Business Process Outsourcing (BPO): Current and Future Trends

Business process outsourcing (BPO) is a widely popular way that companies are conducting business all around the world. Employing such techniques can have a dramatic effect on your bottom line, but also open you up to many more advantages that ultimately help your business function more efficiently.

The purpose of this report is to critically review past literature on the topic to gain a better understanding of why businesses will choose to outsource processes. This report will also seek to provide greater insights into the effects outsourcing has on the company and also the host country being outsourced.

We found that there is an overwhelming trend to outsource processes from Australia and that brings other benefits such as getting closer to new market opportunities. The main body of this report outlines when and why a company should choose to outsource and the decision-making rationale around such concepts.

Research also indicated that there is a booming industry for companies that assist in aiding the outsourcing process and connecting you with partners in various host nations. This report discovered that there are also some ethical and moral obligations that need to be carefully considered as recent criticisms have damaged the reputations of some businesses.

Overall, the implications of our research hovered around a few key findings: the cost benefits associated with outsourcing and the greater efficiencies and quality in tasks that can be utilized in partnering with the right host company.

At this point in time across businesses all around the world, just about every standard business process has been outsourced to some extent. This is not limited by industry and includes processes like human resources, procurement, document management, customer service, call centres, finance and accounting, acquisitions and research and development (Halvey, Murphy, 2007).

In the wake of the global financial crisis, there has been a BPO boom as companies search for new ways to reduce costs, improve processes and methodologies, gain access to new markets and ultimately remain competitive. Developments such as globalization, more demanding consumers, corporate restructurings and advances in information and communication technologies (ICTs) have been important drivers of business process outsourcing (McIvor, 2010).

As stated by Dossani and Dossani (2015), in the year 2011 alone, worldwide spending on BPO services totalled $153 billion (USD) and it is one of the largest and fastest-growing outsourcing activities. This paper reviews theoretical insights and prior published journal articles to better understand the concept of BPO, how and why businesses choose it, and how it affects firms globally.

The report first defines BPO and extracts some clarity around the topic, as there is typically some general confusion. The phrase 'outsourcing' brings to light some negative connotations, primarily that of shipping jobs offshore. Whilst this can be a component of it, it's not always about jobs.

Adam Mole of Transeo, a company specializing in assisting businesses with BPO states that 'Outsourcing' is a function a business takes when it cannot or perhaps would rather not do a specific business requirement or function 'in-house'. For example, while staff could empty bins and clean the office kitchen, firms pay specialist cleaning companies to do that competitively and cost-effectively, freeing employees to focus on core work.

We must differentiate between outsourcing and 'offshoring'. Offshoring is the intentional decision of sending jobs offshore to another country. Apart from lower production costs, offshoring may secure qualified and skilled workers, access emerging markets, and avoid trade barriers.

Since the late 1880s and the industrial revolution, firms have experimented with structures to gain competitive advantage. By the 20th century, large integrated firms dominated; by the 1960s and later decades, firms pursued diversification and global footprint expansion.

The invention and spread of the Internet in the late 1980s shifted emphasis toward flexibility and core competencies. Outsourcing rose as a formal business strategy in 1989 (Mullin, 1996), and boomed in the mid-1990s as firms pursued cost-efficient external providers.

In recent years many large reputable companies adopted BPO strategies and established overseas labs, call centres, and support functions to utilize skilled lower-wage human capital across India, China, and the Philippines. Example corporate moves reported include:

• General Electric outsourced 20,000 jobs to India (R&D, financial reporting, IT support, call centre).
• Accenture outsourced 5,000 jobs to the Philippines (accounting, back-office admin and software design).
• Oracle outsourced 4,000 jobs to India (software design, customer support).
• Conseco outsourced 1,700 jobs to India (insurance claim processing).

Source: 'Learning to Live with Offshoring', BusinessWeek Online (2006).

Understanding what motivates a business to outsource is critical. Decisions can be proactive or reactive and depend on lifecycle stage and strategic priorities. This section outlines motivational drivers and common decision frameworks.

BPO brings advantages and risks. Decision-makers must weigh potential benefits against exposure to quality variation, loss of control, and cross-cultural misunderstandings. For instance, U.S. companies outsourced sizable volumes of services to India and the Philippines; cultural differences can affect perceived quality.

• Politics — political instability, strikes, or regulation changes in host countries.
• Managing customer expectations — offshore service perceptions and quality must be managed.
• Budget constraints — underinvestment can degrade service quality.
• Health concerns — time-zone differences may require unusual working hours, affecting well-being.
• Finding a good BPO partner — recruitment and retention can be challenging, raising turnover and training costs.
• Disruptions — connectivity, power outages, and infrastructure issues can interrupt workflows.
• Brand equity and quality control — poor offshore experiences can damage the home firm's reputation.

The Philippines is one of the front-runners in the global BPO market, with strengths in ICT, customer service, and voice-based BPM owing to language skills and cultural affinity. The first contact centre in the Philippines emerged in 1992, with major multinational entrants in the late 1990s.

By the 2000s, ICT advances enabled rapid growth. The sector has delivered strong GDP contributions and employment gains. Key milestones and statistics from Nikki Natividad's 2015 summary include:

• 2010 — The Philippines declared the world's BPO capital: ~525,000 employees in call centres and $8.9B revenue.
• 2011 — $11B revenue and ~638,000 employed; ~4.9% of GDP.
• 2012 — Industry grew 46% annually since 2006; revenue ~5.4% of GDP.
• 2013 — Revenue ~ $15.5B and ~900,000 employed.
• 2016 (projection) — 1.3M new jobs and 17% projected annual growth.

The Philippines' advantages include better English fluency and neutral accent vs some competitors, competitive infrastructure, and large graduating cohorts with appropriate skills. Benefits accrue when offshoring is executed carefully with reputable partners.

The BPO future will be shaped by automation, AI, robotics, and cloud technologies. Data entry and repetitive tasks may be automated; however, human elements (e.g., sales, relationship management) remain harder to replace.

Experts provide differing views: some see BPO plateauing because high-quality offshore services can approach onshore costs, while others argue BPO will endure due to ease of global connectivity and persistent demand for low-cost labour and round-the-clock coverage.

Companies should plan how BPO providers can adopt automation and upskill staff to stay competitive. BPO may remain attractive for cost centres and high headcount non-core units if decisions properly weigh risks and benefits.

Outsourcing via BPO requires careful evaluation. The benefits—cost savings, efficiency gains, and focus on core activities—are tangible, but risks are also real and must be managed.

A balanced approach that considers objectives, operational risks, and long-term strategic fit should underpin any BPO decision. When well-executed, BPO can contribute significantly to firm performance; when mismanaged, it can erode competitive advantage.