The risks associated with outsourcing have been the principal limitation on the growth of business process outsourcing, especially cross-border outsourcing. In addition to technological improvements in risk management, it is possible to reduce the risk of opportunistic behavior faced by the buyer by redesigning work flows and dividing work among multiple vendors, increasing the range of tasks that are now appropriate candidates for outsourcing. We provide a taxonomy of risks associated with the outsourcing of business processes. We focus on strategic risks and identify the components of this risk and the means by which it can be mitigated.
Key words and phrases: holdup problem , interorganizational work flows , outsourcing , process design , strategic risks , transaction-cost economics