Managing E-Collaboration Risks in Business Process Outsourcing

A marked development in the last decade has been the growth of “virtual organizations” (or “extended enterprises”), where a network of service supplier and vendor firms cooperates to create customer value. One form of cooperation is described as business process outsourcing (BPO). A business process involves several interrelated activities performed with the goal of generating customer value. Because of the growth in e-collaboration tools, it is now possible for firms to outsource even core business processes to external vendors. Examples of processes typically outsourced include logistics, customer support, human resources, and back-office accounting functions. BPO and the value networks created by vendors and purchasers hold the promise of substantial business benefits associated with specialization and scale. These include reduced costs, greater business flexibility, and higher service quality. According to the Gartner Group, the world market for BPO services is likely to increase from $100 billion in 2002 to $173 billion by 2007 (Gartner, 2004). E-collaboration is a core aspect of BPO, as vendor and purchaser are physically separated, and without this collaboration, the level of integration needed between vendor and client would be impossible. Maturing IT capabilities, and in particular e-collaboration tools, were important drivers of the large growth in outsourcing witnessed since 1989. Yet the e-collaboration that enables BPO also introduces new corporate risks, particularly those associated with sharing of data, and with the change from face-to-face interactions based on propinquity to computer-mediated interactions. Drawing on a series of focus groups, this paper summarizes the promises e-collaboration holds for BPO, but also highlights risks that need to be managed. These risks have increased with recent legislative demands like the US Sarbanes-Oxley and EU privacy legislation. The findings reported here are based on ten focus groups and individual interviews with practitioners involved in outsourcing IT/IS or BPO services. These were conducted between 1999 and 2004. In all, 46 informants were interviewed in the focus groups, and a further five informants were interviewed individually. While most informants were from purchaser organizations, one focus group involved informants from outsourcing vendors. Services supplied within these outsourcing arrangements included back-end bank processing, scientific data collection, call centre operations, delivery of ongoing mainframe services, software development, help desk operations, and desktop support. Details are reported in Rouse (2002) and Rouse and Corbitt (2004).