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Über dieses Buch

Bringing together theoretical and empirical studies from the Journal of Information Technology, this book provides a definitive guide to research discovered on the growing global sourcing phenomenon. Paying particular attention to Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO), theoretical chapters explore insightful ways of thinking about the different facets of outsourcing, and provide useful information to practitioners and researchers. Empirical chapters report the findings of 405 major research studies into the risks and successes of relationships between customer and vendor, the development of trust in these relationships, the factors affecting locations for offshoring, and specialized offshoring organizations such as captive centres. In this comprehensive study, the editors present an expert review of the historical development of this field, and offer analysis of emerging findings and practices for the future.



1. Introduction

Modern organizations and their IT functions are increasingly choosing to rely on external service providers for IT hardware, software, telecommunications, cloud computing resources, and automation tools, a practice known as information technology outsourcing (ITO). Meanwhile especially since 1999 and several landmark human resource outsourcing deals, business process outsourcing (BPO), has also increasingly spread across fundamental back office functions like finance and accounting, procurement, legal, real estate, human resources, insurance claims and general administration. By early 2014, global outsourcing contracts for ITO and BPO services exceeded US$648 billion (ITO $344 billion; BPO $304 billion), according to HFS Research. By the beginning of 2015 the combined total exceeded US$700 billion (Fersht and Snowden 2014). By the end of 2016, the global ITO and BPO services market was estimated to be US$1,007 billion (ITO $657 billion; BPO $322 billion) (Snowden and Fersht 2016). There are many, often wildly diverging, estimates on market growth. Much depends on the assumptions made. However, taking a conservative route through many estimates, we follow Snowden and Fersht (2016) in seeing the market experiencing a 2.2% ITO and a 4.0% BPO compound annual growth through 2016 to end of 2020, reflecting more activities being outsourced, and new service lines and delivery locations added.
Leslie P. Willcocks, Mary C. Lacity, Chris Sauer

Theoretical Perspectives


2. Theoretical Perspectives on the Outsourcing of Information Systems

Critics have argued that the field of information systems (IS) lacks a coherent theoretical framework. This paper attempts to further the theoretical development of a critical and pervasive contemporary phenomenon, outsourcing of IS functions, by synthesizing four theoretical models (resource-based theory, resource-dependence theory, transaction cost theory and agency theory) that are useful for understanding determinants of a firm’s outsourcing strategy. From these theoretical models, a contingency model of outsourcing is developed which can be used to direct empirical research.
Myun J. Creon, Varun Grover, James T.C. Teng

3. The Information Technology Outsourcing Risk: A Transaction Cost and Agency Theory-Based Perspective

Many firms have adopted outsourcing in recent years as a means of governing their information technology (IT) operations. While outsourcing is associated with significant benefits, it can also be a risky endeavour. This paper proposes a scenario-based conceptualization of the IT outsourcing risk, wherein risk is defined as a quadruplet comprising a scenario, the likelihood of that scenario, its consequences and the risk mitigation mechanisms that can attenuate or help avoid the occurrence of a scenario. This definition draws on and extends a risk assessment framework that is widely used in engineering. The proposed conceptualization of risk is then applied to the specific context of IT outsourcing using previous research on IT outsourcing as well as transaction cost and agency theory as a point of departure.
Bouchaib Bahli, Suzanne Rivard

4. Moments of Governance in IS Outsourcing: Conceptualizing Effects of Contracts on Value Capture and Creation

Research on the governance of IS outsourcing has recognized two moments of governance (MoG): the formal outsourcing contract (promissory contract) and post-contractual relationship management (psychological contract). While this research has been prescriptive of contract terms that lead to successful outsourcing, there is need for clarity on what specific governance options are available at each moment of governance and how governance choices at one moment affect those at another, and consequently affect outsourcing outcomes. This paper draws on theoretical and empirical work in the areas of governance and contracts to develop a model of IS outsourcing governance, delineating specific moments of governance. It describes how the IS outsourcing context circumscribes market, hierarchy, and network governance options that are available at the promissory contract and psychological contract moments. Processes and structures that constitute governance choices at each moment of governance are identified. This analysis of outcomes recognizes an inherent tension in interorganizational relationships: firms’ desire for value capture or efficiency vs their desire for value creation or innovation. We explore how choices in formulating the promissory contract affect the psychological contract, and how psychological contract choices impact value capture and creation. The paper concludes by exploring the implications of the MoG model for practitioners and suggesting areas in which further conceptualization and empirical work may be beneficial.
Shaila M. Miranda, C. Bruce Kavan

From IT Outsourcing to Offshoring and Business Process Outsourcing


5. Norm Development in Outsourcing Relationships

This paper considers the role of norms within networks by describing how BP Exploration outsourced its information technology function – a major business activity. This outsourcing venture led to the formation of a consortium. However, this attempt was found to have failed. It is suggested here that central to the failure of the consortium as an outsourcing arrangement was the issue of ‘norms’.
Thomas Kern, Keith Blois

6. Organizational Design of IT Supplier Relationship Management: A Multiple Case Study of Five Client Companies

This papers shows that the management of contractual relationships in IS/IT outsourcing is not only receiving greater attention in academic research, but that it has also moved into focus of companies with high outsourcing degrees. This shift of management attention is accompanied by observable changes in IT organizations’ design, revealing an underrepresented but promising research topic. While prior research has predominantly explored single aspects, for example, supplier selection or relationship building, this article takes a more holistic approach on IT supplier relationship management (SRM) with a focus on organizational design. A conceptual framework, covering three core elements of organizational design, strategy, structure and process, guided the multiple case study on IT SRM in five client IT organizations. One key finding from sourcing strategy is that IT organizations have in parts significantly and abruptly reduced their number of suppliers in the last years, a phenomenon typically well known in the automobile industry. With regard to structure, different organizational models are presented, varying upon their degree of centralization and mode of sourcing. The concept of a hybrid (centralized-decentralized) structure, where a central unit fulfills SRM activities, was shown to be the predominant model within our case organizations. Design and potential benefits of this barely examined model are discussed in detail and empirical examples are provided respectively. As a third organizational design component, formal processes and lateral connections are presented as a means to bridge barriers between organizational entities central to IT SRM. Finally, various opportunities for future research are illustrated.
Jasmin Kaiser, Peter Buxmann

7. How Do IT Outsourcing Vendors Respond to Shocks in Client Demand? A Resource Dependence Perspective

IT outsourcing vendors depend on projects from their clients to reap gains and develop capabilities. Because of this dependence, vendors are vulnerable to shocks in client demand. However, the extant literature on how vendors mitigate the damage from demand shocks is very limited. These multiple case studies examined five pairs of relationships between Chinese vendors and their Japanese clients, drawing on resource dependence theory, which considers two response strategies: bridging and buffering. Our findings suggest that both bridging and buffering should be specified further on the basis of their explorative and exploitative dimensions and that the choice of a particular strategy depended on the power relation between the vendor and client. Results show that when the client was in a high-power advantage, the vendor chose bridging. More specifically, if the vendor also had high power, it adopted explorative bridging; otherwise, it adopted exploitative bridging. When the client was in a low-power position, the vendor would pursue explorative buffering. Exploitative buffering was a common response to demand shocks, independent of the dyadic power relation.
Fang Su, Ji-Ye Mao, Sirkka L Jarvenpaa

8. Operational Capabilities Development in Mediated Offshore Software Services Models

The paper expands theoretical and empirical understanding of capabilities development in the mediated offshore outsourcing model whereby a small or a medium-sized firm delivers offshore software services to a larger information technology firm that in turn contracts and interfaces with the actual end-client onshore firms. Such a mediated model has received little prior research attention, although it is common particularly among Chinese firms exporting services to Japan, the largest export market for Chinese software services. We conducted case studies in four China-based software companies to understand the mechanisms used to develop their operational capabilities. We focused on client-specific process and human resources capabilities that have been previously associated with vendor success. We found a range of learning mechanisms to build the capabilities in offshore firms. Results show that the development of human resources capabilities was most challenging in the mediated model, yet foundational for the development of the other capabilities. This paper contributes to the information systems literature by improving our understanding of the development of operational capabilities in small- and medium-sized Chinese firms that deploy the mediated model of offshore software services.
Sirkka L. Jarvenpaa, Ji-Ye Mao

9. A Dynamic Model of Offshore Software Development

As the offshoring of knowledge work has accelerated, theoretical models to explain the phenomenon have not kept up. Most theoretical models assume a static transactional relationship from various factors to a binary offshoring decision. Such models do not take into account the mix of sourcing choices at the level of a firm, nor do they consider dynamic changes over time. To help fill these gaps, we use five case studies on offshore migration of software work by major US companies. Data were collected from senior executives. We use these data to develop a dynamic conceptual model that incorporates three factor groupings which collectively help explain offshore sourcing outcomes: (1) economic factors, (2) the nature of the development activity, and (3) managerial capabilities and practices. Importantly, the model includes five feedback loops among sourcing decisions, sourcing mix, and these three factors. Thus, the relationships in the model are not unidirectional, nor static; rather, they are iterative and dynamic, involving feedback loops, learning, and cumulative effects over time. In this dynamic model, the sourcing ‘mix,’ a continuously changing offshore portfolio, is a key firm-level-dependent variable, closer to the economic concept of a ‘stock’ measure that represents the cumulative effect of sourcing decisions over time. This variable may be measured in different ways, for instance as the amount of work done offshore, or the number of workers employed offshore.
Jason Dedrick, Erran Carmel, Kenneth L. Kraemer

10. Anxiety and Psychological Security in Offshoring Relationships: The Role and Development of Trust as Emotional Commitment

In this paper we focus on the neglected role of anxiety and psychological security in organizational life, specifically in the context of the organization and development of offshoring relationships that extend across time and geography. In contrast with much of the literature on offshoring (and interorganizational relationships more generally), which tends to take a very conventional rational decision-making perspective on the phenomenon in question, we emphasize the less tangible, emotional dimensions. In particular, we are concerned with understanding the processes by which clients, who have little or no previous experience of offshoring, may develop and sustain adequate levels of psychological security to enable them to bracket risk and productively engage in such unfamiliar and alien work arrangements. To this end, we draw on Anthony Giddens’ distinctive, noncognitivist conception of trust, supplemented by other important contributions in the area, to explore the processes by which a sense of psychological security and stability is achieved in the face of the quotidian anxieties provoked by engagement in these contemporary modes of global organizing. Our synthesized theoretical framework is developed and illustrated in the context of an ongoing, in-depth, longitudinal study of the evolution of an Ireland–India information systems offshoring relationship. By tracing the dynamics of this relationship over an 18-month period, we examine the practices (or ‘relationship work’) through which trust is produced and suggest that different mechanisms can be discerned at different (albeit overlapping) stages of the relationship. In the earlier phase, the emphasis is on the role played by care and attentiveness in producing a sense of trust in the qualities of the supplier. As the relationship develops, however, the emphasis shifts to the production of a stable collaborative order. Here, we focus on the micropolitical dynamics of such processes and draw attention to three important tactical interventions (brokerage, signaling, and the ‘third man’). We conclude by arguing that the sense of trust that was carefully cultivated in the earlier phase of the relationship provided a crucial foundation, which not only facilitated the subsequent development of a stable collaborative order but, most noticeably, helped contain a serious crisis that beset the project in December 2006.
Séamas Kelly, Camilla Noonan

11. Cross-cultural (Mis)Communication in IS Offshoring: Understanding Through Conversation Analysis

The offshoring of information systems (IS) work has seen phenomenal growth in the past 5 or more years. This has resulted in IS professionals, interacting with workers from vastly different cultural backgrounds, in order to deliver IS project and support services. This cultural ‘barrier’ has been highlighted in the IS literature as a key challenge for offshoring; however, the attention given to research in the field has in the main been restricted to surveys or interviews, often reliant on reductionist national culture models. Within the fields of linguistics and anthropology, the ethnographic research technique of conversation analysis (CA) has been successfully applied to cross-cultural communications. However, there have been no concerted research efforts to apply CA to IS research in general and to IS offshoring in particular. Our research aims to address that gap by analysing naturally occurring recordings of telephone conferences between offshore vendor staff in India and UK/US employees of a major pharmaceutical company. The research has identified and analysed two important phenomena observed within these communications. Firstly, evidence of asymmetries of participation across cultural divides has been documented and analysed for underlying causes, such as different attitudes to hierarchy and a lack of shared understanding of expected responses. Secondly, differences in the rhetorical organisation of conversation by participants have also been observed and clearly documented within transcribed specimens of these conversations. These phenomena led to seven findings that are aimed to stimulate further research. Finally, and perhaps most importantly, this chapter demonstrates how the methodological approach of CA can be applied to IS offshoring research, producing key insights into culturally loaded conversations with clear applications for practice. We hope that this evidence of the potential of CA in IS research will inspire IS researchers to use the approach in other domains as well as in further work in offshoring situations.
David Avison, Peter Banks

12. Applying Multiple Perspectives to the BPO Decision: A Case Study of Call Centres in Australia

Information technology-enabled business process outsourcing (BPO) is a growing phenomenon; yet, little research has been conducted to understand the factors that determine its appropriateness for organisations and what capabilities they should seek in potential suppliers. A multi-perspective approach to the BPO decision, encompassing the transaction, the organisation and its context, is proposed and a set of supplier capabilities to deliver upon it is outlined. A case study of outsourced call centres in Australia, based upon interviews with three suppliers and three clients, suggests such a multi-perspective approach is useful but that the interaction between the factors shaping the BPO decision is more complex than envisaged. The case also suggests that a common set of capabilities is sought from suppliers – though it is narrower than first proposed.
Mark Borman

13. A Historical Review of the Information Technology and Business Process Captive Centre Sector

A captive centre is a business unit that is owned and provides services to the parent firm from an offshore location. In this paper we seek to apply a historical perspective in order to understand what factors shaped its development path. In particular, we are interested to document and explain changes that took place in the captive sector vis-à-vis extant country attractiveness frameworks. To achieve this objective, we examine changes that multinationals introduced in their offshore captive investments, concerning the type of the captive they set up, the functions they offshored through a captive centre and to which location. Information was collected from secondary sources on offshore captive investments made by Fortune 250 global firms between 1985 and 2010. On the basis of the analysis the paper considers the importance of disrupting factors to the extant country selection literature.
Ilan Oshri, Bob van Uhm

14. Review of the Empirical Business Services Sourcing Literature: An Update and Future Directions

The 2010 Journal of Information Technology (JIT) article, ‘A Review of the IT Outsourcing Empirical Literature and Future Research Directions’, analyzed 741 findings on the determinants of information technology outsourcing (ITO) decisions and outcomes from 164 empirical articles published between 1992 and 2010. Using the same coding method, the 2011 JIT article, ‘Business Process Outsourcing Studies: A Critical Review and Research Directions’, analyzed 615 findings on the determinants of business process outsourcing (BPO) decisions and outcomes from 67 empirical articles published between 1996 and 2011. Taken together, these two reviews found that the preponderance of evidence from both ITO and BPO research streams produced largely consistent results pertaining to the categories of independent variables that affected outsourcing decisions and outcomes. To investigate the most current research findings on business services, which comprise ITO and BPO, and to compare the results with the prior JIT reviews, we replicated the method used in the prior JIT reviews. In this update, we examined 174 newly published articles across 78 academic journals published between 2010 and 2014. We found that researchers have significantly expanded the variables of interest in the last 4 years. In all, researchers investigated 69 new variables. Compared with earlier research, this review of recent articles found a deeper exploration of the direct effects of transaction attributes, sourcing motivations, client and provider capabilities, and governance on sourcing decisions and outcomes. Researchers have also studied a broader variety of sourcing decisions, including shared services, captive centers, rural sourcing, and backsourcing. This update also found a more nuanced understanding of relational governance and its interaction with contractual governance. We assessed the research progress that has been made on 10 previously identified gaps in knowledge. We proposed a future research agenda that includes continued, incremental progress on ‘normal science’ research questions, as well as more ambitious research goals. We challenged researchers to investigate how sourcing clients, providers, and advisors can protect jobs, protect the environment, and ensure security in an increasingly automated world.
Mary C. Lacity, Shaji A. Khan, Aihua Yan
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