Shared Services and Outsourcing: A Contemporary Outlook

Why do firms outsource information technology (it)? The literature is divided on whether it outsourcing is a cost-reduction strategy or a growth strategy. We argue that organizations can do both, i.e., they can make choices between exploitative and explorative aspects of it outsourcing, depending on the firm’s objective, i.e., to increase revenues and/or decrease costs. Our empirical findings show that it outsourcing has a positive direct effect on revenues and no impact on costs. We also find that the firms with low internal innovation capability use it outsourcing as a substitute for internal research and development (R&D) expenditure to increase revenues while firms with high internal R&D capability use it outsourcing as a complement for internal R&D expenditure to decrease costs. Moreover, in case of less concentrated i.e., more competitive industries firms tend to outsource more in order to increase revenues, while in highly concentrated i.e., less competitive industries firms tend to outsource in order to reduce cost. We reconcile our findings which are partially consistent with disparate perspectives from the literature, using the contextual ambidexterity framework. Our findings suggest that contextual ambidexterity also occurs at organizational level and is embedded in organizational level contexts. We provide important implications for is scholars working on it outsourcing and practitioners from outsourcing firms as well as it vendors.

This study focuses on how knowledge sharing across boundaries of merging entities during an information system (IS) implementation project in a shared services center (SSC) context affects the resulting system functionality. Although the literature stresses the growing adoption of the SSC as an outsourcing model, there is a lack of studies that examine shared services as a dynamic process of knowledge sharing across the organizational boundaries. We draw on a sociomaterial practice perspective and on the theory of workarounds to analyze an IS implementation project in a healthcare organization resulting from a merger of previously independent hospitals. The results suggest that new technology can be enacted in different ways as it links up with practices of different communities of users. We propose a multilevel process model that indicates at the end of the project a resulting mix of formal and informal (workarounds) practices that emerged from a dialectic process of resistance to, and negotiation of, the IS configuration during its implementation.

Setting-up hybrid shared services is not a straightforward and requires methodology support. To learn more about current practices and experiences with shared services delivery models and methodologies to setup shared services we conduct survey research among companies that deploy shared service centres. In this research paper we report on the findings of our research. Based on the results we outline initial requirements and present building blocks for an integrated methodology to effectively support implementing shared services.

New ways of professional working associated with new organisational forms such as the shared service centre (SSC) are challenging the ways in which careers exist and are perceived by finance professionals. Schein’s original concept of career anchors has proved to be a helpful and robust framework for understanding career motivations over time, culture and context. Nonetheless, the theory is still largely based on career motivations and personal expectations prevailing in the 1970s and updated in 1990. Empirical testing of new anchors is rare and proposals for refreshing anchors tend to be conceptual. Using mixed methods this paper investigates the underlying constructs of career anchors for finance professionals in the contemporary SSC environment. Exploratory factor analysis (EFA) is used to explore a number of issues arising from interviews in a global multi-national organisation. The results suggest that a six-factor model, which blends traditional and new ideas about career motivations, can better represent career anchors in new organisational contexts than original theory.

Empirical research on the maturity of retained IT organizations has remained scarce. IS literature shows that studies do not investigate the effect of organizational culture determinants on the relationship with the growth stage of an retained organization. The aim of this paper is to examine the relationship between organizational culture determinants and retained organizations stages of growth. Data from three case studies was collected and the Social Exchange Theory is used to understand the degree of interaction between the staff of retained organizations. Our analysis identified that culture determinants form a predictable pattern with the growth stage of a retained organization. Specifically, the culture determinants Management and Focus fit with their assumed growth stage in all three case studies. This might indicate that both determinants are interrelated as executive management of a firm has to develop a clear focus to achieve their IT mission and goals. Moreover, from an individual level, the results show that the degree of social interaction between staff is influenced by the perception of IT in the organization.

The outsourcing of information technology (IT) to external vendors promises lower delivery cost while attaining higher delivery quality. Despite these positive prospects, many IT outsourcing (ITO) projects still fail. On key aspect for non-working ITO engagements are cultural differences between organizations, teams, and individuals. This study explores the concept of culture in the context of ITO relationships by identifying and explaining particular cultural differences in such relationships. Building upon data from focus group discussions, we identify specific cultural differences in ITO relationships on the level of national culture (macro), organizational culture (meso) as well as team and individual culture (micro). Based on this, we apply the institutional logics perspective as a theoretical lens to derive institutional logics in ITO relationships, which explain and reason the identified cultural differences. With our results, we shed light on the under-researched concept of culture in ITO based on a multi-level analysis approach.

Italy is known for bringing to the world some of the greatest inventions and arts. Indeed, creativity and innovation are not strange phrases in many Italian sectors such as fashion, automotive and leather. But challenges to achieve innovation in the Italian service outsourcing sector still lay ahead. Recent reports have highlighted the complexity involved in fostering collaborative innovation between a client firm and a supplier, often resolving is unsatisfactory results. Hence, in this report, we seek to unveil whether the long innovative tradition plays a role in its local service outsourcing industry. A study of 150 British and Italian Service Outsourcing executives was carried out to examine their comparative innovation performance and the mechanisms that support innovation in each country. The results show that Italian client firms reported more satisfaction with the quality, frequency and impact of innovation delivered by suppliers than their British counterparts. The main differences between the Italian and British cases that may explain our results were (i) Italian client firms’ strategic intent has been revolving around the objective to increase the pace of innovation within the firm while their British counterparts have been focusing on cost reduction, (ii) Italian client firms have mainly been using outcome base pricing model while British client firms have mainly been using fixed-price model and (iii) Italian client firms have been using advisory firms to a far more extent than their British counterparts. We conclude by offering a practical framework to achieve innovation through outsourcing.

Offshoring is increasingly being adopted by professional accounting firms of all sizes and has become a component of the larger Business Process Outsourcing (“BPO”) industry. The traditionally conservative accounting profession operates in an environment subject to an intense and dynamic regulatory oversight. There is increasing competition and a pressure to reduce costs and manage staffing shortages faced by the profession. Offshoring presents itself as a solution to these pressures and as such is a key motivator for adopting offshoring. This suggests that offshoring in accounting firms is worthy of being examined in its own right.

Whilst offshoring generally has been the subject of much research, the use of offshoring in accounting firms, and in particular, research on the human resources aspect of offshoring for the domestic firm is scarce. This paper attempts to fill this void by investigating how the unique features of accounting firms apply to the general offshoring research through a rich case study approach. It demonstrates that “buy in” and human resourcing issues are important in ensuring the success of offshoring in accounting firms. This research in progress also examines the different offshoring ownership models adopted by accounting firms. Importantly, this paper introduces different interaction frameworks that firms can adopt, aiming to develop a model for firms to help them decide which is the most appropriate model and framework for them. In addition, this paper looks at the impact offshoring has on both the recruitment and development of domestic graduates in primarily Australian accounting firms and seeks to provide guidelines to assist firms in this area.

Outsourcing of IT-related work to an offshore (or nearshore) location takes almost always place from a developed country to a less developed country. One of the reasons is that wages of IT workers in the less developed country are usually significantly lower but additional reasons for such a move may exist (e.g., better availability of skilled personnel). While there are meanwhile complex sourcing arrangements and even cases of backsourcing from offshore to a developed country, a relatively new phenomenon can be observed where IT-based services are outsourced from less developed to more developed countries. These are cases of services with a high amount of automation or complexity. In our research on the service of Internet traffic exchange, we find that it is not only the costs that drive the decision to acquire the service from a supplier in a developed country.

Increasingly, outsourcing companies decline to renew their contracts automatically at the end of their duration [1, 2]. Furthermore, only a very few contracts are renewed in sole-source contract negotiations. Switching IT outsourcing suppliers is becoming more common [3]. Organizations send out Requests for Proposal instead and may select a new provider for their Information Technology (IT) services. The costs of selection and knowledge transfer processes, switching costs, are substantial [4‐6]. Service delivery continuity is also under pressure when a transfer to a new provider is made [8, 9]. What are the considerations in contract renewal decisions for IT services? The findings presented will be useful for client companies facing contract renewal decisions. In the current, increasingly mature outsourcing market, qualitative factors are considered most important in deciding contract renewal versus switching suppliers, as outsourcing companies are now well capable of negotiating a market-conform price [10]. In this research project, we focus on qualitative as well as financial factors related to switching suppliers. Furthermore, termination provisions in contracts are important. How can service delivery continuity be assured while switching your supplier? This results in a framework for contract renewal decision making in IT outsourcing containing motives, switching costs, risks and contract good practices.

This research presents the findings of a survey on contract renewal decisions in IT outsourcing. Dutch-based customer organizations participated in this research project. The data for this research is collected via survey.

In the paper we discuss the following research questions: How do start-ups provide themselves with software and what are the motivations behind deciding on a specific sourcing option? The questions are motivated from the fact that acquirement of software is a challenging question, and it is especially interesting to explore how start-ups do, since they do not have a legacy to deal with. The research was conducted as a mixed approach including a survey among start-ups followed by interviewing decision-makers in some start-ups. The research indicates that motivations for choosing a specific software application include ease of use, compatibility, reliability, flexibility, and previous familiarity. Right now, sourcing of paid software mostly occurs in a single license set-up, although interviewed start-ups showed to prefer Pay-Per-Use, as it is more flexible and because they feel more in control over how much money they spend. The start-ups said to consider free software options in case alternatives that fulfilled their requirements were available. In the cases where start-ups paid for software the motivation was either because there were no other options available, or they felt that this sourcing method secured support.