Business process outsourcing is where a business hands over the execution of a given task to a third party. When looking at services BPO, many people will quickly think of IT outsourcing. And while it is true that IT outsourcing is the most common form of outsourcing, there are many other processes that businesses can and do outsource to a third party.
Companies may relocate a portion of their business process to another institution located either within or outside their home county. Often services BPO are considered by a business because of the direct cost savings. Outsourcing makes it possible for a business to lower its production costs thanks to the lower wage rates offered by the outsourced companies and thanks to their access to cheap but skilled labor. However, some companies may choose to relocate their facilities to another country where the cost of direct operation may be high but where there are numerous tax advantages. The business may access these tax advantages by either one of several ways. It could be by employing a large number of persons within that country or simply by owning or renting a business premise in that country.
Services BPO have been discussed at great length mainly around the impact outsourcing of services has on economies of the world. It has been argued that when companies outsource, they deny employment opportunities to citizens in their country and thus affect the purchasing power of the people in that country. Though the products and services are offered at significantly lower prices, the number of consumers willing and able to buy these products and services may experience a substantial decrease.
There is a counter argument on services BPO. That is, it has greatly stimulated and spurred economic growth in developing countries. This is because it brings about more job opportunities which in turn increases the number of people in the middle class in that country thus raising the overall standards of living. Of course when this takes place for a long time, the wages of the persons in the developing country start to go up and may eventually make outsourcing to that country seem increasingly unattractive. An example of this is in India where as more companies have outsourced their services there, the booming economy has seen the wages of employees start to shoot up and approach a similar level as wages in developed countries.
Daven Michaels Author of the book Outsource This!