Business Process Outsourcing (BPO) is an industry on the move. Many new trends are emerging in 2010 and the tool used by many U.S. companies can be easily viewed as a trade risk or a trade opportunity.
The BPO market struggled in 2009, dropping to $18.5 billion in contract value, its lowest since 2001. Sourcing advisory firm TPI assessed 2010 to be a year of steady growth and rehabilitation for the industry “as companies commit to long-term strategies to reduce cost and streamline operations.”
A few hurdles, however, still stand in BPO’s way to rebuilding it’s industry. More specifically, risks associated with financial, contractual and security/privacy have created a trend shift in the way BPO is considered by companies, especially in the global market.
The most important lesson in assessing BPO risk is to consider the difference between offshore, onshore or near-shore. Near-shoring is a trend gaining speed as companies look to have operations in similar time zones and take advantage of rural, less expensive operation costs.
Basic risks and advantages of near-shoring are a hot topic in current global trade talks. Risks and benefits are often interchangeable depending on the host country being considered for the near-shore outsourcing contract. In some cases, cost of labor can be much less or similar to U.S. labor depending on the location. The universal benefits, however, can include keeping those outsourced services in a similar time zone and cutting cost for executive travel between operations.
Trade agreements and relationships are also enhanced by near-shoring activities when companies choose to grant contracts to grow jobs in neighboring countries. This practice could encourage more trade and be a benefit to both sides of the agreement.
Risk still needs to be addressed in near-shore outsourcing, especially any time information is passed across borders. The security of information passed between outsourced locations and clients or customers should be protected. Although the proximity of a near-shored practice may ease a portion of that risk, patent and copyright violations are sometimes difficult to enforce across borders and procedures for protecting a business’ assets is ideal. Other forms of risk can include less control of quality of service and not achieving 24-hour service.
Regardless the level of outsourcing a company is interested or engaged in, understanding the risks and opportunities on a global stage can protect the bottom line and create more sound engagements with sourcing firms both domestically and overseas.
To learn more about the major risks and opportunities involved with BPO, plan now to attend the next Navigating Global Risk series, “Business Process Outsourcing: A global trade risk management tool? Find out how to protect your bottom line.” The event will take place from 7:30-10 a.m., Thursday, June 24, 2010, at the Westin Galleria. Agenda details and registrations are now available HERE or contact Kelle Marsalis at (214) 712-1901, kmarsalis@dallaschamber.org. Continuing education credits are awarded in MCLE and CPA/CPE.
