Q.What is Outsourcing? Explain BPO and KPO with their benefits to business.

This is one of the most frequently asked essay questions on this AP Intermediate Commerce chapter, combining the meaning of outsourcing with its two main forms.

Outsourcing means a business enterprise contracting out one or more of its business activities or processes — which it could otherwise perform itself — to an outside specialist firm, mainly to reduce cost, gain access to expertise, or allow its own staff to focus on the firm's core activities. Common examples of outsourced work include payroll processing, customer support, accounting, data entry, software development and market research.

Business Process Outsourcing, or BPO, refers to outsourcing routine, process-driven business functions, such as customer call-handling, billing or data entry, to an external firm. BPO work is typically repetitive and rule-based, and the main objective of a firm outsourcing it is usually to reduce operating cost while keeping service quality acceptable.

Knowledge Process Outsourcing, or KPO, refers to outsourcing work that requires specialised knowledge, analysis and judgement rather than mere execution of a routine process, such as financial research and analysis, legal research, engineering design, market research and data analytics. KPO work commands higher value and needs more skilled, often specially qualified, personnel than typical BPO work. …