The impact of process standardization on business process outsourcing success

Abstract

It seems a safe bet to say that process standardization is desirable (Lee & Kim, 1997; Manrodt & Vitasek, 2004) and, particularly in service industries, offers technical interchangeability, compliance with regulations, and improved customer confidence (de Vries, 1999). Also, many expect that standardized business processes are better to outsource and there are empirical indications that business process standardization reduces the risks of BPO (Wüllenweber & Weitzel, 2007). Yet, despite the importance of both areas - process standards and outsourcing - neither the outsourcing nor standardization literature has so far offered a conclusive picture of the value of process standardization to business process outsourcing (BPO). In this paper, our overall research question thus is: What is the impact of business process standardization on BPO success? We argue that process standardization has a direct and positive production cost effect on BPO success, since economies of scale and skill can be achieved more easily. Further, we expect an indirect and positive effect via improved contractual and relational governance means: process standardization allows defining clear and precise process output objectives to be met by the service provider. On the other side, uniformity of process activities facilitates communication and coordination between exchange partners. Our results provide strong evidence that process characteristics - such as the degree of standardization - are an important prerequisite for BPO ventures. © 2009 Springer Berlin Heidelberg.