Abstract

As information-based processes are usually independent of the location or even the processor, they

can be oftentimes either automated or relocated to foreign sites to profit from differences in wages.

Both strategies bear enormous micro-economic potential in terms of cost savings. However, with the

main focus on cost reduction, risk due to the uncertain development of effective labor costs or future

transaction volumes are oftentimes either inadequately considered or neglected. This systematically

leads to false decisions, in particular since the two strategies – relocation and automation – result in

different risk profiles. In this paper, we analyze the conditions for automating or relocating parts of

business processes and propose a decision model that suggests a risk/return efficient allocation to the

alternatives. In particular, we consider how uncertainties of effective labor costs and transaction

volumes influence the decision. As shifting tasks to other locations has effects on the workload at the

original location, we also take into account costs for social effects. The practicability of our approach

is demonstrated with an example that is based on real data of a major financial services provider.

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