Business process outsourcing (BPO)

It contains the transmission of processes along with the associated operational activities and responsibilities, to a third party with at least a guaranteed equal service level and where the client contains a firm grip over the (activities of the) vendor for mutual long term success.

BPO is positively related to the search for more efficient organizational designs: cost reduction, productivity growth and innovative capabilities. Hence, a source for strategic advantage.

Traditionally, BPO is undertaken by manufacturing firms. For instance Coca Cola, where almost the entire supply chain is outsourced and the company is essentially becoming a marketing organization. However, BPO is nowadays rapidly conquering the service oriented firms as well.

A well-known example is provided by the Bank of America, who outsourced their entire HR function to Exult, one of the leading Human Resources BPO vendors.

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