Academic journal article South Asian Journal of Management

Business Process Offshoring: Challenges in Establishing Enduring Relationships between Canadian and Indian Organizations

Academic journal article South Asian Journal of Management

Business Process Offshoring: Challenges in Establishing Enduring Relationships between Canadian and Indian Organizations

Article excerpt

Business Pocess Offshoring (BPO) is having a big impact on the way service activities are being organized across the world, just like manufacturing offshoring changed global manufacturing a few decades ago. This paper examines whether business process offshoring has the potential of helping Canada and India give a fillip to their trade relationship, which is today considerably below its potential. Based on a qualitative study of the experience of four Canadian organizations, it concludes that the impediments to increase cross border trade in services based on business process offshoring are many, and it may take a long time before it becomes a significant driver of growth for the Indian BPO industry or a significant contributor to trade between India and Canada.

INTRODUCTION

Business Process Offshoring (BPO) is the most recent phenomenon in a long sequence of trends that has had an impact on the way economic activity has been organized. As McFarlan (2005) indicated, it is hard to think of a topic that is more important to the global business community than offshoring has been in the last few years. India has been labeled the back office of the world largely based on offshoring of business processes from the English speaking world, particularly the US and to some extent from the UK, and there are quite a few studies examining various issues related to business process offshoring relationships between India and the US and UK. However, there seems to be fewer relationships with other English speaking countries, particularly Canada, and even fewer studies examining relationships between Indian and Canadian organizations. It is quite well acknowledged that business relationships between India and Canada need to be enhanced, and an understanding of the challenges in establishing enduring relationships between Canadian and Indian organizations will go a long way in promoting business between the two countries. In this paper, an attempt has been made to identify some of the impediments on the path of business process offshoring between Canada and India that need to be addressed in order to meet the potential for trade in services between the two countries.

Outsourcing manufacturing processes in some form or the other has been practiced since the early days of industrialization when a focal organization purchased components and other inputs from smaller organizations in its region. However, it has evolved into offshoring, which largely refers to the global cross border trade in goods and services. The trends are gradually progressing to create a single global market in which value chains are disaggregated into sub-activities that are distributed across the globe and their outputs are re-integrated to produce the good or service required by end users in any part of the world.

While often, outsourcing and offshoring are used interchangeably, it is important that the terms, as used in this paper, be defined clearly. Following Ramanujam and Jane (2006), outsourcing is defined as the contractual delegation of an activity that is normally performed in-house to a supplier based in the same country. Since this does not lead to cross border trade, this paper does not focus on outsourcing. The focus of this paper is on offshoring which refers to the situation in which a company transfers work that has been done in the home country to an organization in a foreign country. In the case of offshoring, the end-user and service provider are located in different countries. Offshoring can be further divided into three categories. The first category is pure offshoring in which the organization in the foreign country to which the work has been offshored is owned and operated by the parent company, referred to as 'captive' operations. Outsourced-offshoring is the situation in which an organization, operating in the home country, to which an activity has been outsourced, in turn offshores all or some of its activities to a third party or its own subsidiary or joint venture in a foreign country. …

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