Offshoring Business Process Services and Governance Control Mechanisms: An Examination of Service Providers from India

As emerging markets increasingly rely on service businesses through offshore outsourcing, we examine the role of governance control mechanisms in improving performance among business process outsourcing (BPO) service providers in India. Using data collected from 205 emerging market‐based BPO service providers in India, we examine the antecedents and consequences of establishing governance control mechanisms in BPO service providers. Specifically, we examine how structural (use of contracts with the client), administrative (effective allocation and demarcation of responsibilities within the firm), and relational (collaboration and information sharing with the client) mechanisms drive the performance of a BPO service provider operating in an emerging market. We also examine how key task‐related (task connectivity and task security) and client‐related (end customer orientation and global control) antecedents influence the use of different governance control approaches in this environment. Our analysis finds that both task connectivity and task security significantly impact use of structural and administrative mechanisms, whereas end customer orientation is significantly associated with the strength of the relational mechanisms governing the emerging market‐based BPO service provider and its client. Further global control significantly influences the strength of the structural mechanisms between the client and the BPO service provider. Finally, the three mechanisms have a complementary influence in driving the BPO service provider's performance.     

Incentive issues in performance-based outsourcing contracts in the UK defence industry: a simulation study

Traditional outsourcing literature has claimed gains for the customer in terms of quality and costs. However, such gains are illusory in outsourcing of high-risk, complex tasks. The use of contracts and governance mechanisms for handling complex procurements is essential in obtaining rewards from outsourcing. Powerful incentives and risks are normally used in industrial service contracts to transfer risks to measure compliance with performance measures. The availability contracts for complex engineering services provision are forms of outsourcing contracts that transfer resources from government to external service providers on a substantial scale. The change moves the contractor role from creating resources to managing resources. Such role change mandates collaboration with customers and suppliers in supply/value chains. The management task is then perceived in terms of linking and optimising alignments rather than increasing service levels. Incentive design is one mechanism for linking the coordination of resources required in availability contracting to the business model. This article studies the impacts of agreed contract type and incentive mechanism on the customer and service provider profits using agent-based discrete event simulation model under multiple risk sharing scenarios.     

Validating measures of information technology outsourcing risk factors

Outsourcing information technology (IT) operations has been recognized to have important potential benefits, including cost reduction, improved quality of service, and access to technological expertise. Researchers and practitioners also recognize that, in some circumstances, IT outsourcing entails risk, and that it sometimes leads to undesirable consequences that are the opposite of the expected benefits. The main purpose of this study was to validate measures of the risk factors associated with outsourcing IT operations. Insights from transaction costs theory suggest that there exist three major sources of risk factors for IT outsourcing: the transaction, the client and the supplier. From these insights, preliminary measures of IT outsourcing risk factors were developed and data from a survey of 132 IT executives were analyzed with partial least squares to assess their reliability and validity. The results confirm that these factors are useful indicators for assessing IT outsourcing risks.     

R&D (Re)location and Offshore Outsourcing: A Management Perspective

The paper reviews and systematizes the management literature directly and indirectly related to (re)location of research and development (R&D), in the form of both insourcing and outsourcing. The focus in particular is on R&D offshore outsourcing and its main drivers, including locational constraints and opportunities, motives, strategic decisions and managerial challenges. The analysis synthesizes and links the main propositions and findings of the theoretical and empirical work to build an original management and strategy centred framework which looks at R&D (re)location from a client–vendor perspective. In this case, the client is the offshoring company, and the vendors are the firms located in the host country. The characteristics of the firms and locations considered vis‐à‐vis the offshoring firm's goals are examined, the strategies implemented, the management and organizational challenges that R&D offshore outsourcing entails, and the ways in which offshoring impacts on both home and host locations are investigated.     

Exploring uncertainties in a marketplace for cloud computing: a revelatory case study

Today, highly standardized information technology (IT) resources such as storage and processing power are becoming available and affordable to all. Therefore, IT managers evermore focus on reducing the costs and risks that these resources entail rather than on the benefits or competitive edge they provide. A marketplace for cloud computing represents a promising alternative for obtaining standardized IT resources in a highly flexible and scalable manner. Based on a revelatory case study of a cloud market project, we show that uncertainties are prevalent in cloud markets and that the principal-agent theory is an adequate perspective to study and explain these uncertainties. By triangulating data from formal and informal interviews, documentations and project meetings, we develop a second-level contextual understanding of uncertainties in the relationships between market operator, cloud providers and users. Our analysis reveals that while cloud market operators have capabilities to mitigate uncertainties between cloud provider and user, they also cause new uncertainties from the cloud provider and user perspective. As an outcome, we present a framework that sheds light on the uncertainty trade-offs involved in the decision to adopt a cloud market by cloud providers and users.     

How Provider Selection and Management Contribute to Successful Innovation Outsourcing: An Empirical Study at Siemens

It is becoming increasingly common to involve external technology providers in developing new technologies and new products. Two important phases involved in working with technology vendors are vendor selection and vendor management. Because for both steps theory development of key decision guidelines is still immature, we use detailed case studies of 31 innovation outsourcing projects at Siemens to develop grounded theory on provider selection criteria and on project management success drivers. A selection criterion often associated with successful outsourcing is the provider's “track record” or previous experience. Our cases suggest that there is no standard “track record” for success but that a “match” between the client firm's outsourcing motivation and the provider's strengths appears to be a necessary condition for a successful outsourcing collaboration. As to the second phase—managing the vendor—we identify a number of operational project success drivers. There seems to be no universal checklist, but the most important drivers seem to be contingent on the type of vendor chosen and on the maturity of the technology. We compare five provider types—universities, competitors, customers, start‐up companies, and component suppliers—and find that some success drivers are common to all providers, while others are relevant only for certain types of provider. Moreover, drivers in the case of a mature technology are more focused on successful transfer to manufacturing than on development itself. Our findings offer guidelines for innovation managers on how to select innovation providers and how to manage them during the project.     

Global Software Development: Commitment,Trust and Cultural Sensitivity in Strategic Partnerships

Much research has studied off-shore outsourcing from a Western client perspective. This article tries to shed light on what an Indian vendor perceives as important to manage large and complex strategic partnerships in IT outsourcing, and in particular how mutually profitable, long-term relationships with European clients are created and maintained, both at company and project levels. We investigate this issue through qualitative interviews with various vendor representatives in offshore and on-site teams in a top tier multinational company of Indian origin.In the analysis of interview accounts of close collaboration processes in two large and complex projects, where off-shoring of software development is moved to a strategic level, we found that the vendor was able to establish a strategic partnership through long-term engagement with the field of banking and insurance as well as through conscious relationship management with the clients. Three major themes describe important aspects of the strategic partnerships: 1) senior management commitment and employee identification with the projects, 2) mutual trust and transparency, and 3) cross-cultural understanding and sensitivity. The article draws attention to the important collaborative work done by people who are able to span boundaries in the complex organizational set-up of global IT development projects.     

Fit between sourcing capabilities and organisational structure on IT outsourcing performance

Thus far, relatively few studies on the supplier side of Information Technology (IT) outsourcing arrangements have been based on empirical quantitative research. Previous research identified a recurring supplier problem, a lack of sustainability in IT performance. The literature revealed that a supplier's capabilities and organisational structure affect the supplier performance. We hypothesise that realising a fit between the necessary sourcing capabilities and organisational structure on the IT supplier side will result in a sustainable sourcing performance. We executed a survey research among employees involved in sourcing activities of three different IT outsourcing suppliers (N?=?135). The results from our analysis provide evidence that these constructs can be used to analyse differences between the three types of service suppliers. Results indicate that suppliers who focus on establishing a fit are more willing or able to monitor if they achieve a sustainable performance.     

Build-operate-transfer Outsourcing Contracts in Services – Boon or Bane to Emerging Market Vendor Firms?

Build-operate-transfer (BOT) contracting has been widely used in the engineering and construction industry and has recently spread into the service industry domains. Notably, service provider firms from emerging markets, India in particular, are now offering BOT outsourcing contracts in which the client firms are allotted call options, i.e. the right, but not the obligation, to transfer pre-specified assets from the service provider. As such, BOT outsourcing contracts seems to be an interesting contractual novelty that combines the advantages of outsourced and captive offshoring operations. In this paper we investigate under which circumstances a BOT outsourcing contract (i.e. a contract where the client firm exercises its call option) is beneficial, or the opposite, to the emerging market vendor firm. Whether BOT outsourcing contracts are boon or bane to an emerging market vendor basically hinges, we submit, on its internal diffusion of client-specific knowledge and capabilities prior to the execution of the call option.     

Sourcing Information Security Operations: The Role of Risk Interdependency and Competitive Externality in Outsourcing Decisions

Firms are increasingly outsourcing information security operations to managed security service providers (MSSPs). Cost reduction and quality (security) improvement are often mentioned as motives for outsourcing information security, and these are also the frequently cited reasons for outsourcing traditional information technology (IT) functions, such as software development and maintenance. In this study, we present a different explanation—one based on interdependent risks and competitive externalities associated with IT security—for firms' decisions to outsource security. We show that in the absence of competitive externalities and interdependent risks, a firm will outsource security if and only if the MSSP offers a quality advantage over in‐house operations, which is consistent with the conventional explanation for security outsourcing. However, when security risks are interdependent and breaches impose competitive externalities, although firms still have stronger incentive to outsource security if the MSSP offers a higher quality in terms of preventing breaches than in‐house management, a quality advantage of MSSP over in‐house management is neither a prerequisite for a firm to outsource security nor a guarantee that a firm will. In addition to MSSP quality, the type of externality (positive or negative), the degree of externality, whether outsourcing increases or decreases risk interdependency, and the breach characteristics determine firms' sourcing decisions. When security breaches impose a positive externality, the incentive to outsource is enhanced if the MSSP decreases the risk interdependency and diminished if the MSSP increases this interdependency. A negative externality has the opposite effect on firms' incentives to outsource. A high demand spillover to a competitor, together with a high loss in industry demand because of a security breach, enhances these incentives to outsource security operations when the externality is negative. Finally, we extend our base model in several dimensions and show that our main results regarding the impact of interdependent risks and competitive externalities on sourcing decisions are robust and generalizable to different specifications.     

不对称信息下信息技术服务外包合同设计

本文针对客户企业向IT供应商外包信息技术服务这一背景,考虑IT供应商不仅具有开发信息系统能力的私有信息,且其开发过程中的努力行为对于客户企业不可见的情况,研究了客户企业信息技术服务外包合同设计问题。研究发现,不对称信息下,客户企业可以通过设计最优合同菜单来甄别不同能力的IT供应商,但是此时客户企业需要向高能力IT供应商支付信息租金。同时,客户企业可以通过设计最优合同有效规制高能力IT供应商系统开发过程中的努力行为,但是相比于信息对称的情况,不对称信息下低能力IT供应商会存在努力不足的现象。低能力IT供应商努力不足的现象会降低社会福利和客户企业的期望利润;客户企业向高能力IT供应商支付信息租金的行为也会减少客户企业的期望利润。增加系统调试阶段的调试时间或者选择信息系统故障检出率高的IT供应商,可以降低高能力IT供应商的信息租金,并缓解低能力IT供应商努力不足的现象,进而减少信息不对称给客户企业带来的利润损失。     

Sourcing strategy of Belgian SMEs: empirical evidence for the accounting services

The primary objective of this paper is to examine the sourcing strategy for one business function (accounting services), by looking at the degree of outsourcing for each task of this function. Three research questions are addressed: (1) What sourcing strategy do SMEs use for accounting services? (2) What are the reasons? (3) Is there a link between sourcing strategy and company characteristics? The research design consisted of a postal survey sent out to 1200 managers of SMEs in Belgium. The main results showed that 53% use selective outsourcing, i.e. combining both an inhouse accountant with an accounting service provider. The results also showed that 35% use total insourcing and 12% prefer total outsourcing. Surprisingly, cost reduction is not the main reason for outsourcing. External expertise is the main reason for selectively outsourcing. SMEs select a total insourcing strategy because they want the accounting information at hand. Finally, larger SMEs decide for a total insourcing strategy and prefer to keep the accounting services internal. The conclusions show that future research should focus on the degree of outsourcing. The practical implication of this study is that accounting service providers should highlight their expertise and overcome the disadvantage of remote data analysis to attract more SME-customers.     

A Path to Successful IT Outsourcing: Interaction Between Service‐Level Agreements and Commitment

Although service‐level agreements (SLAs) are important for IT outsourcing management, appropriate mechanisms for constructing effective SLAs are still poorly understood, leading to inadequate or overcomplicated contracts that are ineffective. This study examines the associations among three distinct sets of SLA characteristics and outsourcing success, as well as the role of commitment in these relationships. Analyzing survey data based on a model theorizing the alignment of SLA characteristics with intended outsourcing objectives, we find that different types of benefits attained through IT outsourcing arrangements are associated with the use of specific contractual dimensions. We also find that commitment, in general, moderates the impact of SLAs on outsourcing success, although the nature of the moderation varies with the different benefits IT outsourcing engagement is intended to achieve. Interestingly, in certain cases—change characteristics for achieving technology benefits, in particular—commitment can be a barrier to the effective use of SLAs in achieving intended outsourcing benefits. As such, our study extends the literature on IT outsourcing, contracting and commitment, as well as provides a general guideline for practitioners to structure effective SLAs and to properly use commitment for managing IT outsourcing engagements to successfully achieve intended benefits.     

关系契约治理与外包合作绩效——对日离岸软件外包项目的实证研究

对日离岸软件外包项目具有典型的关系契约特性,现有文献对软件外包中的关系契约治理及对合作绩效的影响还缺乏系统的理论分析和实证研究。信任、交流和相互适应调整作为重要的关系规范,在对日软件外包关系契约治理中具有重要意义。本研究根据访谈和110个项目的数据实证检验了关系规范对离岸软件外包项目绩效的影响。通过结构方程模型方法发现,交流的有效性对于项目质量和供应商成本控制绩效有积极影响,相互适应调整对于成本控制绩效也有积极影响。这个发现有助于构建有效的关系契约治理机制,促进软件外包产业发展。     

Global Multisourcing Strategy: The Emergence of a Supplier Portfolio in Services Offshoring

In today's global services outsourcing arena, increasing numbers of companies adopt “multisourcing,” that is, they select and combine information technology (IT) and business services from multiple providers. The literature on IT outsourcing and supply chain management has identified critical tradeoffs involved in increasing the number of suppliers and has strongly recommended focusing on a handful of strategic partners to balance these tradeoffs. Committing to a few strategic partners, however, may prevent a firm from discovering new suppliers, or even supply regions. Such missed opportunities may be particularly limiting in the context of offshoring professional services, which has exhibited rapid changes in supplier markets in the last decade. Thus, firms may want to engage in a more intensive multisourcing in services. If they do so, their success will depend on a global sourcing process that effectively addresses the critical tradeoffs involved. To explore how a global sourcing process can support multisourcing, we conducted a qualitative longitudinal case study of a large financial services institution that developed a varied global supply base to obtain offshore professional services. Our analysis results in a theory that emphasizes (i) advantages of a multiple provider strategy in rapidly changing global supply markets; (ii) the critical role of middle managers in enabling continuous innovation in the supplier structure; and (iii) the importance of the global sourcing process combining top–down and bottom–up decision making in multisourcing.     

中国IT服务外包企业能力研究

基于企业能力理论与价值链分析,建立了适合我国国情的中国IT服务外包企业能力评价模型;通过对北京市近40家IT服务外包企业的实地访谈与问卷调查,分析了中国IT服务外包企业的能力现状及存在问题;结合理论研究与实证分析,提出了提升中国IT服务外包企业能力的对策建议。     

IT服务外包项目工期与费用控制的 多属性英氏逆拍卖机制

工期和费用是影响IT服务外包项目成败的两个重要因素,且两者之间呈负相关的关系。在IT服务外包项目执行前,发包方与接包方需要就项目的工期和费用达成一致。通常,发包方并不完全了解外包项目的市场行情,在这种情况下,就需要一种有效的方式使发包方和接包方之间就工期和费用达成一致。本文设计了改进的英氏逆拍卖机制,针对一对多的情况设计了新的拍卖协议;针对工期和费用的多属性情况,引入多属性效用理论解决,设计了相应的效用增加函数。最后通过一个算例来演示所设计的拍卖机制对解决此类决策问题的作用。得出一些结论:所设计机制能够以拍卖方式描述费用和工期管理流程;找到了发包方和接包方的最佳增量效用,并且建议的拍卖协议是发包方和接包方获得双赢结果的机制;从不同大小的案例中可以得到完全一致的结果,这表明设计的拍卖机制的有效性和效用增加函数对协商结果的有效性。     

Outsourcing Competition and Information Sharing with Asymmetrically Informed Suppliers

This paper studies an outsourcing problem where two service providers (suppliers) compete for the service contract from a client. The suppliers face uncertain cost for providing the service because they do not have perfect information about the client's type. The suppliers receive differential private signals about the client type and thus compete under asymmetric information. We first characterize the equilibrium of the supplier competition. Then we investigate two of the client's information sharing decisions. It is shown that less information asymmetry between the suppliers may dampen their competition. Therefore, the client does not necessarily have the incentive to reduce information asymmetry between the suppliers. We characterize the conditions under which leveling the informational ground is beneficial to the client. We also find that under the presence of information asymmetry (e.g., when the suppliers have different learning abilities), sharing more information with both suppliers may enhance the advantage of one supplier over the other and at the same time increase the upper bound of the suppliers' quotes in equilibrium. Consequently, the suppliers compete less aggressively and the client's payoff decreases in the amount of shared information. The findings from this study provide useful managerial implications on information management for outsourcing firms.     

Social model of emotional labour and client satisfaction: exploring inter- and intrapersonal characteristics of the client−provider encounter

As part of healthcare organisations’ efforts to improve client satisfaction, special attention is directed to care providers’ expression of authenticity through genuine emotional displays in care encounters. The study’s aim was to test a mediating–moderating model for predicting clients’ satisfaction. The model combined intrapersonal forces (the healthcare provider’s level of caring and emotional load) and interpersonal forces (meeting the client in a team of professionals or alone, and client?provider similarity), as predictors of emotional labour strategies, and subsequent client satisfaction. Clients’ evaluation of whether or not the emotional displays were authentic was intended to moderate the link between emotional labour and client satisfaction. The sample consisted of 103 healthcare providers’ encounters with clients’ family members, randomly selected from five nursing homes. Data were collected by validated questionnaires at three time points. Mixed linear model analyses generally supported the proposed model. Meeting a client’s family in teams, ethnic similarity, and providers’ caring and emotional load stimulated higher levels of deep acting. Meeting clients alone and less emotional load involved more surface acting. These findings offer empirical support for the social interaction explanation of emotional labour, pointing to the importance of social characteristics of the service encounter in shaping emotional labour strategies and maintaining client satisfaction.