Before deciding to outsource business processes to an external provider located abroad, companies must make a detailed assessment of their goals and needs, according to Gartner.
Based on the assessment, a company may discover, for example, that it may make more sense to open its own service operation abroad to handle the business processes in question, as opposed to hiring an external provider, Gartner said. Or a company may decide to use a hybrid strategy, farming out some business processes externally while handing off others to overseas operations of its own, Gartner said.
Outsourcing IT tasks and business processes to providers in countries with lower labor costs is becoming popular because the price of services is often significantly lower than in the client's own country. In particular, India has become a hotbed for providing lower-cost IT services to clients located in countries with more expensive workforces, such as the U.S. and the U.K.
These types of services provided to a client from overseas are commonly referred to as "offshore." The offshore segment that deals with the outsourcing of business processes is known as offshore BPO, an acronym that stands for business process outsourcing. In a BPO engagement, complete operations such as payroll and human resources are outsourced along with the IT tasks they involve. These BPO engagements are thus more encompassing than traditional IT outsourcing projects, which are limited in scope to IT operations and don't cross over into business functions.
Gartner cautions companies not to get swept away by the BPO offshore outsourcing hype and instead to consider questions such as these when they consider hiring an external provider:
-- What does the company expect to accomplish from the outsourcing? The decision whether to use an external provider could vary depending on whether the company is looking to lower costs, improve services or focus on its core business, for example.
-- What is the nature of the business process that might get outsourced? Good fits for offshore BPO include processes that are repetitive and transaction-intensive, while it might not be the best idea to outsource abroad processes involving sensitive or confidential data that must be kept secure.
-- How efficiently is the company carrying out the business process in question today? Companies that measure this may find that if they are particularly efficient at performing this function, it might end up costing them more if they outsource it to an offshore provider that will not be able to match its productivity. The reverse could also be true, in which case offshore BPO would make sense.