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BPO Journal

Friday, May 06, 2005

Paradox solved

Our research offers some interesting explanations for the BPO paradox:

We find that governance capabilities, when aligned with outsourced process requirements, lead to higher service satisfaction. In fact, when such capabilities are misaligned with outsourced process requirements, they adversely impact service quality and satisfaction. However, we find that most outsourcing managers design BPO governance structures to the exclusion of process requirements. Therefore, dissatisfaction with outsourcing may be explained by either (1) an under- or over- investment in governance capabilities or (2) design of governance capabilities to the exclusion of process requirements in favor of other factors such as broad strategic objectives, environmental dynamism, mimetic adoption of industry practices, etc.

Deloitte's study also reflects sampling issues and the flaw with averages. It is necessary to control for factors such as firm size, industry, etc. while analyzing service satisfaction in BPO. For example, we find that most firms tend to use BPO as an organizational lever that provides access to skills and capabilities required to deal with dynamic business environments, i.e. they outsource the risk associated with volatile, uncertain business environments. However, they also seem to outsource the management of such uncertainty - we find that environmental uncertainty adversely impacts service satisfaction. This speaks for a decision bias amongst managers that contributes to the paradox.

A copy of complete findings will be emailed to survey respondents soon.

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