Organizations need diversified business process management and multi-dimensional knowledge management, critical components of organizational outcomes, to succeed in the Business Process Outsourcing (BPO) industry. The current study examines how to improve BPO to determine what drives organizations to develop the BPO industry. Data has been collected using a structured questionnaire considering the 7-point Likert scale. The Structural Equation Model (SEM) has been employed to simultaneously show the relationships among constructs. The findings reveal that business process and knowledge management positively promote business process outsourcing. Nonetheless, the growing trend of the BPO industry is a source of concern for the Bangladeshi industry in the current environment. Testing business processes and knowledge management inside BPM also provides researchers and policymakers with significant insights and diverse ramifications. Bangladesh is the 13th best-emerging economy in the world; thus, the findings generated from Bangladesh could be generalized to the other emerging economies in the world for increasing the BPO industry.
Business Process Outsourcing (BPO) has captured much interest in the contemporary age to the business managers and the researchers. An organization deprives itself from outsourcing when its competitors are doing the reverse, the organization is putting itself out of bus-iness (Budhwar et al., 2006). By this line, the authors tried to understand why contemporary business experts are concerned with business process outsourcing. Busi-ness process outsourcing is delegating the critical bus-iness process to a third party, including its auxiliary services. BPO experts have agreed that we live in an age of outsourcing, which means business process out-sourcing is a widely accepted business model to boost business operations by focusing on core business operations (Sen & Shiel, 2006). Although Experts have commented that BPO has multiple dimensions, organi-zations rely on offshore or sourcing (Ramachandran & Voleti, 2004). BPO proponents argue that organizations are outsourcing entire services, including human resource services. Scholars view that BPO has multiple impacts on organizations. Because BPO helps reduce client costs, at the same time, it provides the expert service linked to goal conference (Lahiri and Kedia, 2009).
Scholars recommend that the organization adopt BPO for cost-saving purposes, but many scholars comment that BPO adopts by the organization for a strategic purpose (Lahiri & Kedia, 2009). With the increasing pressure and potential opportunity to grab the foreign market, organizations try to capitalize on this oppor-tunity by employing internal and external resources. Linking to these potential opportunities, the organi-zation looks for tactical or strategic outsourcing. Scholars are viewed that strategic outsourcing as the process of improving business and gaining competitive advantage rather than a cost-cutting strategy. In con-trast, practical outsourcing refers to the short-term focus oriented (Neeli). Researchers have commented that some specific driving factors are responsible for BPO revaluation. Many experts agreed that inform-ation technology, infrastructure and the digitalization process shape the BPO industry. Few prominent scholars also noted that software is the key resource source in the BPO industry (Mahmoodzadeh et al., 2009). This package combines expert, decision sup-port, and artificial intelligence at the most promising software tools to perform analytical tasks. Besides online analytical processing, these opportunities have created a new horizon in the BPO industry. So, the growth of BPO industries is increasing daily due to technological development. However, in the BPO in-dustry, the current status of Bangladesh is not satis-factory. That means Bangladesh is far from capitali-zing on these opportunities com-pared to the other countries. Like China has substantial growth and is considered a hotspot worldwide in the manufacturing and technology sectors (Bhat et al., 2010).
In the same way, India has the highest position in the engineering and technology sector of BPO. Mexico is also a hotspot in manufacturing, and in the setting of analysis and creativity, the United States is the hot spot for BPO. The Philippines is considered a BPO hot spot worldwide in the administrative sector. A recent report on the global business process outsourcing service market is expected to reach USD 35.2 billion by the end of 2024 (Uddin, 2022). Statistics indicate that BPO is the most promising industry in the upcoming year. Surprisingly BPO industry in Bangladesh is still an unexplored area. So, the research draws attention to developing the BPO with the help of promoting bus-iness process and knowledge management. Bangladesh is the 13th best-emerging economy in the world. Economic and financial status trends have been slowly but surely increasing in the last couple of years. Linking with the holistic development of a countrys business process management provides many oppor-tunities to boost economic growth.
Proponents of business experts address that countries like India Philippines, and Sri Lanka have already made their markets in the BPO industry (Askari et al., 2015; Uddin, 2022; Wattegama, 2009). A small coun-try like Sri Lanka exceeds 3 billion dollars of earnings through BPO. Interestingly, Bangladesh has so many comparative advantages of lower cost of showing destination in the global outsourcing landscape. So, Bangladesh has the potential opportunities to expand the BPO industry. The contemporary business experts agreed that the BPO industry would be the second biggest industry in earning foreign currency after the RMG. Bangladesh has two key strengths in expanding the BPO industry large-scale stock of talented young people and which leads to the capability oflow-cost provider. Scholars suggest accounting and financial services are the most significant drivers of the BPO industry where business graduates can BA part of industry expansion (Ratan et al., 2020; Islam, 2022).
The study aims to develop BPO by promoting business processes and knowledge management. Even though the role of the regulatory environment as a factor in BPO industry expansion has been pointed out many times, BPO expansion does not result only from the regulatory environment (Kumar et al.,). It also stems from the cost of doing business, customer expectations and improving business agility. Even though this particular BPO can be one of the most pertinent ans-wers to industrial expansion, few research studies have examined the causes and results of the BPO industry (Probir et al., 2006). Furthermore, the number of res-earch conducted using an integrative method to in-vestigate the BPO industrys expansion is very few (Tang et al., 2013). In our research, we look at how to improve BPO to determine what drives organizations to develop the BPO industry. We also examine how developing BPO affects the bus-iness process and knowledge management. In this paper, the following are the most important questions and issues: Does the growth of the BPO industry have to do with business process management and know-ledge management? Our main goal is to look at how to improve BPO and figure out what makes organizations want to grow the BPO industry so we can tell policy-makers and busi-nesses what to do. With the findings of this study, we hope to learn more about the BPO industry.
In answering the research mentioned above, we pro-vide four principal contributions to the current literature in the field of the BPO industry. First, one of the most important contributions of this study is the promotion of a business process and knowledge man-agement integrative approach to the BPO industrys development. Second, Testing business processes and knowledge management inside BPM also provides researchers and policymakers with significant insights and diverse ramifications.Third, Bangladesh is the 13th best-emerging economy in the world; thus, the findings generated from Bangladesh could be generalized to the other emerging economies in the world for increasing the BPO industry. Finally, regarding the method-logical issue, this study will use structural equation modelling (SEM), a high-powered estimation tech-nique, to run the specified conceptual model, which will be the new dimension in the research domain. The subsequent portion of this researcher Section 2 con-tains an extensive literature review andhypothesis development to develop the link among BPO, BPM and KM. Section 3 presents the data and methodology. Section 4 presents the main results of our study and leads to the discussion, while section 5 concludes the paper, notes the limitations of the study and offers suggestions for future research.
Literature Review and Hypothesis Development
Business Process Management and Business Process Outsourcing
The Business Process Management (BPM) System coordinates the sequential execution of a business process. The objective of the Business Process Man-agement (BPM) System is to manage the sequential execution of a business process (Tang et al., 2013). Business process management and lean six sigma share an abundance of similarities. Business process management (BPM) reveals how BPO and SOA interact to enhance the quality of business processes (Ghodeswar & Vaidyanathan, 2008). In addition, BPM has been recognized as a robust foundation for boost-ing modularity and clarity in business process out-sourcing service development (BPO). Joachim, N. (2012) noted that the delegation of one or more information technology-enabled business processes to an external service provider is known as business process outsourcing (Rouse and Corbitt, 2006; Wulen-weber et al., 2008). Business operations involve mani-pulating physical or digital objects (Davenport and Short, 1990). Therefore, information technology is integral to managing and executing business process outsourcing (BPO). Progressively, firms are concentra-ting on a small number of adequate business activities while outsourcing those for which they lack core com-petencies. Thus, customer service, logistics, human resources, and accounting procedures are increasingly outsourced. Therefore, the management of business processes should not only extend beyond the organi-zations borders but also to the suppliers regions (Del Prado, 2015). Business process management and busi-ness process outsourcing are critical components that address the specifically;"Outsourcing helps the organi-zation achieve higher levels of value creation for the final customer. A wide range of core and non-core critical business processes are increasingly being out sourced, covering many sectors and operations, en-abling host organizations to access world-class cap-abilities" (Del Prado, 2015),
Outsourcing has been hailed as a boon for businesses but also brings new managerial and organizational difficulties. Coordination and administration of out-sourced business operations with internal business pro-cesses and integrating information are two of the most challenging. Therefore, we require a method for stand-ardizing definitions and exchanging protocols in data and process domains to coordinate business processes across the organizations value chain. By utilizing a service-oriented business process management system, it is possible to engage internal requestor processes and service provider processes and be able to check the status of the entire virtual process involving different firms at any moment (Khoshafian, 2007). Also, Elha-dad et al. (2008) have explained how the BPM meth-odology improves BPO services. Consequently, accor-ding to the research mentioned earlier, information sharing and process integration via the BPM method-logy are essential elements for the success of BPO (Bronzo et al., 2013).
Furthermore, it is discussed that BPM is one of the mechanisms for developing the BPO services. So, an organization should focus on developing the business process management to expand the outsourcing pro-cess. Enormous studies have been carried out on the issue of BPO and economic development, even if the application of proxies variables (Antounian et al., 2021; Brown & Caylor, 2004; Husnain et al., 2021; Khatib & Nour, 2021; Leopizzi et al., 2021; Ngatno et al., 2021; Sani & Owoade, 2021), except few ones which address the key issues in developing BPO in-dustry (Ababneh & Aga, 2019). Few empirical res-earch has attempted to link BPO with the challenges and factors carried out across Europe, Africa, the Middle East, and Asia (Kang & Kim, 2011). No single study has been found in the south Asian country region which linked BPO and BPM (Ababneh & Aga, 2019). Additionally, previous studies were conducted from an oriental culture perspective (Ababneh & Aga, 2019). Considering these issues, the authors set out a frame-work to test whether BPM positively influences the expansion of BPO and the specific economic sectors in which it is applied. Bangladesh ranks 13th among emerging economies that are making substantial adv-ances. So, the study draws significant attention to developing economies like Bangladesh. As a result, the authors formulate the following hypothesis
H1: Increasing business process management capa-bilities help to improve BPO
Knowledge Management and Business process out-sourcing
Numerous challenges must be overcome for the industry as a whole to deal with these issues and formulate BPO, such as the outsourcing of one or more IT-related business methods to an external service provider, who is responsible for maintaining processes to reach the Service Recipients, which is a defined and ascertainable circle of production goals (Ghosh & Scott, 2005) BPO is attractive to businesses because it offers more economic benefits while posing less risk than in-house process optimization (Jadraque, 2020). Businesses prefer BPO because of the higher economic benefit and lower risk it offers compared to in-house process improvement (Santos & Frederico, 2018). Like most businesses, including the BPO sector, have come to know, Knowledge Management (KM) is of signify-cant importance. Most of them have difficulty compiling and integrating all of their experiences and knowledge. There is a lot of work to get individuals to contribute to and use the stored knowledge assets (Wattegama, 2009). These individuals do not know that "people empower people" through an effective Knowledge Management system (KM). As out-sour-cing becomes more popular, organizations need to work closely with their outsourcing partners. Their performance depends on the successful interaction of numerous teams and stakeholders located in different places (Wattegama, 2009). To establish a successful partnership, information and expertise must be trans-ferred and shared without direct interaction between the parties involved (Seshasai et al., 2004). Infor-mation will inevitably be shared with a larger group of people outside of ones organization. When it comes to retaining, utilizing, and developing knowledge, several issues arise from expanding the breadth of outsourcing in companies versus the resistance of organizations to keep core competencies and their expertise (Zhao et al., 2004). Outsourcing presents a strategic problem because strategic information can be lost and the threat of opportunistic partners (Gronau et al., 2012). Accor-ding to the firms resource-based theory, a resource must give economic value and be currently rare, dif-ficult to copy, non-substitutable, and not readily available in factor markets to establish a durable com-petitive advantage. An organizations intangible re-sources, such as knowledge, could be strategic. Thats why managing the firms knowledge as a strategic resource requires an effective KM system rather than losing vital information (Gottschalk, 2005). According to Bandyopadhyay and Pathak, outsourcing projects are more likely to succeed when knowledge challenges are addressed. Management must be involved in negotiating the outsourcing contract as well as in the techniques of operation and interactions between the two enterprises when a business out-sources to take advantage of a complementary set of capabilities (Manivannan & Ilangovan, 2010). Know-ledge management (KM) is a crucial success factor in BPO. Human capital, structural capital, economies of scale, and, increasingly, access to strategic and bus-iness counsel are all part of the outsourcing promise made by the supplier when the customer can return their focus to strategic, core competence and know-ledge areas (Gottschalk, 2006). As a result, KM may assist firms in managing and reducing the previously described risk of knowledge publishing due to out-sourcing as a strategic risk. Knowledge application is the most critical of KMs four capabilities. Among the four aspects of KM competence, knowledge protection is the second most important for low KM capability organizations but the least important for medium and high KM capability firms. Each KM capability dimen-sion positively influences BPO performance. Size, industry, and age of outsourcing all affect the dimen-sions of KM capabilities in different ways. Modeling the firms characteristics, knowledge management cap-abilities, and business process outsourcing (BPO) capabilities. Idea: Firms with a high KM capability significantly differ from those with low and medium KM capabilities; different companies have various levels of KM capability; developing knowledge appli-cation capability should be the priority in managing BPO, and improving KM capability is an effective means to improve BPO performance. S. Liu and colle-agues, (2015).
However, the previous study has shown that KM factors have minor effects on BPO industry; however, the phenomena of BPM and BPO are still on the track to generating renewed research interest. Even though prior research has indicated that KM have only a minimal impact on BPO (Lahiri & Kedia, 2009), the phenomena of KM and BPO are still on the track to producing new research interests. Based on the above ground, we postulate the following hypothesis,
H2: Increasing Knowledge Management (KM) cap-abilities help to improve BPO.
A conceptual model has been created based on a thorough literature review that shows the connections between the driving forces and BPO in Bangladesh.
All the constructs used to create this conceptual model were obtained from reading earlier studies (Wugan, Guangpei, 2018; Angela et al., 2013).
Research Type
The current study is empirical and primarily relies on primary data. To calculate the relationships between endogenous and exogenous construct structural equ-ation modeling (SEM) has been employed since it is prevalent to the researcher and is a widely used multi-variate regression analysis technique that includes factor analysis, correlation analysis, causal modelling, or path analysis, etc (Habidin et al., 2018). However, SEM is more suitable for the current study model, which is determined to be extremely complicated, has many constructions, deals with relatively small sample size, and the research goal is to anticipate the import-ant construct (Hair et al., 2011).
Sample Characteristics
A total of 50 businesses were contacted for data collec-tion, and 48 responded. Consequently, the sample size is 48 (Table 1). This comprises 22 companies from the Chottogram (Cumilla, Feni, and Chottogram district) division in Bangladesh and 26 from Dhaka (Narayan-gonj, Gazipur, and Dhaka districts) division. Because probability sampling or randomization is impracticable for a big population, non-probability convenience sampling techniques have been considered when selec-ting a sample from the population. Owners of manu-facturing SMEs and managers at the managerial level made up the target respondents. Most of the samples businesses are privately owned (45 firms).
Development of Measurement
The construction of the model, the choice of items, and the constructs of this study are all based on a literature review and the advice of experts. Three latent variables Business Process Management (BPM) (Tang et al., 2013), Knowledge Management (KM) (Santos & Frederico, 2018), and Business Process Outsourcing (Liu & Deng, 2015) - were developed. Studies show that both seven and five - point scales work well for surveys (Song & Parry, 1996). However, a 1-7 ranking is more preferable than a 1-5 scale to ensure the reli-ability, validity, and discriminating power of collected data (Preston & Colman, 2000). And thus, a 7- point Likert scale has been used to measure the opinion of survey participants (from 01 "Strongly Disagree" to 07 "Strongly Agree") in the questionnaire.
Table 1: Sample Characteristics.
Data Collection
The analysis and findings of this study are primarily based on primary data. In contrast, secondary data were considered when coming up with the idea, creat-ing the questionnaire, choosing the items and const-ructs, etc. The responders were physically met to gather data for the study. The respondents responded to a standardized questionnaire by providing their thoughts on several topics. A pilot survey with 05 informants was used to pre-test the questionnaire in order to assess its validity and accuracy and to look for any errors. It is important to pre-test the draft question-naire with five to ten participants before the major survey (Burns & Bush, 2003). The questionnaire draft was distributed to certain subject-matter experts before it was finalized to get their well-considered feedback on the suitability of the items chosen under each construct. The final survey is launched when the questionnaire has been revised in accordance with suggestions from experts and comments from the pilot survey. There were several questions on the profiles of the firms, such as their year of operation, type of ownership, etc., in addition to the respondents opi-nions on the various things in the questionnaire. Journals, and periodicals issued by national and inter-national commercial associations like the SME Found-ation, the World SME Forum, newspapers, etc. were used to obtain secondary data.
Common Method Variance Test
Since every respondent was a high authority, there could have been common method variance in the data, leading to measurement inaccuracy. To rectify the common method variance Hermans single factor test was employed, which is the widely used tool given by Podsakoff et al. (2003). For every question on all 48 questionnaires, an exploratory factor analysis (EFA) was done. The unrotated principal components ana-lysis results indicated that the first factor accounted for 31.56 percent of the variation and that no factor accounted for a majority of the variance, indicating that the data were free of common method variance.
Reliability and Validity Test
In order to assess the validity and reliability of the data, factor loadings for each item have been calculat-ed (Table 2). Items with a factor loading of greater than 0.5 were kept for analysis, while the rest were removed. Additionally, AVE (Average Variance Extra cted) and Cronbachs Alpha have been used. Since all latent constructs with Cronbachs Alpha measurements greater than 0.7 indicate stronger dependability (Wort-zel, 1979). The Square Root of Average Variance Ex-tracted (AVE) for each of the latent constructs is found to be greater than 0.50 (Table 3). Since all of the factor loadings for the items measured larger than 0.6, high convergent validity was found.
The questionnaires content, however, appears to be reliable because it is backed up by research and was created using the professional judgment from a tho-rough interview with managers. A Confirmatory Factor Analysis (CFA) was performed to evaluate the cons-truct validity using IBM AMOS v21. Following are the model fit indices that are calculated (Table 3).
Table 2: Measurement Model of Latent Variables.
Table 3: Model Fit Indices.
Thus, according to the model fit indices, the measure-ment model is suitable.
Structural Equation Modeling (SEM) has been utilized to examine the data gathered using the survey instru-ment. SEM is the best technique for this studys analysis since it allows researchers to simultaneously investigate correlations between various components (Habidin et al., 2018). SEM is also useful for deter-mining the mediating influence and evaluating the quality of fit of a theory.
As a result, SEM was used in this study to examine all the hypothesized correlations between the constructs. The statistical outcome of the analysis showed what follows.
However, the the goodness of fit indices accounted for χ2 =962.325, χ2/dƒ =001.572, TLI=0.867, RMSR= 0.052, CFI= 0.825, RMSR= 0.052 and RMSEA= 0.061 1indicates that the model has a good fit with the data. The statistical findings supported the two hypotheses in their entirety. As the p-value accounts for less than 0.01 in this study.
Table 4: Estimated Relationships.
It is found that Business Process Management (BPM) and Knowledge Management (KM) considerably in-fluence the firms Business Process Outsourcing (BPO).
Linking BPM to BPO creates potential opportunities; the organization looks for tactical or strategic out-sourcing. Outsourcing as the process of improving business and gaining competitive advantage rather than a cost-cutting strategy. The increasing business process management capability positively influences deve-loping business process outsourcing. The authors found a strong association between BPM and BPO industry expansion. The current findings align with the previous results (Mahmoodzadeh et al., 2009; Tang et al., 2013). So, organizations need to focus on increase-ing the capacity of BPM to capitalize on the BPO opportunities. Next, in assessing the association bet-ween knowledge management and business process outsourcing, the authors found a significant relation-ship between them. The results of current study are supported by previous studies (Bhat et al., 2010; Wattegama 2009) It is assumed that knowledge man-agement (KM) is a crucial success factor in BPO. Human capital, structural capital, economies of scale, and, increasingly, access to strategic and business counsel are all part of the outsourcing promise made by the supplier when the customer can return their focus to strategic, core competence and knowledge areas.
In our research, the authors examine how to improve BPO to determine what drives organizations to deve-lop the BPO industry. We also discuss how developing BPO affects the business process and knowledge management. The authors found a positive direction in linking the relationship between knowledge manage-ment, business process management, and business process outsourcing. Surprisingly BPO Indus-try in Bangladesh is still an unexplored area. So, the research draws attention to developing the BPO with the help of promoting business process and knowledge manage-ment. Bangladesh is the 13th best-emerging economy in the world. Economic and financial status trends have slowly but surely increased in the last couple of years. Linking with the holistic development of a countrys business process management provides many opportunities to boost economic growth. To explore a deep understanding of BPO and its comprehensive services, future researchers should incorporate drivers of BPO and large size of data. In addition, a cross-cultural study may be conducted in future.
The authors would like to acknowledge the support of Managers of different firms and the academics who devoted time to filling and returning questionnaires during the survey. We are also grateful to the data collectors for the purpose of this study. We are thank-ful to the colleagues who assist us in this research. Finally, we want to apologize to the people whose names have not been mentioned here, and their contri-bution is highly appreciated.
This research declares no competing interests.
Academic Editor
Dr. Doaa Wafik Nada, Associate Professor, School of Business and Economics, Badr University in Cairo (BUC), Cairo, Egypt.
Department of Management Studies, Comilla University, Comilla, Bangladesh
Hasan MJ., and Karim MR. (2022). Business process outsourcing through business process management and Knowledge management evidence from Bangladesh, Int. J. Manag. Account. 4(3), 49-58. https://doi.org/10.34104/ijma.022.00490058