Value Chain Glossary: Business Process Outsourcing
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Business Process Outsourcing
Transmission of processes and associated operational activities and responsibilities to a third party. In a globalized economy, firms seek the lowest cost of production possible while maintaining a competitive product and market position. A qualified, educated and low-cost workforce can attract multinational firms to contract out their production processes or invest in integrated outsourcing centers in the developing world.
Examples of Business Process Outsourcing:
- Internationally recognized fashion houses like MaxMara and Kenneth Cole contract production services to producers or producer groups in Moldova, Guatemala and El Salvador.
- In India and the Philippines, the rise of IT-enabled services has allowed these countries to export a new kind of export sector based on outsourced business services. Multinational software development companies like Accenture and SVI set up integrated operations in the Philippines to capitalize on low wage requirements and highly qualified Indian and Filipino developers. Services provided by local employees would be far more costly if sourced in the US. Accenture has been operating in Manila for 15 years and employs 3,500 individuals, most of whom are software developers. SVI, Manila employs about 2,100 local service providers.[1]
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