Control in Business Process Outsourcing: A Transaction Cost Perspective

Abstract

The better service levels an d cost-savings prom ise o f business process outsourcing is m akin g it one o f the fastest-grow ing
practices in the m arket today. The greatest challenge in this m anagem ent tool, however, is one o f 'control'. M anagers are
accustom ed to having direct control over the resources to deliver the results fo r which they're accountable. With BPO, these
controls are in the hands o f the provider. How the control issue is han dled can m ean the difference betiveen adequ ate results
an d high perform ing outsourcing that delivers beyond expectations. This paper adopts a transaction cost framework to
advance the understanding o f the im pact o f the nature o f the outsourced activity on the structure o f the control portfolio an d
the relationship betw een control an d outsourcing success.