Strategic governance and risk-management of the outsourcing ecosystem:developing dynamic capabilities and addressing implementation challenges

As outsourcing continues to grow in large global organisations, governance and risk management of the related outsourcing ecosystem is evolving as a strategic Board-level activity, driving competitive advantage and value-creation, in addition to value-protection. Amidst this growth and evolution, the outsourcing of Information Technology (IT) and IT-enabled Business Process Outsourcing (BPO) continues to mature into a broader category referred to by contemporary researchers as “business services” including almost every service that can be delivered by third parties, often enabled by digitisation and technology. Through such strategic initiatives, focused on creating inimitable competitive advantage and organisational value, organisations have increased their levels of dependence on outsourcing, exposing themselves to newer risks amid shifting business environments. But despite these developments, there has been limited research on the ability of organisations to manage risks around outsourcing with a dynamic mind-set to create and protect value for organisations. Instead, most research continues to focus exclusively on preventing “bad things happening”. The first part of the research establishes the context by providing a forward-looking multi-disciplinary view on strategic risk and governance related to outsourcing. This is followed by gaining an understanding of how and why large global organisations are broadening their perspective and enhancing maturity over governance and risk-management around their outsourcing ecosystem, including capabilities that they must develop to emerge as astute decision-makers, using industry-specific case studies. The second part of the research uses primary data to capture the overall progress made in achieving this transformation and implementation challenges. This thesis contributes to the growing body of outsourcing literature by focusing on governance from a novel “outsourcing ecosystem” perspective. It also makes practical contributions by identifying and addressing implementation challenges relevant to this transformational thinking, together with a 2x2 framework, which hold relevance for organisations operating with a significant outsourcing ecosystem and their leadership

Offshoring effectiveness: Measurement and improvement with optimization approach.

This study takes a refreshing look at IT outsourcing from a vendor\u27s perspective and discusses best practices required to effectively manage offshore business needs and offshoring effectiveness. We have conducted a detailed investigation to learn why outsourcing ventures fail, how to effectively measure up to service provider capability, and how to deliver strategic value to the end customer. Extant literature does not talk about the vendor\u27s issues and problems in outsourcing, and our investigation emphasized the vendor\u27s perspective on offshoring strategy and offshore resource effectiveness as the two important differentiators in a make-or-buy decision. Measurement metrics for each of the two items were devised to estimate their effect on offshoring effectiveness. We spoke to some of the top 10 IT vendors in India, collected offshoring data from both clients and vendors, and used the data to validate our decision framework. The framework helps us to investigate current industry practices in IT outsourcing, identify issues and problems beyond the obvious advantages of outsourcing, and propose measures to assess offshoring effectiveness. The investigation gave us an opportunity to record the best IT practices as well as suggest possible improvements in the service or product delivery cycle to enhance customer experience

OUTSOURCING STRATEGIES. HOW TO FORMALIZE AND NEGOTIATE THE OUTSOURCING CONTRACT.

In the globalized economy multinational firms have given rise to local firms able to produce at a low cost and at acceptable quality levels. A growing number of firms have outsourced production and manufacturing activities of all types to these firms, not only to reduce production costs but also to make their organizational structures more streamlined and flexible. Outsourcing decisions, which originally were limited to production which had a modest technological content and was of marginal importance for the business in question, is increasingly adopted for activities which, requiring core competencies or belonging to the core business, were considered inseparable from the organization and thus not outsourceable. Gradually an outsourcing strategy has developed which has found it convenient to outsource even core competencies and functions, such as specialized manufacturing, which require a particular technology, marketing, product design, and the search for know-how (Prahalad and Hamel 1990: 79-91).\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\r\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\nSuch an outsourcing strategy has a number of advantages, among which quality improvement, a greater focus on managing other core competencies, a greater flexibility and leverage regarding resources, along with the possibility of entering new markets, even ones with a high rate of development.\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\r\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\nThis article analyzes the fundamental stages for an outsourcing strategy. It will demonstrate how, in order to achieve an outsourcing strategy, it is necessary to include outsourcing in the general strategy, gather suitable information for choosing the outsourcer, negotiate the contract with the supplier, choose the type of relationship to have with the supplier, and, finally, plan the transfer of activities and functions from the outsourcee to one or more outsourcers or providers.\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\r\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\noutsourcing, outourcing decision, strategic perspective, outsourcing contract, contract negotiation, outside information, organizational culture

Strategic Information Technology Partnerships in Outsourcing as a Distinctive Source of Information Technology Value: A Social Capital Perspective

Firms increasingly acquire needed information technology (IT) products and services from external partners. In spite of the ubiquity of IT outsourcing in contemporary organizations, however, theoretical understanding of the dynamics of this phenomenon is limited. A dominant perspective used to explain IT outsourcing is transactions-cost economics (TCE) that focuses attention on efficiency and cost-reduction goals, and emphasizes opportunistic behavior. We suggest that by viewing outsourcing relationships as arms-length transactions, TCE may lead to overlooking potential mechanisms inherent in IT outsourcing relationships for the creation of alternative types of value. We present a relational lens for viewing the IT outsourcing phenomenon that is premised on knowledge exchange and learning. Specifically, we argue that the strategic partnership a firm forms through IT outsourcing constitutes a source of social capital for the focal firm, which facilitates (IT) collaboration between the focal firm and its partner. The learning resulting from knowledge exchange and transfer through the collaboration, in turn, generates (IT) value for the focal firm. Two manifestations of IT value are considered: strengthened internal IT partnerships, and IT-enabled innovation. We examine specific characteristics of social capital and how they influence the learning that occurs in the partnership. Propositions that can serve as the basis for future research are developed

Business outcomes of outsourcing: lessons from management research

Outsourcing has been broadly recognized as an important strategic choice made by companies and other organizations to achieve a wide variety of goals. Many studies have focused on the economic and financial impacts and on the relationship between outsourcers and outsourcees. This chapter offers a comprehensive overview of actual outsourcing outcomes found in management research, including impacts on human capital. Analysis of the evidence on outsourcing in the OECD STAN database (OECD 2011: 1970-2009) shows that both the number of transactions (deals) and their scope (activities involved) have increased constantly during the last 20 years. Over time, outsourcing popularity peaks have coincided with certain trends, such as business process reengineering, strategic focusing on core business, outsourcing/offshoring strategies, shared services and corporate downsizing (e.g. Brunetta and Peruffo 2014). Furthermore, as recent research shows, companies are expeditiously outsourcing non-core business processes and functions in order to maximize their profits. Business profits can be increased through reducing costs and/or via acquiring external sources of strategic differentiation (e.g. higher-quality raw materials or distinctive expertise/competences able to improve the overall quality of products and services, enabling companies to sell them at higher prices) (De Fontenay and Gans 2008; Gospel and Sako 2010; Angeli and Grimaldi 2010; Doellgast and Gospel 2012; Giustiniano et al. 2014). In such a scenario, multinational companies (MNCs) have a wider range of opportunities for outsourcing and offshoring activities due to their scope and international presence. On the other hand, MNCs are exposed to possible changes in employee relations models in the diverse labour markets in which they operate (Marginson and Meardi 2006; Sippola 2011). At company level, the decision to outsource activities is linked to expected structural and strategic changes which can be assessed through the adoption of a long-term perspective. While immediate results are related to purely economic assessments, long-term effects are more strategic and made up of opportunities (e.g. focus on core competencies and pursuit of greater higher specialization) and drawbacks (e.g. less strategic flexibility). Nevertheless, in a company\u2019s strategic plans, management focus is generally on the short-term results due to the (shorter, expected) timespan of their individual assignments and the contingent pressures of shareholders and financial markets. The short-term nature of outsourcing assessments is also a traditional argument used by trade unions and emphasized by the widening geographic scope of outsourcing and offshoring. While unions have been traditionally considered as opposing outsourcing and offshoring (e.g. Lommerud, Meland and Straume 2009), more recent studies have detected a significant shift from resistance to proactive strategies (Ramioul and De Bruyn 2006). Similarly, MNCs embracing outsourcing are better able to interpret the differences existing in national cultures, business practices, workplace representation systems and collective bargaining structures (Anner et al. 2006; Doellgast and Gospel 2012; Pulignano and Doerflinger 2013), contributing to a better local strategic responsiveness in their local subsidiaries (Almond et al. 2005; Arrowsmith and Marginson 2006; Bartlett and Ghoshal 1992). The aim of this chapter is to illustrate the main findings on the expected outcomes as reported in management and financial literature. To achieve this, the chapter explains a number of management paradoxes related to outsourcing, as well as how companies relate to their stakeholders. Management paradoxes referred to include: a) the paradox of financial and economic vs. strategic and organizational outcomes; and b) the time paradox. The chapter draws on previous research conducted on outsourcing antecedents, processes and outcomes, both in general (Marchegiani et al., 2012) and applied to specific activities within the value chain (Gospel and Sako 2010; Doellgast and Gospel 2012; Giustiniano et al. 2014; Brunetta, Giustiniano and Marchegiani 2014; Sorrentino et al. 2015). The focus is on analysing the \u2018lessons learned\u2019 reported in management and financial literature to nurture implementation strategies, for use by workers representatives (e.g., Benassi 2011). Among these lessons, it seems useful to affirm that in order to maximise the positive outcomes of outsourcing strategies, organizations have to take into account all the human implications of outsourcing, such as the effects on workers and their representatives. To illustrate this, the investigation on the outsourcing outcomes will be complemented by an analysis of certain aspects related to organizational design (i.e. company boundaries, coordination mechanisms) and labour issues (i.e. human reactions: resistance to change, hidden costs and the loss of competences and competitive advantage)

The construction of client organisations and contract structures in outsourcing within dynamic contexts: a longitudinal case study approach

This explorative study investigates how bureaucratic public sector client organisations deal with information technology (ITO) and business process (BPO) outsourcing in terms of internal management. To supplement the lack of studies emphasising pre-existing client organisational structure and the contextual and internal changes intertwined with and required for outsourcing, the thesis develops theoretical underpinnings that incorporate change, time, dynamism and context. These consist of a structuration theory-informed formal organisation perspective and a processual analysis-informed multidimensional outsourcing configuration framework. This thesis primarily seeks answers to 'why' and 'how' questions such as: why bureaucratic client organisations are concerned about IT outsourcing or BPO; in consequence, how they construct or change their strategy, organisational arrangements and outsourcing contracts; and, what are the contexts and social processes that let those constructions go forward? Studied by means of a longitudinal case study approach, with elements of comparison, the two cases are the IT outsourcing of the Public Procurement Service of Korea‘s e-government procurement system and the BPO of the Teachers‘ Pension Scheme administration of the British Department for Children, Schools and Families. Through contextual and micro-level analyses, the research found that client organisations appear to work at transforming outsourcing-related strategy, contract structure, and their own organisations—which are mutually interrelated—in the context of five IT governance concerns: strategic alignment, delivery of business value, performance management, risk management, and control and accountability. Institutionalised human behaviours were found to be strongly involved with these processes. The thesis provides rich data on how the organisations decomposed and recomposed existing bureaucratic structures and processes. This thesis also found three standards emerging as rationales for the strategic choices of the client organisations when they moved to outsourcing. These were: core vs. non-core perception of outsourced functions; high vs. low supplier switching costs; and high vs. low variability of business and applied IT. Against expectations, explicit distinctions such as cultural differences between two government environments and differences between ITO and BPO, did not sufficiently explain the core phenomena regarding outsourcing and client organisational change. In practice, core/non-core perception was found to be the key shaper of the outsourcing contracts and client organisation construction, though each outsourcing arrangement emerged as distinctively different in terms of relevant decisions, context, and processes. Overall, the research supports Kallinikos's formal organisation perspective for explaining outsourcing as an enabler of organisational change, and provides an enriched and extended outsourcing configuration framework for disaggregating and studying, and for practitioners helping to manage, outsourcing arrangements in depth

Using the OESP Framework to Explore the Performance of Large Firms Facing Globalisation: Findings from Interviews with Top Managers

Adaptation is a crucial challenge on large firm performance, and an important theme in the strategy and organisation theory. This study develops and tests a dynamic perspective on strategic fit. However, research into large firms performance has been limited to frameworks that are linear, static and its coverage is too constricted. On the other hand, OESP concept looks more promising and covers the issues facing large firms performance internally and externally. However, the lack of understanding on how to utilize the OESP framework is prevalent. This study proposes a distinctive OESP framework to identify environmental and organisational contingencies that should predict in large firms strategy and performance. It resolve this problem by examining the independent impact of outsourcing, top management team (TMT) culture diversity and strategic flexibility to large firms market share growth while taking the interrelationship between them under consideration. Outsourcing has positively influence on business performance, while TMT culture diversity and strategic flexibility has receive positive relationship to large firms performance, but highly dependent on external market conditions. Implications for managers, government and academics were given as guidance for future research

GOVERNANCE FORM AND VALUE CREATION IN IT OUTSOURCING

This research-in-progress considers the make/buy dichotomy common in research on IT outsourcing (ITO) transaction arrangements. Recent strategic management research finds that several kinds of transaction arrangements exist and categorizes them on three independent dimensions of control. Using a sample of 100+ ITO transactions from a small consulting firm, I plan to empirically test the relationship between use of these arrangements in ITO transactions and value created and captured by the transaction partners. Expected findings of the completed research will contribute to the outsourcing literature by validating a more nuanced means of analyzing outsourcing transactions. In addition, this research aids scholars’ understanding of how transaction arrangements contribute to the creation of value for transaction partners. Finally, this research contributes an additional IS perspective on a prominent theory of the firm, transaction cost economics (TCE), and contributes to ongoing debate in the IS literature regarding the applicability of TCE to ITO transactions

Supply Chain Management in Service-based Firms: Empirical Study of Nigeria Telecommunication Sector

The study examined service supply chain management practices adopted by the Nigerian Telecommunication industry. It also evaluated the relationship between organizational performance and service supply chain management in the Nigerian Telecommunication Industry. A sample size of 368 respondents was selected using a simple random sampling technique. Data were analysed using descriptive and inferential statistics - regression analysis. Results from the study showed that customer relationship, strategic supplier partnership, quality of information sharing, and extent of outsourcing were the supply chain management practices adopted by the telecommunication companies. Also, certain financial performance such as market share, adjusted operating profit, revenue, and related organic growth was the highest. Finally, results showed that strategic supplier partnership and customer relationship all had a significant and positive influence on organizational performance, while the quality of information sharing, the extent of outsourcing, and postponement all had no significant influence on the performance of the organization. The contribution of this study is that it expounds on the existent supply chain methodologies from a service-based enterprise perspective with empirical validation. While extant studies have focused majorly on supply chain issues in manufacturing enterprises, this study examined the concept in the service industry of an emerging market.

Outsourcing Childcare

Existing discourse on childcare decisions proceeds as if there were one right answer to the question of who should care for children. The law has preferences, too. But the reality is that parents, like businesses, make diverse, strategic decisions about when to keep work in-house, and when to collaborate with outside partners. This Article uses the lens of business outsourcing to gain fresh perspective on childcare decisionmaking, and the law\u27s relationship to it. The outsourcing framework provides three key insights. First, it enables us to better understand the diversity of childcare decisions and the reasons underlying them. Second, the outsourcing model rejects a one-size-fits-all approach to childcare, and instead respects and values a diversity of approaches. Third, the normative value in this diversity suggests a particular role for the law in interacting with childcare decisions. The law should accommodate and support a variety of approaches, rather than take a position on the substantive content of childcare decisions. Using this benchmark, this Article critically surveys existing law impacting childcare decisions and explores how it might evolve to better support the families making these decisions