Understanding critical risks of business process outsourcing from the vendor perspective: A dyadic comparison Delphi study

Abstract

Business process outsourcing (BPO) enables organizations to enhance operational capability, shorten response time, and gain strategic value. Yet, BPO risks are real and BPO initiatives can and do go awry. While prior research has attempted to understand BPO risks from the client perspective, the critical risks of BPO from the vendor perspective (and how they differ from those of the client perspective) are not well understood. By using the Delphi method, this study identifies and ranks BPO risk factors from the perspective of vendors as well as clients (for comparison purposes) across two countries. We identify a list of 68 BPO risk factors perceived by vendors and clients and top-ranked risk factors perceived by vendors. We categorize these factors into six risk dimensions (i.e., organizational environment, client, complexity, contract, execution, and vendor). Our findings indicate that vendors are concerned about not only the risks that influence their own business, but also those that may impact the business of clients. However, vendors focus more on client and execution risks, whereas clients focus more on vendor and organizational environment risks. Our research contributes to the existing literature by not only investigating the top-ranked risks from the perspective of vendors, but also revealing the similarities and differences in the perceptions of vendors and clients with respect to BPO risk. Our research also has practical utility for BPO vendors and clients.