Business Process Outsourcing

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain.

Benefits

The main advantage of BPO is the way in which it helps increase a company’s flexibility. However, several sources have different ways in which they perceive organizational flexibility. In early 2000s BPO was all about
cost efficiency, which allowed a certain level of flexibility at the time. Due to technological advances and changes in the industry (specifically the move to more service-based rather than product-based contracts), companies who choose to outsource their back-office increasingly look for time flexibility and direct quality control. Business process outsourcing enhances the flexibility of an organization in different ways.

Threats

Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing leads to a different relationship between an organization and its contractor.

Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a Business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.

Another framework, more focused on the identification process of potential outsourceable Information Systems, identified as AHP, is explained.[22]
L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT- processes.[23] BPO is a sector which is processed business from outsources.

Industry size

India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component.

 This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year, other locations like Philippines, and South Africa have emerged to take a share of the market.

The South African call center industry has grown by approximately 8% per year since 2003 and it directly employs about 54 000 people, contributing 0.92% to South Africa's gross domestic product(GDP).

China is also trying to grow from a very small base in this industry.

However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune, Patna, Trivandrum, Bhubaneswar and New Delhi.

 In fact, the Philippines has overtaken India as the largest call center industry in the world in 2010.

The Association of Southeast Asian Nation (ASEAN) countries, along with the People's Republic of China and India—known collectively as ACI countries—are likely to see services like BPO figure strongly in their economies over the medium term. Services trade among ACI countries has been growing at a very rapid rate over recent years, despite starting from a relatively low baseline. Although data are scarce and must be interpreted with caution, an analysis of applied services sector policies in the region suggests there is much policymakers can do to intensify this process, and increase the pace at which the transformation to a service economy is taking place.