Drivers Of The BPO Phenomenon

BPO or Business Process Outsourcing is a business tool by which firms’ contract out non-primary business activities to third-party providers. BPO includes customer services/call center outsourcing, human resource management, payroll and accounting sectors. If you are looking to understand the driving forces behind BPO, then keep reading!

  1. Why Is The BPO Phenomenon On The Rise?

Several Asian countries like India are putting forth masses of young and talented individuals that are looking for work fresh off the market. This presents a golden opportunity to multinational companies based in the United States and the United Kingdom etc. Much like call center outsourcing, this allows firms to hire foreign workers that need to be paid much less than they would pay potential local employees. Also, different time zones prove compatible, and firms can remain active with 24/7 working hours and hence achieve more development and higher profits.

  1. Globalization

Globalization of the international economy has opened countless doors for the development of BPO. Firstly, it has reduced the biases and misconceptions that were present between the eastern and western economic setups. Consequently, with all parts of the international market becoming more interconnected and well integrated over time, a healthy and interactive globalized economy has been established. This yields more lucrative opportunities for both the east and west as they can learn and benefit from each other in the long run. This is especially true for developing countries, as they can gather useful infrastructure and knowledge about the latest technology from their international counterparts. Additionally, they can brush up on more technical skills and aspects of larger businesses. Similarly, with outsourcing parts of the business sectors and becoming more integrated with locals, multinational corporations can focus more on expanding to foreign markets as well.

  1. Economics

With growing knowledge and awareness of both micro and macro aspects of the economy, several theories regarding economies of scale came into view. With this, came the concept of comparative advantage of production. To simplify, there is no doubt there first world countries like the US or UK have the absolute advantage of production for several goods and services. However, this does not mean that producing all those products in-house will yield the maximum profits. Here the idea of comparative advantage comes into play as there are foreign countries that can produce those same goods at lower opportunity costs. This greatly facilitates both parties as goods can be imported and exported at mutually beneficial costs. In addition to flourishing trade between the east and west, there is a marked upgrading of software and BPO sectors that thrive by low-cost production and profits from international markets.

  1. Geopolitics

Another significant driving force behind BPO is the initiative taken by developed countries in the west to increase interaction with the east. This has led to an overall betterment of international relations on a global front. This is highly encouraging as more beneficial trade is inadvertently leading to more political clarity. It is imperative to understand that the aforementioned factors are all intertwined and act like three equally fundamental pillars of the same triangle and uphold one another in every regard.

  1. Demographics

This last factor is deemed by many as a happy coincidence. To elucidate, it depends on the average age of the western and eastern populations. As people in the western economies got older, more and younger and educated emerge in the east and vice versa. Therefore, both are integral for their counterparts and can provide immense help for the other. This has also led to the advent of highly skilled employees in the east, especially in countries like India and will further their status as a developing country in the long run.

Conclusion

There is no way to predict the state and efficiency of BPO shortly. Some may argue that the current ongoing global recession can undermine the potential of upcoming technology and BPO sectors. However it is also a globally acknowledged truth that thus far there has been little to no hold ups, and it is expected that BPO culture will thrive in the coming years!

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