Business-process outsourcing (BPO) is a type of outsourcing that consists of contracting operations and responsibilities of a specific business process (e.g., human resources) to a third-party service provider. Such outsourcing generally began with manufacturing firms outsourcing their supply chain but has grown into a much wider range of processes, including marketing, finance, sales, and accounting. Competition among firms in the BPO market is strong. Companies based in the United States include HP Enterprise Services, Affiliated Computer Services, and Automated Data Processing (ADP). A number of Indian companies, however, also provide worldwide BPO services, such as Infosys, Wipro, and Genpact.
An article in Business Wire suggested that BPO can save end users anywhere from 30-50% . International BPO service providers are particularly attractive since offshore labor offers an additional 25-30% cost savings. Furthermore, approximately 25% of the cost savings results from BPO firms’ proprietary products. The remaining 10-30% in cost reduction accrues from consolidated operations.
Suppose you are the manager of a company and must decide whether to outsource your Human Resources department.
- Based on the information above, please outline arguments supporting and opposing a decision to outsource this function of your business. Use the IRAC method to outline your argument:
○ Identify the issue.
○ Relevant examples or similar cases – Here you need to explain the relevant examples or similar cases, not just list them. This could include sections of other corporate examples, cases, or laws.
○ Application to the facts – the examples are applied to the facts of the issue identified.
- Please explain, from a purely business standpoint, any issues that might arise from contracting with an international-based versus U.S.-based BPO service firm?
The Boeing Commercial Airline Group (BCAG) recently recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this Boeing division combined efforts of capital and more than 90,000 workers. Suppose the European company Airbus enjoys a similar production technology and produces a similar number of aircraft but that labor costs (including fringe benefits) are higher in Europe than in the United States. Would you expect workers at Airbus to have the same marginal product as workers at Boeing? Explain carefully. Complete your discussion response and respond to one other classmate’s response.