European Journal of Developing Country Studies, Vol.2 2006 ISSN(paper)2668-3385 ISSN(online)2668-3687 www.BellPress.org as this can result in facing issues regarding malfunction in meeting service expectation, ambiguous contractual issues, everyday changing business needs and rise in prices, which companies need to take in consideration such issues before getting into BPO. Knowledge Process Outsourcing (KPO) unlike BPO deals with the core business activities that plays a central role in company‘s value chain. To perform these core outsourced activities KPO involve the use of highly developed analytical and technical skills. It requires workers with high intellect and expertise as it involve high level decision making than workers in BPO work. Another type i.e. rapidly gaining prominence in outsourcing framework is the buzzword, ITO (Information Technology Outsourcing) as the name is self explanatory this type involves services that satisfies company’s IT needs and provide IT resources to the companies and is witnessed in all types of companies. ITO makes possible for companies to remain cost effective by cutting cost of purchasing expensive soft wares ,web servers ,Human resource and most importantly no maintenance cost. The service provider does all the IT tasks of the companies like web hosting, developing reports for management, maintaining and managing soft wares and equipment etc. Risks associated with Outsourcing Every business strategy has some benefits and risks associated with it; similarly in outsourcing too firms adopting it have to face some inherent risks that are linked with it. Broadly, these associated risks can be listed as, Operational risks: Risk that appears when outsourcing firm losses direct control of its functions and people, processes, system associated with those activities if the service outsourced is a core function of the organization unlike non core activities, it can create a negative impact on the operations of the firm. (Securities and Exchange Board of India, SEBI, 2011) Reputational risks: Such type of risk materialize because of the malfunction by third party that may result in the providing deliverables without keeping in mind the regulatory standards that ultimately leads to regulatory actions. (Securities and Exchange Board of India, SEBI, 2011) Loss of control: The firm that outsource its operations to other firm or offshore it to other country’s firm losses its control over its activities and at the same there is also a risk of having difference in motivation level, attitude ,goals achievement between workforce of third party service provider and internal staff of the firm. Legal risks: Legal risks can also hinder outsourcing relationship predominantly when legal documents and contractual relationships are not redefined or renewed with the changes in outsourced activities takes or come to an end. (Securities and Exchange Board of India, SEBI, 2011) Risk of Quality Standards: Every service provider country has its own quality and performance standards according to the demands of their local customer that can sometimes adversely affect the outsourced functions and might result in risk of getting poor quality of deliverables. (Subhankar Dhar, Bindu Balakrishnan, 2006) Miscommunication: Since outsourcing decisions are being taken at different levels, between outsourcing firms and service providers there can be a danger of miscommunication in product/service specifications, contracts and legal agreements that can impact outsourcing decisions and deliverables (service /product being delivered.). Vendor failure to deliver services on time: Another risk unfavourably effect outsourcing especially in the case of outsourcing of IT services is the risk of getting system crash and ultimately failure to deliver on time solutions to firms outsourcing functions/needs, so major suggestion for the outsourcing firm is to always search firms with better contingency plan so that companies always provide services on time and have a back up plan in store in time of unforeseen circumstances.( Dean Davison, 2003) Cultural risk: Culture also plays an important role in how the workforce of offshore outsource country behaves, deals and reacts to different business situation like for example if call centre services are outsourced to other country as in Pakistan the accent and pronunciation is entirely different form that of America, UK and other European counties so there will be a need to train call centre employees according to the accent of firms home country, at the same time dressing style social activities, customer services and dealing ,religious practices and the way of dealing customers all will have a reflection of third party’s country culture that can sometimes contribute as a risk factor in business dealings. Viability of service provider: Outsourcing customers are more concerned nowadays about the viability of the service provider, as there can be a risk of failure in providing services and the danger of leaving firm without giving access to all the products/services outsourced (Berinato, S., 2001). Such failure create security concerns for outsourcing firm and sometimes losses in business too due to which it becomes difficult to stay in business
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