Business Process Outsourcing: A Manager’s Guide to Understanding the Market Phenomenon

Abstract

Faster, cheaper, better has become the mantra for business success in today’s economy and business process outsourcing (BPO) has become one of the means by which this goal may be achieved. BPO is defined as the long-term contracting out of information technology enabled business processes to an outside provider to help achieve increased shareholder value (Devata and Stratopoulos, 2004). With market analysts and researchers reporting significant benefits in terms of cost reduction, quality improvement as well as gains in flexibility and ability to focus more on the company’s core competencies, companies of all sizes are contemplating the pros and cons of the global outsourcing of business processes. The global BPO market grew by 13 per cent between 1999 and 2000 to $119 billion and is estimated to reach $234 billion by 2005 (Whinston, 2004). The Americas lead in terms of BPO spending, with the US accounting for over 59 per cent of total worldwide expenditure. Europe is the second largest market for outsourcing services, accounting for 22 per cent of the market.