Article Preview
TopIntroduction
Western companies outsource a wide range of business processes to developing countries, such as India. According to Mickoleit et al. (2009), India’s business process outsourcing (BPO) market is growing by 20% a year, thereby doubling every four years. As Gartner (2009) reports on the BPO industry in India: “By the end of 2008, the top 20 India-centric BPO providers accounted for $4 billion in revenue, representing 5 percent of the $80 billion revenue of the top 150 BPO service providers.” Gartner (2009) also “expects this trend to accelerate because of economic pressures that are leading to demand for low-cost BPO.” When looking at the future of India and its position in the BPO industry, Joshi & Madigonda (2008) suggest that “for the next 8-10 years, and possibly even beyond that, India is likely to retain its number one position in offshoring of services” (p. 224).
Advantages of outsourcing mentioned in the literature are cost reductions, improved focus on core competences, access to better resources and technology, increased flexibility, and more predictable cost structures (Ghodeswar & Vaidyanathan, 2008; Gonzales et al., 2005; Gottschalk & Solli-Saether, 2005; Joshi & Madigonda, 2008; LaMonica, 1998; Lee & Kim, 1999; Nair & Prasad, 2004; Winkler et al., 2008). However, BPO also has its downsides. Tafti (2005), for example, describes contracting processes as a risk factor, arguing that services are often difficult to define in perfect detail. Other common problems of BPO are related to cultural differences, difficulties in assessing the costs of outsourcing projects, privacy and security issues, difficulties related to trust, and dependency on the external service provider (Collet, 2004; Gottschalk & Solli-Saether, 2005; Rao, 2004).
Overall, the many disadvantages might outweigh the advantages. Kakumanu and Portanova (2006) claim that user needs are occasionally “lost in translation”, referring to the general problem of communication difficulties associated with outsourcing arrangements. The issue of communication problems has been identified by many other researchers. Shelby (1994) reports on communication problems causing differences in expectations regarding technical, functional, and aesthetics specifications. Lee and Kim (1999) emphasise the accuracy of communication, also often an issue in outsourcing arrangements. Although communication may not be a goal in itself in outsourcing arrangements, many researchers point to the prevailing effects of communication on the success of outsourcing deals (Grover & Cheon, 1996; Lee & Kim, 1999; Mohr & Spekman, 1994; Winkler et al., 2008).