BPO

2007-03-01T15:48:00.000-08:00

BPO - Business Process Outsourcing, according to wikipedia is "the increasing trend of relocating entire business functions to either self-owned or third-party service providers, typically in low-cost locations".

In most cases, BPO refers to moving lower skilled functions, offshore where they can be replicated most accurately. Although many business face great challenges in offshoring organizational functions, many firms have cut real costs by 25-60%. There have been numerous case studies showing that offshoring truly cuts costs, which explains why so many companies today, especially in Europe and North American have been offshoring.

It appears many Asian firms in India, Philippines, and China are far behind North American and European counterparts in terms of performance and standards, although experts estimate in less than 10 years, most of these offshore firms in places like Asia will catch up to American firms in terms of quality.

Thomas Friedman, author of "The World is Flat" identifies the early 1990s dot com bubble burst as the source of demand for Indian talent in the U.S. In the aftermath of the bubble burst, U.S. venture capitalists scouted globally for high quality companies to perform back-office work at low offshore costs. This started the global outsourcing trend, Friedman writes: "I better start outsourcing as many functions as I can from the beginning, as I have to make money for my investors as fast as possible,". Events such as the "Y2K" bug accelerated the BPO trend.

In 1985 Texas Instruments was the first organization to establish circuit design and development functions in India. Since then, the industry has grown at breakneck speeds. A study by of the big 5 accounting firms in 2005, stated the Indian BPO industry had total revenues of over $5.7 billion, with over 245,100 people employed. The study further projected another 94,500 people would be hired during the next 1-2 years.

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