Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific

business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced [1] large segments of its supply chain. . In the contemporary context, it is primarily used to refer to the outsourcing of services. BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customerrelated services such as contact center services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called nearshore outsourcing. Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service orITES. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.

Industry size
India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year, other locations like Philippines, and South [citation needed] Africa have emerged to take a share of the market . China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in Indiaare Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune and New Delhi. The top five Indian BPO exporters for 2009-2010 according to NASSCOM are Genpact, TCS BPO, WNS [3] Global Services, Wipro BPO, andAegis Ltd.. According to McKinsey, the global "addressable" BPO market is worth $122 $154 billion, of which: 3540 retail banking, 25-35 insurance, 10-12 travel/hospitality, 10-12 auto, 8-10 telecoms, 8 pharma, 10-15 others and 20-25 is finance, accounting and HR. Moreover, they estimate that 8% of that capacity was utilized as of 2006.
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Benefits and limitations

An advantage of BPO is the way in which it helps to increase a companys flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways. Most services provided by BPO vendors are offered on a fee-for-service basis . This can help a [4] company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in [5] assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental [citation needed] changes . Another way in which BPO contributes to a companys flexibility is that a company is able to focus on its [6] core competencies, without being burdened by the demands of bureaucratic restraints. Key employees are herewith released from performing non-core or administrative processes and can invest more time
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and energy in building the firms core businesses. The key lies in knowing which of the main value drivers to focus on customer intimacy, product leadership, or operational excellence. Focusing more on [8] one of these drivers may help a company create a competitive edge. A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming can reduce cycle time and inventory levels, [citation needed] which can increase efficiency and cut costs . Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business [9] processes, such as the throughput in the case of a manufacturing company. Finally, flexibility is seenas a stage in the organizational life cycle. BPO helped to transform Nortel from a [citation needed] bureaucratic organization into a very agile competitor . A company can maintain growth goals [10] while avoiding standard business bottlenecks. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic [11] mode of operation. A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time. Although the above-mentioned arguments favor the view that BPO increases the flexibility of organizations, management needs to be careful with the implementation of it as there are an issues, which work against these advantages. Among problems, which arise in practice are: A failure to meet service levels, unclear contractual issues, changing requirements and unforeseen charges, and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to be considered [12] before a company decides to engage in business process outsourcing A further issue is that in many cases there is little that differentiates the BPO providers other than size. They often provide similar services, have similar geographic footprints, leverage similar technology [13] stacks, and have similar Quality Improvement approaches.

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Threats
Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing [14][15] leads to a different relationship between an organization and its contractor. Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a Business continuity management (BCM) model is setup. BCM consists of a set of steps, to successfully [16] identify, manage and control the business processes that are, or can be outsourced. Another framework, more focused on the identification process of potential outsourceable Information [17] Systems, identified as AHP, is explained. L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT- processes

Knowledge process outsourcing (KPO) is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost. Unlike the outsourcing of manufacturing, this typically involves high-value work carried out by highly skilled staff. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisionstypically those that are easily undone if they conflict with higher-level business plans.

Overview
Process transparency is a major barrier to using KPO services. Many organizations do not track carefully which decisions are made by whom, and rely so much on informal social processes (and "soft skills") that it is unclear how much the use of KPO would disrupt existing operations. However, requirements like Sarbanes-Oxley and radical transparency movements like full cost accounting, shareholder activism and eco-labels and moral purchasing require organizations to be more explicit about when and by whom decisions are made. These trends make it easier for outsourcing non-critical jobs to be considered by qualifying the impact of decisions in advance. Furthermore, it becomes easier to evaluate and compare success. A fully developed service economy enables KPO by treating all functions as services. So do more technical trends such as service oriented architecture, enterprise application integration and telework: it is easier to outsource a job if it is already being performed outside the head office. Organizations adopting ISO 9000 and ISO 19011 should also find it much easier to integrate externally provided KPO into their operations and audit them on a fair basis. As of 2007, most US organizations were hiring foreign professionals under H-1 visas to do jobs in the USA for several years, after which they would return to their home countries as managers to train and supervise others, continuing to report to their former business units. The following extract from chapter two of the British Computer Society book 'Global Services: Moving to a Level Playing Field' by Mark Kobayashi-Hillary and Dr Richard Sykes attempts to define KPO: "KPO is merely a continuation of BPO, though with rather more business complexity. The defining difference is that KPO is usually focused on knowledge-intensive business processes that require significant domain expertise (application professionalism in the language of Chapter 1). The offshore team servicing a KPO contract cannot be easily hired overnight as they will be highly educated and trained, and trusted to take decisions on behalf of the client. IT outsourcing is strongly focused around technical professionalism, and the migration to business process outsourcing introduces this extra dimension of application professionalism. Ever more complex services, as implied by KPO, demonstrate this very well. The profile of people being hired to serve within KPO service companies are more diverse than just being drawn from technical IT services these are people with MBAs, and medical, engineering, design or other specialist business skills. KPO delivers higher value to organizations that offshore their domain-based processes, thereby enhancing the traditional cost quality paradigm of BPO. The central theme of KPO is to create value for the client by providing business expertise rather than process expertise. So KPO involves a shift from standardized processes to advanced analytical thinking, technical skills and decisive judgement based on experience."

Types of KPO services

KPO services include the following: Investment research services (equity, fixed income and credit, and quantitative research) Business research services Data Analytics

Market research services Valuation and Fairness Opinions Legal research services (also known as Legal Process Outsourcing) Patent research services

Market researching
Leaders in the market research industry are slowly seeing the benefits offered by KPO and have begun [citation needed] outsourcing. Comprehensive IT solutions are offered by vendors who provide solutions covering the entire life cycle of a market research project. Smaller firms can also benefit from these solutions as they are cost effective and remain within the budget of smaller organizations. KPO is claimed to efficiently increase productivity and increase cost savings in the area of market [citation needed] research. Advocates claim that the trend is likely to prove increasingly popular in the global market research industry.

LPO---Legal Process Outsourcing (LPO) is the industry in which in-house legal departments or organisations outsource legal work from areas where it is costly to perform, such as the United States or Europe to areas where it can be performed at a significantly decreased cost, primarily India. Legal Process Outsourcing covers the following services in general: Legal Research Document Drafting like standard contracts, agreements, letters to the clients, patent applications etc. Legal Billing activities like preparation of invoices, collation of time sheets etc. Intellectual Property research--substantive and administrative Paralegal Services Administrative and secretarial activities like following up with clients, etc.

The work is done by experienced paralegals and attorneys using industry standard databases like Lexisnexis and Westlaw. The main criteria for deriving value from such services is the level of maturity of delivery processes of the service provider. Also sufficient control should be exercised on the operations to ensure that the work is delivered to the level of expectation of quality of the client and the data is secure.

Advantages
Most firms and corporations outsource primarily for cost saving measures and this is considered the biggest advantage for legal process outsourcing. While an attorney in major legal markets such as the US may charge over 250 dollars for work, countries that are offering legal process outsourcing charge just a fraction.

Criticism
One of the major concerns with legal process outsourcing is the potential for breach of clients confidentiality. Another concern is that the people performing legal work in different countries are not bound by by the same ethical standards attorneys are subject to at home

Eso
India is fast emerging as a hot destination for global automobile and aerospace giants, who are increasingly outsourcing engineering services such as designing to Indian BPOs. India is expected to garner one-fourth of the global Engineering Services Outsourcing (ESO) business by 2020, generating a whopping $40 billion. The National Association of Software and Services Companies (NASSCOM) and Booz Allen Hamilton together published a report Globalization of Engineering Services recently to take a close look at this burgeoning sector. CIOL brings you the highlights of this report and some of the case studies that indicate how Indian companies are providing hi-tech engineering services to major global players. A $40 billion opportunity Talent Crunch Acute for ESO Engineering services outsourcing Sunil Mehta, Vice President of apex (ESO) is the next logical step for industry body NASSCOM reveals India, moving from low-end BPO work to high-end ESO. But the road to success is dotted with potholes and craters, much like the roads in any of the metros. some concern areas that face the delicious $40 billion Engineering Service Offshoring pie for India.

Indian engineering providers can provide you with customized engineering outsourcing services for Aerospace, Pharmaceutical, Healthcare or any other type of industry. You can get an expert and low cost offshore vendor for a range of engineering services, such as, CAD conversion, 2D drafting, Reverse engineering, 3D rendering, Retail space planning, Paper to CAD, MEP design, HVAC, FEA services or Peer review services. If engineering is not a part of your core competency, it is best outsourced, as any type of engineering requires experience, skill, proficiency in specific software and technical know-how. By outsourcing, you can concentrate on your core business activities and stay assured that your engineering requirements are being met by experts.