Business Process Outsourcing
One direct consequence of all globalization trends is the need of multinational companies and other truly global firms to stay and be competitive using their relative advantages. Sometimes in the search for these advantages, these firms go for cost-cutting measures like outsourcing some or most of the operations to outside contractors. Before the term outsourcing became fashionable in the business world, it was commonly called subcontracting. This business practice is resorted to for a number of reasons, among them are to lower labor costs or to allow the firm to focus on its core competency or both.
In a certain sense, the special economic zones around the world are precursors of this concept since business entities within these zones are doing the processes of either manufacturing or assembling products. Some steps in the production and the manufacture of exportable products have been “out-sourced” in these zones. Many of the firms inside these zones operate labor-only contracting or the only value that is being added is the marginal cost of the local labor.
Nowadays, the most common form of business process outsourcing involves the delegation of common and repetitive administrative tasks to an outside third party. Many service firms in such diverse industries as those in finance, banking, insurance, health maintenance, legal, and accounting to name a few, have turned to BPO as their competitive tool in the global economy. Some departments integral to a big firm are also outsourced such as marketing, distribution, warehousing, and human resource management.
The two most common processes being outsourced relate to back office operations (billing, accounting, purchasing, accounts receivable collections, etc.) or front office operations (mainly marketing, sales inquiries, and customer support). Most firms that offer BPO services are located in special economic zones to avail of incentives to further lower operating costs. Examples of this arrangement are India (with the largest share of BPO industry revenues), the Philippines, and Malaysia. The strategic business proposition for operating or using BPO services is creating sustainable organic growth through cost reductions and improved service levels that result in higher customer satisfaction and long-term client retention. Critics call BPO as essentially exporting jobs overseas to lower paid employees. One of the best BPO providers is EDS with a wide range of services on offer:
http://www.eds.com/services/bpo/
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