What Is and Is Not Bpo?

What does exactly Business Process Outsourcing mean?

As companies started to develop their business in a much broader environment due to the globalization and liberalization of markets, and began to face a stronger competency from local and international competitors, some management and operational decisions become key factors for a sustainable success. One of those main decisions makes reference to the strategic process of deciding whether to centralize or decentralize some organizational functions. So, depending on the strategy selected and its affinity to the organizational structure, a company may be able to access to better and cheaper resources, achieve cost savings, full fill skill-gaps, and to improve their core competences.

By centralizing is meant the process in which companies decide to keep in house their production and operational functions. So, in the case that they want to expand their global presence by producing their products and service in another country, then they will normally use a market entry strategy such as Foreign Direct Investment (FDI). Meanwhile, by decentralizing is meant the process in which companies decide to buy some products or services from an outside provider instead of producing in-house. This can be referred as well as the “make or buy” decision, and most currently related to outsourcing (eNotes, 2006).

Outsourcing is not a new idea; indeed some of its roots came from different economic factors and already practiced theories. So, we can find for example the economic idea about the division and specialization of work, which was supported for several economic theorists such as Plato, David Hume, Adam Smith, Karl Marx, etc. However, it was just until the 90` s when it became much easier to consider the idea of subcontracting some business tasks to an outside provider, given the flexibility of work brought by the information technology revolution. So, outsourcing appeared as a result of the combination of several factors...