Business Process Outsourcing is today the new mantra by which, modern day organizations focus on their core competencies and stay away from non-core activities. outsourcing can facilitate cost reduction, specialization and faster response to changing customer needs. But BPO has its own perils. Outsourcing may fail if the selection of the partner is wrong, if there is an overestimation of the provider's capabilities, if the responsibility of the provider is not clearly defined or if measurable performance objectives are not included in the agreement.

In 1776, the brilliant British political economist, Adam Smith, in Wealth of Nations wrote "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it from them with some part of the produce of our own industry, employed in a way in which we have some advantage." The idea here is simple and intuitive. If our country can produce some set of goods at lower cost than a foreign country, and if the foreign country can produce some other set of goods at a lower cost than we can produce, then it would be best for us to trade our relatively cheaper goods for their relatively cheaper goods.

New names and acronyms have been given to the concept propounded by Adam Smith more than 200 years ago. One of the new names is Business Process Outsourcing (BPO). Business Process Outsourcing is currently the most revered topic among the academicians, industry experts and business houses in India.

Outsourcing is simply the transfer of operational responsibility of either business processes or infrastructure management to an external service provider. BPO is the process by which, the modern day organizations focus on their core businesses and competence and stay away from the non-core business areas and functions by outsourcing the same.

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