To understand Offshore Business Process Outsourcing, first of all we shall discuss Business Process Outsourcing. Business Process Outsourcing is the process of hiring another company to handle business activities for you. So when your organization hires experts for accounting work, it is actually Business Process Outsourcing. When your hired party belongs to some other country, it is called Offshore Business Process Outsourcing.
In the early days of Business Process Outsourcing, it was consisted of outsourcing processes such as payroll and employee benefit management. Now it encompasses all the functions except primary business of the company. Now it is very common of organizations to outsource financial and administration processes, human resource functions, call centers, customer services, accounting and payroll. Now world has become a global village so the distance between the countries is reduced that increased the Offshore Business Process Outsourcing.
Business Process Outsourcing is different from IT outsourcing. In Information Technology outsourcing, an organization contracts with a software house for launching a website or making software. Both the parties remain in contract till the time of completion of task. So it is Business Process Outsourcing from the view point of software house but not from the side of other organization whom website is launched. Similarly, Internal Audit Assignment to an audit firm is outsourcing but external audit is not so.
Offshore Business Process Outsourcing usually deals with multi year contracts of billions of dollars. For example, you need financial assistance of some audit firm to perform your internal audit function. Audit firm sends his employee to your company. He performs all internal audit functions for years. It is Business Process Outsourcing. It is a contract between you and audit firm. But if you hire that particular person yourself who was appointed to you by audit firm, that person becomes your employee and it is no more Business Process Outsourcing. When you contact an audit firm of abroad for the same assignment, it is called Offshore Business Process Outsourcing.
India emerged as a big name for the Offshore Business Process Outsourcing. It is first choice for all the big US companies for Offshore Business Process Outsourcing due to low labor cost, big population, vast market and many other benefits.