In the practice of business process outsourcing, firms face increasing challenges of losing control, knowledge misappropriation, information security and partners’ opportunism. Modularization strategy can reduce such risks and transaction costs. This research-in-progress paper introduces the concept of modularity of outsourced business process (MOBP). Drawing upon the institutional theory, we examine how three institutional pressures impact the degree of MOBP. We explore the impacts of MOBP on communication and knowledge transfer between outsourcing firms and vendors. This paper also describes the research plan to test the research hypotheses. Contributions to research and practice are also highlighted.