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.     

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.     

The Importance of Social Embeddedness: Churn Models at Mobile Providers

This article argues the importance of social embeddedness at mobile providers by examining the effects of customers’ network topological properties on churn probability—the probability of a customer switching from one telecommunication provider to another. This article uses data from regional snowball sampling—the only practically feasible network sampling method—to identify groups with significantly different churn ratios for customers with different network topological properties. Clear evidence indicates that individual network characteristics (node‐level metrics) have considerable impact on churn probabilities. The inclusion of network‐related measures in the churn model allows a longer‐term projection of churners and improves the predictive power of the model. With no possibility to carry out repeated sampling, sample stability was checked through simulation results. On the one hand, this article highlights the importance and effectiveness of the provider's tailored marketing campaigns by showing that customers targeted by direct marketing campaigns are less threatened by churn than nontargeted customers. On the other, this article shows that social embeddedness blocks the impact of the very same marketing efforts. This article forwards the idea that social embeddedness, also prevalent in vendor switching, can be extended to understanding the development of professional societies threatened by membership churn.     

The Impact of Switching Costs on the Outsourcing of Knowledge‐Intensive Business Processes

This study examines the impact of switching costs on vendor selection and contract efficiency in the outsourcing of knowledge‐intensive business services (KIBS). We show that under most plausible scenarios in KIBS outsourcing, there is an intrinsic tension between vendor selection and contract efficiency: in the process in which the winning vendor's bid constitutes the terms of the contract between client and vendor (e.g., competitive bidding), there is good selection but contract inefficiency (positive information rent paid by the client). If, by contrast, the client establishes the contract terms, then its performance yields contract efficiency but poor selection. We also highlight the implications of performance metrics for contract design in KIBS outsourcing.     

Optimal Choice for Appointment Scheduling Window under Patient No‐Show Behavior

Observing that patients with longer appointment delays tend to have higher no‐show rates, many providers place a limit on how far into the future that an appointment can be scheduled. This article studies how the choice of appointment scheduling window affects a provider's operational efficiency. We use a single server queue to model the registered appointments in a provider's work schedule, and the capacity of the queue serves as a proxy of the size of the appointment window. The provider chooses a common appointment window for all patients to maximize her long‐run average net reward, which depends on the rewards collected from patients served and the “penalty” paid for those who cannot be scheduled. Using a stylized M/M/1/K queueing model, we provide an analytical characterization for the optimal appointment queue capacity K, and study how it should be adjusted in response to changes in other model parameters. In particular, we find that simply increasing appointment window could be counterproductive when patients become more likely to show up. Patient sensitivity to incremental delays, rather than the magnitudes of no‐show probabilities, plays a more important role in determining the optimal appointment window. Via extensive numerical experiments, we confirm that our analytical results obtained under the M/M/1/K model continue to hold in more realistic settings. Our numerical study also reveals substantial efficiency gains resulted from adopting an optimal appointment scheduling window when the provider has no other operational levers available to deal with patient no‐shows. However, when the provider can adjust panel size and overbooking level, limiting the appointment window serves more as a substitute strategy, rather than a complement.     

The Role of Contracts on Quality and Returns to Quality in Offshore Software Development Outsourcing

In this study, we examine how the different incentive structures inherent in two primary contract types—time and materials (T&M) and fixed price (FP)—influence the quality provided by the vendor in the software development outsourcing industry. We argue that the incentive structure of FP contracts motivates a vendor to be more efficient in the software development process, which results in higher quality as compared to projects executed under a T&M contract. We thus argue that vendors consistently staff FP projects with better trained personnel because they face the most risk on these contracts, resulting in better outcomes on these projects. We extend our analysis to propose that providing higher quality is associated with higher profit margins for the vendor only for FP contracts. We develop and test these hypotheses on data collected from 100 software projects completed by a leading Indian offshore vendor. The results provide strong support for our fundamental thesis that the drivers of and returns to quality vary by contract type. We discuss the implications of our research for both researchers and practitioners.     

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.     

The financial benefits to building outsourcing partnerships

The value of whether to outsource EH&S services is a question that compares the importance of maintaining in-house core competencies and accountability versus that of the cost and efficiency for this expertise. At Baxter International's Cardio-Vascular Group in Irvine, California, Environmental Manager Curtis Stephan has lead the development of “outsourcing partners.” Stephan believes that by developing a concept that goes beyond the traditional “contractor-employer” relationship, Baxter is best able to concentrate on what they do best—manufacturing— and save money in the process.     

Determinants of Interoutsourcing: An Analytical Approach

Interoutsourcing is a round‐way process in which the vendor is its customer's customer and the customer is its vendor's vendor. While interoutsourcing is emerging as a prominent outsourcing strategy in many industries, there are no rigorous analytical studies focusing on this mechanism. In this article, we analytically demonstrate the efficacy of interoutsourcing by comparing it with normal outsourcing. Our results show that, compared with normal outsourcing, interoutsourcing acts as a self‐enforcer of vendor firms' behaviors toward increasing outsourcing service value. However, in situations where there is a mismatch of outsourcing activities, a high degree of incentive that is based on outsourcing service value, and a high cost of capital, interoutsourcing is not preferred to normal outsourcing. We discuss these results in detail and provide managerial implications for firms involved in interoutsourcing decisions.     

Information systems outsourcing projects as a double moral hazard problem

In the past two decades many organizations have turned to other organizations to satisfy their information systems needs. Information systems outsourcing arrangements cover the spectrum from agreements involving the delivery of all information services to those providing specific services such as systems development, communications management, desktop computing provision and maintenance, and so on.In this paper we model information systems outsourcing arrangements as a non-cooperative game with two players: a company and an outsourcing vendor. The game between the two players has an inherent double moral hazard problem as the success of the information system outsourcing project depends on the actions of both players, which are costly for them and are not directly contractible. Both parties make their decisions taking into account the effects that these decisions have on the other player's actions. In our analysis, we compare the solution obtained without a moral hazard problem (the first-best solution) to the one obtained under a double moral hazard setting (the second-best solution). We demonstrate some results based on the assumption that increases in the productivity of the vendor lead to increases in the productivity of the company. Further we establish that outsourcing contracts should provide no separate payment for failure to the outsourcing vendor although effectively many of them do. We also provide a sharing rule for providing appropriate incentives for the vendor and examine the dynamics associated with this sharing rule. Finally, we further provide for the characterization of response functions and the ensuing Nash solution including the optimal outsourcing fee. This allows for the nuanced consideration of the degree of interaction between the effort of one party and the productivity of the effort of the other party. This particular interaction has not been explored formally in the extant research literature.     

Heterogeneous Submission Behavior and its Implications for Success in Innovation Contests with Public Submissions

Innovation contests are increasingly adopting a format where submissions are viewable by all contestants and the information structure changes during the contest. In such an “unblind” format, contestants must weigh the costs of revealing their submissions against the benefits of improving their submissions through emerging information. We take a closer look at how contestants solve problems in innovation contests with public submission of solutions—that is, unblind contests, by examining the implications of their submission behavior for contest outcomes. We analyze the submission behavior in terms of three dimensions: the position of first submission by the contestant, the number of submissions the contestant makes, and the length of active participation by the contestant. The econometric analysis of a large dataset of unblind innovation contests and participating contestants indicates that, despite the potential for free riding and intellectual property loss from disclosure of submissions, contestants who have a lower position of first submission are more likely to succeed in the contest. Further, we find some evidence of a curvilinear relationship between a contestant's number of submissions and her likelihood of success, indicating a potential “quality–quantity” trade‐off in unblind innovation contests. Finally, our findings indicate that increasing the length of participation in a contest has a positive effect on a contestant's likelihood of success. Departing from prior studies on innovation contests, where a contestant's success is assumed to be a function of her prior experience and problem‐solving skills, our study provides new empirical evidence that, in innovation contests with public submissions, the submission behavior of a contestant also plays an explanatory role in a contestant's success.     

Risks in offshore IT outsourcing: A service provider perspective

Offshore outsourcing of Information Technology (IT) services is the prevalent practice in global businesses today. Despite the strategic advantages and cost benefits that offshore outsourcing offers, outsourcing relationships also involve risks, for both the client, as well as the service provider – a fact that is evidenced by the reported failures of such engagements. Some of the prior researches in this area have focused on identifying various types of client risks and their sources. However, the study of risks from a service provider’s perspective has not received due treatment in literature. This study analyses offshore IT outsourcing risks from the perspective of service providers. A case based approach using the principles of grounded theory was used for studying the risks. Theoretical sampling was used to collect data from 5 mid-tier offshore third party service providers based in Bangalore, India. From our coding and analysis three broad categories of service provider risks emerged, namely, macroeconomic, relationship specific and project specific. Relationship maturity, nature of contract, nature of service or project and nature of client were identified as contextual factors which influence the degree of risk.     

Identifying key performance indicators in food technology contract R&D

Innovating companies increasingly rely on outsourcing to Contract Research Organisations (CROs) for their Research and Development (R&D), which are largely understudied. This paper presents the outcome of a case study in the field of food technology contract research, identifying context specific Key Performance Indicators (KPIs) for a CRO. KPIs were identified with a modified version of the Wageningen Innovation Assessment Tool, with which 72 finished successful and less successful projects were analysed. We developed a benchmarking tool to evaluate starting or running innovation project quality, which allows for direct, in situ project improvements by project leaders at CROs.     

软件外包项目复杂性下的交互记忆系统与知识转移

针对软件外包项目团队中如何有效知识转移问题,构建交互记忆系统、项目复杂性和知识转移绩效之间关系的概念模型,基于25家软件外包承接企业中107个软件外包团队的问卷调查数据,运用偏最小二乘法对数据进行分析。研究结果表明,专长度和可信度对团队知识转移绩效和协调度有显著的正向影响,软件外包项目结构复杂性对专长度与知识转移绩效的关系有显著的正向调节作用,软件外包项目动态复杂性对专长度与知识转移绩效的关系有显著的负向调节作用。研究结果揭示了项目复杂性条件下交互记忆系统与知识转移绩效之间的作用机理,推进了软件外包知识转移理论发展,并为软件外包团队有效地进行知识转移提供管理启示。     

The Impact of Nonagility on Service Level and Project Duration*

“Why projects are late” is a fundamental issue in theory and in practice. One well‐established explanation is that a project's network structure can be a significant factor—the “fatter” or more parallel the project, the later the project completion. Herein we show that a lack of agility, which may frequently arise in projects when there are external resources, can also be a significant factor in project delays—both in more serial‐like projects as well as more parallel ones. Specifically, this article formally characterizes the concept of agility in projects, shows how a lack of agility can have a significant impact on a project, and gives some general properties on agility with respect to a project's structure.     

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.     

Push or Pull? Design of Content Delivery Systems

Advances in information technology, especially the expansion of cellular and WiFi networks, are dramatically changing how people consume digital content. These changes in user access behavior present a challenge of delivering content to a diversified consumer base. This article addresses this challenge by identifying the key factors for the design of content delivery systems (gross value of content, delivery delay, sensitivity to delivery delay, accessing cost, and processing cost) and explicitly modeling their interactions. We investigate two content delivery systems—push and pull systems, and solve for the content provider's optimal push frequency decision and consumers’ push versus pull decisions. We show that the content provider's selection of push frequency plays a critical role determining the segmentation of the consumer market into the push group and the pull group. Our findings suggest that firms should set a relatively high push frequency to cater to high‐type consumers, which leads to two consumer groups with low‐type consumers belonging to the pull group and high‐type consumers belonging to the push group.     

Strategic Grading in the Product Acquisition Process of a Reverse Supply Chain

Most recommerce providers have moved to a quality‐dependent process for the acquisition of used products. They acquire the products via websites at which product holders submit upfront quality statements and receive quality‐dependent acquisition prices for their used devices. Motivated by this development of reverse logistics practice, the aim of this study is to analyze the product assessment process of a recommerce provider in detail. To this end, we first propose a sequential bargaining model with complete information which captures the individual behavior of the recommerce provider and the product holder. We determine the optimal strategies of the product holder and the recommerce provider in this game. We find that the resulting strategies lead to an efficient allocation, although the recommerce provider can absorb most of the bargaining potential due to his last mover advantage. In a second step, we relax the assumption of complete information and include uncertainty about the product holder's valuation of the product. We show the trade‐off underlying the recommerce provider's optimal counteroffer decision and analyze the optimal strategy, using a logistic regression approach on a real‐life dataset of nearly 6,000 product submissions. The results reveal a significant improvement potential, compared to the currently applied strategy.     

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.