INDIA OUTSOURCING

Key Factor That Influences Organization Choosing India Outsourcing



Key Factor That Influences Organization Choosing India Outsourcing

Background

Grossman and Helpman's (2005: 135) statement, "We live in an age of outsourcing," clearly indicates that outsourcing is now an accepted business strategy. One of the most common forms of outsourcing is business process outsourcing (BPO), i.e., transferring the operational ownership of one or more of the firm's business processes to an external provider that, in turn, manages the processes according to some predefined metrics (Ghosh and Scott, 2005; Stone, 2004: 15-20). Organizations are increasingly relying on offshore BPO partners for myriad operations. In some cases, organizations are outsourcing their entire global back-offices, including functions like human resources (HR), to leverage the cost and time advantages (Feeny et al., 2005: 10-20). BPO is a heterogeneous and rapidly growing offshore market with a projected annual growth rate of 60 percent (Tapper, 2004: 66-74). Brown and Stone (2004) reported that BPO accounted for 34 percent of the global outsourcing contract value in 2004 and projected that BPO services would grow from $1.3 billion in 2002 to $4.3 billion in 2007.

The growing number of global contracts and alliances focusing on BPO service delivery clearly demonstrate the organizations' beliefs in the BPO value-propositions. BPO suppliers not only help reduce clients' costs, but also provide expertise, help improve clients' services, and increase clients' profits. Client and vendor organizations seeking to exploit the benefits of a BPO relationship need to mutually understand their goals, values, and capabilities before entering into an outsourcing partnership (Feeny et al., 2005: 15-50). The relational view of outsourcing (Dyer and Singh, 2008: 52-85) also emphasizes shared goals and mutual understanding of processes and decisions between client and vendor for a win-win situation. Thus, for the client, understanding the vendor's end of the BPO market may be a critical factor in their partnership. For example, issues such as HR, technology, and training may directly affect clients' operations. Moreover, clients must be aware of offshore BPO markets to better negotiate contracts, handle competition, make strategic decisions about ownership, and build long-term vendor relationships. For example, some global companies establish their own outsourcing operations at offshore locations called "captive BPO centres," so understanding the challenges and opportunities of the BPO industry in such locations may be immensely valuable.

Prior research on offshore outsourcing has uncovered some broad concerns including infrastructure, cultural differences, accents, language ability, contractual problems, and fear of reduced service levels (Tapper, 2004: 41; Walsham, 2001: 46-50). Although these studies enhance our understanding of common issues associated with offshore outsourcing, specific issues affecting offshore vendors must be examined and their relative significance assessed. Thus, we focus on the following three points: ( 1) the unique managerial challenges of vendors in major offshore locations like India; ( 2) the issues perceived as most critical by the management of vendor operations in these locations; and ( 3) the opportunities for BPO firms in such locations.

Because India is the world's leading offshore outsourcing destination, studying BPO operations there is ...