Research, and Development can cut the overall cost to 40-50% of the budget.

Companies can reduce processing costs by outsourcing these knowledge operations management tasks offshore to low-wage countries. India, Russia, and China are among the top runners in the outsourcing industry, with a large pool of engineers and high-value skilled workers working at minimal charges.

The cost differential is just the tip of the iceberg regarding the benefits of KPO. There are other more significant and strategically relevant reasons to outsource knowledge-based IT functionalities overseas. Here are the principal reasons why small to medium companies should approach.

More than Cost-Saving Efforts

Developed countries such as the UK, the US, and most European nations need more highly trained specialists in engineering and IT. The ideal way to tackle this predicament is to source from a large talent pool from low-wage developing nations. In fact, according to a report, India alone churns out about 441,000 technical graduates to the IT workforce and about 300,000 post-graduates every year.

High-efficiency move for companies

The NASSCOM-McKinsey study in 2005 stipulated that Indian graduates make up 30% of the workforce in low-cost KPO countries. As a result, more and more businesses are open to having offshore centers in low-labor IT nations. It provides flexibility in terms of workforce and time management. It enables companies to add or reduce human resources easier than hiring in-house.

This makes relying on knowledge process outsourcing companies a high-efficiency move for businesses.


One of the critical risks of relying on strong knowledge process outsourcing firms is a breach of security. Companies can better control access to necessary information and protect business assets in-house. However, these security risks can be avoided by strategically partnering with companies that comply with international security and have an ISO 27000 certification.

Additionally, outsourcing could cause legal risks, language and cultural barriers, the lapse of autonomy and control, delays, or low-quality work. However, you can quickly vet KPO firms based on records, reviews and ratings, former clientele, recommendations, and their extensive portfolio.

Strategic Importance of KPO

The benefits and risks indicate the importance and relevance of knowledge operations management in a highly competitive market.

Strategically partnering with the right KPO firm for outsourcing processes can open many new opportunities for organizations.

  • Leaning on KPOs can allow companies to respond swiftly to the changing market needs in a competitive landscape.
  • Allows companies to focus on core business growth and primary operational functions.
  • Significantly shortens the time to market in scaleups, digital transformation, design, architecture, and development of product/software.
  • It is a complete reallocation and restructures of human and financial resources.
  • It created high-value employment opportunities.
  • Aids in multi-year strategic alliances that help scale businesses with the changing nature of the world market and its demands.

Why Should You Use Data Labeling & Data Mining Services?

Those with a lack of specialization

Data-driven projects require expert knowledge that is not available in disposable quantities. Or the task at hand is too huge for an in-house team to handle independently within the organization. Then seek out KPOs.

AI and Machine learning is one of the key examples wherein large quantities of data collection and data tagging are required to enable machine learning and algorithm proficiency. Output Data Quality is equally important in such use cases, requiring skilled yet low-cost data experts who can churn out the data for training cycles periodically and effectively per the business rules and gold standards set by the use case experts. The partner selection in such cases is so important that it could render the whole software/algorithm development process futile if the output data quality from the KPO is bad.

Often, in Machine Learning, where the software needs to predict outcomes, such as in the Autonomous Vehicles or AgTech models, the phrase concerning training data pipelines goes by: “Garbage In, Garbage Out.” And guess what? This ‘Garbage’ is the data supplied by KPO partners for the ML model’s training.

Netsmartz offers Data Labelling Services to AI/ML startups and Data Mining Services to SaaS-based businesses.

If your business is based in Artificial Intelligence & Machine Learning or SaaS niche and is looking for data labeling and data mining services, then schedule an appointment for a quick assessment.

Those with a lack of resources

Companies outsource due to a need for more innovative tech, processes, and personnel. A lack of these resources leads to outsourcing.

For those lacking employees

KPOs is a financially smart move for those facing a dearth of specific skill sets, several employees, or are overburdened with current commitments. One such example is data research and data mining of contact data for prospecting target Accounts/Buyers in SaaS and Product based IT companies. This is often termed as Accounts intelligence for making effective prospecting happen in Sales Operations.

Usually, this requires separate skilled expertise from Data Researchers/Miners who supply the right Ideal Customer Persona data to the Sales Team for them to focus on prospecting. In the absence of such a KPO-driven team, Sales Reps often waste their crucial time mining data instead of making qualitative reach out to targeted accounts and prospective customers.

Another example is manual product data matching in KPOs for the use case of eCommerce websites and marketplaces where companies work on pricing analytics. Data Collection and Data Processing are the key fundamentals that are required to be in place for the big marketplaces to compete on respective product pricing via intelligence sourced from competitor websites.

The Role of C-Level Management

Knowledge process outsourcing is a skill & research-intensive and complex task that affects the entire organization, from the strategic unit to operational offices. It can cause severe stress at every level of operations within the company.

The C-level management is tasked with familiarising and managing the company through the unstable market, socio-economic stressors, and political climate of the home country. Therefore, management must spearhead and promote entrepreneurial and creative thinking at every management level.

Outsourcing Management Office

The day-to-day management of outsourcing and each process within the network must be run under the umbrella of a department – the outsourcing management office.

The department partakes in operational, strategic, and tactical support for the organization. Some of the key areas that this office covers:

  • Consistency of business objectives and outsourcing needs.
  • Consistent global feasibility analyses of the project and chalk out the opportunity costs.
  • Overall assistance in coordinating assignments, departments, and management to avoid duplicity of work.
  • Conduct post-project/ sprint assessments to help shape a better trajectory of business goals and expectations.
  • Compliance with standardized outsourcing regulations and processes.
  • Evaluate the outsourcing portfolio to assess business value, manage risks, and gauge metrics.

It is paramount that outsourcing offices be set up to oversee, coordinate and execute these daily outsourcing operations.

Outsourcing Relationships

As you begin to form outsourcing alliances with knowledge process outsourcing companies, it is crucial to remember that there is no cookie-cutter format of one-size-fits. Ideally, it is essential to forge relationships that stand the test of time and are geared to achieve long-term goals.

The key to forming such long-standing relationships is establishing effective communication channels and reaching a big-picture goal to avoid unnecessary disagreements. The idea is to achieve a strategic alliance instead of a solution-oriented approach.

Having the right shared expectations, collaboration, transparency and accountability can create a mutually beneficial outsourcing relationship. Forming a value-rich relationship framework leads to renewal in contract post every scored project.

Ways to Improve the Success Rate of Outsourcing in Years to Come

Gearing businesses towards success by relying on knowledge process outsourcing requires the upkeep of standards for work and an ideal strategy in place. Clear communication and implementation of said factors can improve the success rate of businesses.


Conducting training sessions with outsourcing experts with vast knowledge and understanding of the industry can help businesses create a plan of action and adequately manage the project.

Standard & Industry-Specific Certifications

The right way to vet an outsourcing company is to look for professional certifications that certify if the company is aligned with industry standards. It is an excellent way to gauge the company’s efficiency. Springboard Software Engineering Bootcamp, ISC Software Security certification, Salesforce Certification, Agile Leadership Certification, etc., are some types of certificates you should look out for.

For instance, Netsmartz is;

  • iOS developer certified.
  • CMMI Level 3 certified
  • Salesforce certified
  • ISO 9000:2005 Quality Management certified

These are a few among the plethora of certifications we possess.

Client management becomes easy and secure when contracting agents have the required skillsets, pricing, contracting, quality, scope, financial analysis, negotiating, and contract management. Both sides of the outsourcing business can flourish with proper dispute-resolution training.

Goal Orientation

Improving outsourcing strategy based on evaluation criteria is an essential next step that gears businesses toward success. Since there is a need for a bench-marking system for high-performance outsourcing outcomes, both partners determine the success through goal orientation. Exhaustive Discovery Calls for defining the requirements, and expected KPO staff skill set & training is an important aspect here. Task Analysis post discoveries with an allocated Project Manager is an absolute must-have to define goals and formalize them in contracts.

Challenging Service Providers

A better, cheaper, and faster solution is no longer the most appealing offer knowledge process outsourcing companies can provide. To change the landscape from a project-based contracting to a process-based one, service providers must implement new changes to the changing needs of processes.

Service provider side Customer Success Manager meetups driven monthly reviews, in addition to PM-based weekly catch ups is something that can offer agility to the relationship.


Using the right technology can improve the flow of information and control for each project. The technology ensures there’s no duplication of services or billing errors. They also ensure that the quality of service and outsourcing processes is premium. It also provides efficiency in outsourcing partnerships and significantly reduces the cost of management.

Implementation as Overall Corporate Strategy

Collectively implementing all the above stages within outsourcing processing can help organizations produce better results, regularity of work, and lower costs to KPOs. However, the implantation can improve overall corporate strategy and ensure business continuity with the changing times and tides.

Who Should Manage KPOs?

Typically, a project manager, consultant, or vendor manager manages KPOs as there are several challenges, such as finding the best talent, onboarding them, and fine-tuning them to fit best with the internal team.

They also facilitate a steady flow of communication and ensure an alignment in thought, processes and goals at each step.


As the Knowledge Process Outsourcing industry is no longer in its nascent stages, yet, ever-evolving with the changing nature of market demands, it is important that businesses find the right knowledge process outsourcing company that fits their bill. The perfect strategic alliance is one of a long-term association.


The Strategic Importance of Knowledge Process Outsourcing for Businesses
Kanav Jain
Published on
April 4, 2022

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