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  5. An Overview of Business Process Outsourcing (BPO) and the Potential of Utilizing Domestic BPO as a Job Creation Measure

2012 Vol.1
An Overview of Business Process Outsourcing (BPO) and the Potential of Utilizing Domestic BPO as a Job Creation Measure


An increasing number of companies are looking to business process outsourcing (BPO). Types of BPO service can be categorized into”domestic”,”offshore”, and”nearshore”, which is thought as an intermediate category. Among these options, more and more Japanese companies are choosing the offshore BPO service to take advantage of low wages in Asian countries. Traditionally, the target process covered by BPO was limited to specialized IT service and call center operation; however, today it has extended to include areas such as accounting and human resource management which used to be handled in-house at most companies.
When a company uses a BPO service, the following items should be achieved: (1) recognition of issues and the setting of potential goals, (2) decision on which business processed are to be delegated, (3) standardization of operational details and visualization of information transmission paths, (4) selection of BPO vendors and the setting of key performance indicators, and (5) proper implementation and improvement of various aspects based on the plan-do-check-act (PDCA) cycle. It is also necessary to work for appropriate maintenance. Since BPO requires to outsource its operations to third parties, it is important how details of the operations can be transferred clearly and objectively.
The advantages of BPO include reduced costs, shortened lead time, improved operation standardization, and reallocation of in-house resources for growth. On the other hand, the disadvantages, especially with regard to offshore outsourcing, include potential risks of lost opportunities for training in-house human resources, know-how leakage, and exported jobs, as pointed out in heated debates in the United States, a leading country in an offshore BPO business/the biggest user. In particular, continued high unemployment rates among young people are a serious problem for Japan whose population is aging. These employment problems are critical issues that require urgent measures.
As seen in the case of Okinawa Prefecture’s promotion of BPO in its efforts to create jobs, it is highly possible that promoting domestic BPO will ease employment problems. It is also considered that domestic BPO can be utilized as a job creation measure in areas where jobs have been lost due to the Great East Japan Earthquake.