SEO Marketing Research

SEO Marketing Research header image 2

Business process outsourcing (BPO) types

348 Comments · Business outsourcing

Business process outsourcing has usually been discussed in terms of the international relocation of jobs and workplace functions. In reality, there are three types of BPO: offshore, onshore, and nearshore. The table below illustrates how these types are differentiated.

Organizations are prone to use any or all of these types, depending on their needs and the BPO initiative being implemented. In some cases, firms use a combination of types to achieve their objectives. The following sections look at each BPO type in more detail.

Offshore
Offshore BPO is the most challenging type of this relatively new approach to conducting business but potentially the most rewarding.

It began with movement of factory jobs to overseas locations and has been made both famous and infamous with stories of suddenly prosperous geographic regions mixed with stories of exploitative labor practices.

The so-called sweatshops identified in Vietnam, India, China, and elsewhere have stirred criticism for American companies, including Nike, Wal-Mart, and Walt Disney Company.

Despite the criticism leveled at some companies that outsource processes and functions to international labor markets, the advantages of doing so continue to outweigh the disadvantages.

By taking advantage of lower wages overseas, U.S. managers can cut their overall costs by 25 to 40 percent while building a more secure, more focused workforce in the United States.

The complexity of business functions being moved offshore continues to increase. As such, organizations using the offshore approach have developed a variety of different models to ensure continuity.

Some have utilized a model known as offshore insourcing. Under this model, the organization establishes a wholly owned subsidiary in the international market and hires local labor.

An extension of this model is the so-called build-operate-transfer (BOT) model. Organizations build offshore companies (usually with a local joint-venture partner) specializing in a business process, operate them jointly for a year or so, and then transfer the firm to internal control (insource).

It is important to note that there is no one-size-fits-all approach to offshore BPO. With the growing list of companies outsourcing at least some business functions to offshore vendors, the range of possible approaches will grow as well.

This makes it increasingly likely that the next adopter of offshore BPO will find a model suitable to its needs. The Case Study describes how GE Capital and Microsoft have utilized outsourcing for value-added services at low costs.

Two Giants Take the Offshore BPO Lead
GE Capital’s International Services unit, which provides everything from risk calculation to IT services and actuarial analysis for GE worldwide, has grown from 634 employees to 17,000 during the past five years.

More than half of those workers are in India, and they are not being used for mindless data entry – in India every employee has a college degree, and more than 1,200 have Master’s degrees in Business Administration (MBAs).

Microsoft has about 200 employees developing software in Bangalore, where it opened its first non-U.S.-based product development center five years ago.

Microsoft will increase its staff in India in the coming years, as the country continues to turn out tens of thousands of English-speaking engineers each year.

Sources: Adapted from Reed Stevenson and Anshuman Daga, “Microsoft Shifting Development, Support to India,” Reuters News Service (July 2, 2003); and Nelson D. Schwartz, “Down and Out in White Collar America,” Fortune (June 23, 2003), p. 82.

Onshore
It would be a mistake to conceive of BPO only as an international business phenomenon. Many U.S. businesses are outsourcing back-office functions to firms based in America.

One of the more prominent examples of this is payroll outsourcing, which is managed by several large U.S. companies.

Automatic Data Processing (ADP) provides a range of payroll administration services, time sheets, and tax filing and reporting services.

The firm has more than 40,000 employees and, as an indication perhaps of the future potential of the firm, has seen Warren Buffett steadily increasing his company’s position in its stock.

There are many reasons that a firm will use BPO. The cost savings that result from moving back-office processes to low-wage environments is the most oft-cited one.

Nevertheless, firms can also use BPO to transfer service functions to best-in-class performers to gain competitive advantage.

A firm that outsources customer service functions to a firm that specializes in and provides world-class support in that area will perform at a higher level in that function than its competitors.

Moving to a best-in-class provider may actually increase costs in the short run in the interest of developing competitive advantage.

Under this rationale, BPO is a strategic investment that is designed to upgrade service levels at a cost, with the intent of increasing revenues through enhanced competitiveness.

What matters most is the acquisition of partners that provide market-shifting capabilities for the firm doing the outsourcing.

Many U.S.-based outsourcing firms use the world-class provider strategy to acquire business.

Staked to a head start over their low-cost international rivals, U.S.-based outsourcing firms must continuously innovate and seek new ways to provide value to remain in front.

They are worth considering for services, even if their costs are higher, if strategic advantage is the goal of an organization’s BPO initiative.

Nearshore
Nearshore outsourcing is a relatively new term that is used to refer to the practice of outsourcing on the North American continent.

International issues will arise when American firms outsource to Mexico, Canada, or Central America, but they are likely to be less complex than those that attend outsourcing arrangements in, say, India or China.

Nearshore outsourcing allows companies to test the BPO waters without the level of risk associated with going offshore.

Firms that go with a nearshore strategy are often seeking cost savings, but they are also occasionally able to find best-in-class providers of the services they need.

For example, Mortgage Electronic Registration Systems, an organization created by the mortgage banking industry to develop systems for mortgage tracking, is moving its customer relationship management (CRM) function Michigan to Nova Scotia.

The move is expected to save the group 15 percent annually on CRM costs. The firm could have saved even more by outsourcing with firms in India, but it wanted to keep its CRM operations close to home.

Tags:

348 Comments so far ↓

  • سیستم cctv

    سیستم حفاظتی…

    The knowledge pointed out within the report are some of the most powerful accessible….

  • خرید vpn

    vpn ایفون…

    Hey! I know this is somewhat off subject but I was asking yourself which website system are you using for this web site? I’m receiving unwell and tired of WordPress simply because I have experienced difficulties with hackers and I’m looking at alternat…

  • سیستم cctv

    سیستم حفاظتی…

    Great website! I found it while browsing about on Yahoo Information. Do you have any ideas on how to get listed in Yahoo Information? I’ve been attempting for a although but I by no means seem to be to get there! Cheers…

  • خرید گوگل ادوردز

    تبلیغ در گوگل ادوردز…

    Appropriate now it seems like Movable Kind is the best running a blog platform out there appropriate now. (from what I’ve read through) Is that what you are employing on your weblog?…

  • خرید دوربین مدار بسته

    خرید دوربین مدار بسته…

    Right here are a number of of the net web sites we suggest for our site visitors…

  • zand game

    zand game…

    [...]just beneath, are various absolutely not associated internet sites to ours, even so, they are certainly worth going over[...]…

  • فروش طلا

    خرید طلا…

    we came throughout a amazing world wide web website which you could recognize. Take a look when you want…

  • IPhone Wholesale

    IPhone Wholesale…

    [...]Here is a great Weblog You may Find Exciting that we Encourage You[...]…

  • adam & eve butterfly kiss

    adam & eve butterfly kiss…

    [...]Here is a superb Weblog You might Find Interesting that we Encourage You[...]…

  • خرید گوگل ادوردز

    تبلیغ در گوگل ادوردز…

    Check out underneath, are some fully unrelated internet-web sites to ours, however, they’re most dependable sources that we use….

  • سیستم cctv

    سیستم حفاظتی…

    Greetings from Colorado! I’m bored to demise at work so I made a decision to look through your web site on my iphone in the course of lunch split. I genuinely like the information you offer listed here and simply cannot hold out to consider a look when…

  • خرید دوربین مدار بسته

    خرید دوربین مدار بسته…

    What is up it is me, I am also going to this internet site on a standard foundation, this website is actually pleasant and the viewers are really sharing excellent ideas….

  • خرید فیلترشکن

    vpn ایفون…

    Hey there, I feel your site may possibly be having browser compatibility troubles. When I appear at your website in Safari, it appears wonderful but when opening in Internet Explorer, it has some overlapping. I just desired to give you a fast heads up!…

  • قالب جوملا

    جوملا…

    Hey there, I feel your internet site might be having browser compatibility problems. When I appear at your website in Safari, it looks good but when opening in Net Explorer, it has some overlapping. I just wanted to give you a swift heads up! Other the…

  • work in travel

    work in travel…

    [...]please check out the internet sites we stick to, such as this 1, as it represents our picks through the web[...]…

  • gratis inserieren

    gratis inserieren…

    [...]Sites of interest we have a link to[...]…

  • 100 kona coffee

    100 kona coffee…

    [...]usually posts some incredibly exciting stuff like this. If you are new to this site[...]…

  • خرید vpn

    vpn ایفون…

    The information talked about within the report are some of the most successful accessible….

  • p spot stimulation

    p spot stimulation…

    [...]just beneath, are quite a few entirely not associated web pages to ours, even so, they are certainly really worth going over[...]…

  • why use nipple clamps

    why use nipple clamps…

    [...]The data mentioned inside the write-up are several of the most beneficial accessible [...]…

  • سیستم cctv

    سیستم حفاظتی…

    Great weblog! I found it while surfing around on Yahoo News. Do you have any recommendations on how to get listed in Yahoo Information? I’ve been striving for a even though but I never ever seem to be to get there! Cheers…

  • خرید دوربین مدار بسته

    خرید دوربین مدار بسته…

    Do you have a spam dilemma on this website I also am a blogger, and I was curious about your circumstance many of us have created some wonderful techniques and we are hunting to trade strategies with others, why not shoot me an e-mail if interested….

  • خرید اپل ايدي

    خرید دوربین مدار بسته…

    Thanks for another useful web site. The area else could I get that type of details prepared in such an best strategy?I have a venture that I’m just now operating on, and I have been at the seem outfor such data….

  • تعمیر صندلی اداری

    صندلی…

    Hey there! I just lately observed your website and I surely take pleasure in it. I really like to talk about omega xl from time to time. Great to be all around, thanks a whole lot!…

  • کولر صنعتی

    خرید کولر صنعتی…

    I’m actually making the most of the design and structure of your site. It’s a extremely effortless on the eyes which helps make it considerably far more pleasurable for me to come right here and go to much more typically. Did you retain the services of…

  • خرید دوربین مدار بسته

    خرید دوربین مدار بسته…

    Pretty! This has been a truly great write-up. Many thanks for supplying this info….

  • خرید vpn

    vpn ایفون…

    Just beneath, are a whole lot of entirely not relevant net sites to ours, nevertheless, they might be absolutely actually worth heading above….

  • hp drivers

    hp drivers…

    [...]Sites of interest we’ve a link to[...]…

  • best rotating vibrator

    best rotating vibrator…

    [...]Here is a great Weblog You may Discover Intriguing that we Encourage You[...]…

  • tremor sex toy

    tremor sex toy…

    [...]The information mentioned within the write-up are a number of the ideal obtainable [...]…

  • کولر صنعتی

    خرید کولر صنعتی…

    Every after in a even even though we opt for blogs that we go through. Detailed beneath are the most current world wide web sites that we opt for…

  • خرید طلا

    خرید طلا…

    Wonderful tale, reckoned we could combine several unrelated info, even so really actually value using a research, whoa did one particular master about Mid East has got a great deal far more problerms also…

  • hiky vibrator

    hiky vibrator…

    [...]below you’ll uncover the link to some web pages that we assume you’ll want to visit[...]…

  • testing bdsm toys

    testing bdsm toys…

    [...]please go to the web-sites we comply with, like this one, because it represents our picks in the web[...]…

  • vibrator

    vibrator…

    [...]Wonderful story, reckoned we could combine a handful of unrelated information, nevertheless really really worth taking a search, whoa did a single discover about Mid East has got more problerms as well [...]…

  • adam and eve thumper vibrator

    adam and eve thumper vibrator…

    [...]Wonderful story, reckoned we could combine some unrelated information, nevertheless actually really worth taking a look, whoa did one particular learn about Mid East has got much more problerms as well [...]…

  • health

    health…

    [...]one of our visitors not too long ago recommended the following website[...]…

  • black-magic-g-vibrator

    black-magic-g-vibrator…

    [...]The details talked about within the post are several of the most effective offered [...]…

  • mom and baby boutique shop

    mom and baby boutique shop…

    [...]Wonderful story, reckoned we could combine several unrelated data, nonetheless genuinely worth taking a look, whoa did 1 find out about Mid East has got a lot more problerms also [...]…

  • crystal and magnetic therapies

    crystal and magnetic therapies…

    [...]always a huge fan of linking to bloggers that I appreciate but really don’t get a lot of link like from[...]…

  • remove negative from credit report

    remove negative from credit report…

    [...]always a large fan of linking to bloggers that I love but do not get quite a bit of link enjoy from[...]…

  • diet destinations

    diet destinations…

    [...]just beneath, are numerous absolutely not associated websites to ours, nevertheless, they are certainly worth going over[...]…

  • خرید طلا

    خرید طلا…

    Correct now it seems to be like Movable Kind is the leading running a blog platform out there appropriate now. (from what I have read) Is that what you are employing on your website?…

  • homes for sale

    homes for sale…

    [...]although sites we backlink to beneath are considerably not associated to ours, we feel they may be actually worth a go via, so have a look[...]…

  • خرید دوربین مدار بسته

    خرید دوربین مدار بسته…

    listed here are some backlinks to web web pages that we hyperlink to considering that we come to feel they’re genuinely well worth browsing…

  • stock market basics for beginners

    stock market basics for beginners…

    [...]here are some links to web sites that we link to because we think they’re worth visiting[...]…

  • pet training videos

    pet training videos…

    [...]Here is a great Weblog You might Discover Fascinating that we Encourage You[...]…

  • toy rabbit

    toy rabbit…

    [...]check beneath, are some absolutely unrelated websites to ours, on the other hand, they are most trustworthy sources that we use[...]…

Leave a Comment