THE O WORD: OUTSOURCING OVERSEAS

whether or not this headline-grabbing theme takes jobs away from U.S. workers or delivers on its promise to push up the economy, the fact remains that outsourcing internationally is far more common than most people know. And with it comes certain challenges and perils that risk managers need to be aware of.

In the United States, outsourcing largely entails the transferal of certain technology-based jobs-such as computer programming, technical support services, data processing and manning call centers-that used to be handled domestically to countries like India, China, Singapore, Malaysia, Slovakia and Poland, where the same jobs can be done less expensively. Firms outsource through two main methods. Large organizations, such as IBM and Citigroup, tend to buy internationally based business process outsourcing (BPO) providers and use them to replace their own business process departments. Smaller firms generally lack the resources to buy their own BPO providers, so they instead hire the services of one as a third-party contractor. According to Stamford, Connecticut-based consulting firm Gartner, cross-border BPO-of which technology-based functions are the major component- will increase by nearly 70 percent from $123.6 billion in 2001 to $178.5 billion in 2005.