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Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain their position in the marketplace. BPO is often divided into two categories: back office outsourcing which includes internal business functions such as billing or purchasing, and front office outsourcing which includes customer-related services such as marketing or tech support.

BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and BPO that is contracted with the company's own county is sometimes called onshore outsourcing.
Outsourcing

Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business. In some cases, the entire information management of a company is outsourced, including planning and business analysis as well as the installation, management, and servicing of the network and workstations. Outsourcing can range from the large contract in which a company like IBM manages IT services for a company like Xerox to the practice of hiring contractors and temporary office workers on an individual basis.

Offshore outsourcing, a type of business process outsourcing (BPO), is the exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings. Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Offshore imply means "any country other than your own." The Internet and high-speed Internet connections make it possible for outsourcing to be carried out anywhere in the world, a business trend economists call globalization. In general, domestic companies interested in offshore outsourcing are not only trying to save money in order to be more price-competitive against each other, but also to enable them to compete with businesses in other countries.

Critics of offshore outsourcing worry that if too much IT-related work is farmed out to other countries, home-grown IT talent will "dry up." They point out that once a company begins outsourcing overseas, they will find it difficult to reverse the trend and justify paying more in salaries, taxes, and job benefits for the same work they used to outsource. Proponents maintain that the judicious use of offshore outsourcing will help make all IT workers become more productive and allow companies to develop more agile and responsive business models, which in turn, will raise salaries for domestic workers in all countries.

According to the IT research and analysis firm Gartner, by the year 2004 more than 40% of IT-related businesses will either be investigating the possibility of offshore outsourcing or will have already shipped some IT-related work overseas.