Cost, Quality and Time Outcomes of Onshore and Offshore Business Process Outsourcing

Firms are increasingly using onshore and offshore business process outsourcing (BPO) to manage their primary and support functions and achieve their strategic objectives. Despite the growing significance of BPO, there is limited understanding of the performance outcomes for firms that engage in BPO. To study the performance implications of BPO, we first develop a conceptual model based on literature from operations management, performance measurement and vendor management. We then validate our conceptual model by performing an empirical study of data from 47 publicly traded firms in the U.S. We find that a firm’s performance measurement focus and strategy dictates whether the firm achieves quality, cost and/or time benefits from BPO, and that quality benefits from BPO lead to cost and time benefits. Our findings suggest that BPO clients and vendors should focus on quality first, and that quality benefits will lead to subsequent cost and time benefits.