BUSINESS PROCESS OUTSOURCING AND MARKET VALUE OF FIRMS

Recent trends suggest that business process outsourcing is an important contemporary phenomenon that is likely to have profound effects on organizations. This study examines whether there is a relationship between business process outsourcing and firm valuation and whether this relationship depends on the nature of the process outsourced and the location it is outsourced to. Using 375 public announcements of process outsourcing initiatives of Fortune 1000 firms we empirically test our hypotheses using an event study methodology. Our results indicate that business process outsourcing creates modest positive above normal returns. We also found that outsourcing knowledge intensive processes is more value adding than outsourcing labor intensive processes and offshore outsourcing is more value adding than onshore outsourcing. Interestingly, we found that among the options explored offshore outsourcing of knowledge intensive processes could reduce firm valuation

Legal Services as Commodity: Reinventing the Lawyers’ Services

Business service is a very broad, highly fragmented, highly labor-intensive, and capital-adverse industry that provides nonfinancial business-related services to other firms. Due to the broad nature of the industry, the definition of business service includes various services. Recently, powerful forces have reshaped the market for legal advice delivered to corporations. The “new normal” is characterized by a higher price pressure (clients demanding another megatrend, transforming workflows and business models. The volume of data used in legal advice has increased exponentially—a pattern seen in many other industries as well. Legal industry (as a part of business services) has experienced a global paradigm shift in the delivery model for legal services, known as legal process outsourcing, which transfers the work of attorneys, paralegals, and other legal professionals to external vendors located domestically and overseas. Legal outsourcing (both onshore and offshore) is transforming more for less) the deconstruction of formerly homogeneous legal services into different activities and the rise of legal process outsourcing. The digitization of legal data constitutes law practice as law firms and corporate legal departments seek to minimize costs, increase flexibility, and expand their in-house capabilities. With the emergence of legal services outsourcing, the future generation will lead a more sophisticated life, with a higher value of legal work, at a higher level of quality and speed, and dramatically at a lower cost. In this chapter, the author deals with the process of the transformation of legal service into a legal product and points to some dilemmas during that process. This chapter argues that outsourcing ultimately will have a positive effect on the legal profession and development of the quality of legal services. In the second part of this chapter, the author also stresses out some information about different possibilities, how to organize virtual law firms (with legal tech) for low-budget legal services into the Slovenian case

South Africa's business process outsourcing services sector: Lessons for Western-based client firms

Since 2008, South Africa has become one of the world's upcoming offshore destinations for business process outsourcing (BPO), a market estimated to be worth $US 182 billion globally by 2013. Western-based client firms evaluating South Africa as a BPO destination must consider the country's relative value against alternative locations. Client firms also have a number of engagement models from which to choose, inclucling outsourcing, erecting a captive centre, or acquiring an existing BPO business. The research finds that, for the UK, US, and Australian client companies in this study, South Africa's value proposition is not just based on costs as other locations are often cheaper. South Africa's value proposition is about overall economic value, high quality service and staff, strong cultural compatibility, and a favourable time zone. The findings reveal that South Africa complements the global portfolio for Western-based client firms that already have BPO centres in Inclia, the Philippines, and Eastern Europe. Moreover, whether client firms build or buy services from South Africa, the research identifies clistinctive risks that need to be mitigated by investing in and effectively governing the business processes performed offshore. Finally, from the case study research, this article identifies management lessons for leveraging South Africa's identifiable BPO service advantage

Domestic Outsourcing in the United States: A Research Agenda to Assess Trends and Effects on Job Quality

The goal of this paper is to develop a comprehensive research agenda to analyze trends in domestic outsourcing in the U.S. -- firms' use of contractors and independent contractors -- and its effects on job quality and inequality. In the process, we review definitions of outsourcing, the available scant empirical research, and limitations of existing data sources. We also summarize theories that attempt to explain why firms contract out for certain functions and assess their predictions about likely impacts on job quality. We then lay out in detail a major research initiative on domestic outsourcing, discussing the questions it should answer and providing a menu of research methodologies and potential data sources. Such a research investment will be a critical resource for policymakers and other stakeholders as they seek solutions to problems arising from the changing nature of work

Domestic Outsourcing, Rent Seeking, and Increasing Inequality

An increasing share of the economy is organized around financial capitalism, where, in contrast to the past, capital market actors actively assert and manage their claims on wealth creation and distribution. These new actors challenge prior assumptions of managerial capitalism about the goals and governance of firms. The focus on shareholder value is credited with increasing firm efficiency and shareholder returns. This lecture analyzes the changes in organizational behavior and value extraction under financial capitalism

The impact of business process outsourcing on firm performance and the influence of governance : a long term study in the German banking industry

Does BPO pay off at the firm-level? Although there are several studies which analyze the potential benefits of BPO, there is a virtual absence of research papers on BPO outcomes. Based on an analysis of 137 Business process outsourcing (BPO) ventures at 254 German banks in a period between 1994 and 2005, we found that the outsourcer's financial performance in terms of profitability and cost efficiency was increased significantly compared to industry peers without BPO. The increase stems not from workforce reductions but rather from increased employee productivity. Further, we show how BPO governance ensures BPO success: individually negotiated outsourcing contracts help to improve cost efficiency and profitability measures. Relational governance based on trust has only positive effects on profitability. Keywords: Business Process Outsourcing, firm performance, firm characteristics, banking, German banks, governance JEL Classifications: G21, L14, L21, L2

Overcoming inertia : drivers of the outsourcing process

Almost all managers have directly or indirectly been involved in the practice of outsourcing in recent years. But as they know, outsourcing is not straightforward. Outsourcing inertia, when companies are slow to adapt to changing circumstances that accommodate higher outsourcing levels, may undermine a firm’s performance. This article investigates the presence of outsourcing inertia and the factors that help managers overcome it. Using statistical evidence, we show that positive performance effects related to outsourcing can accumulate when circumstances change. This is then followed by rapid increases in outsourcing levels (i.e. outsourcing processes). We investigate what gives rise to these outsourcing processes through follow-up interviews with sourcing executives, which suggest five drivers behind outsourcing processes: managerial initiative (using outside experience); hierarchy (foreign headquarters); imitation (of competitors and of similar firms); outsider advice (from external institutions); knowledge sources (using external information). These five drivers all offer scope for managerial action. We tie them to academic literatures and suggest ways of investigating their presence and impact on the outsourcing process. Overall, we conclude that while economizing factors play a key role in explaining how much firms outsource, it is socializing factors that tend to drive outsourcing processes

How to invent a new business model based on crowdsourcing: the Crowdspirit ® case

Chesbrough's work on open innovation provides a theoretical framework to understand how firms can access external knowledge in order to support their R&D processes. The author defines open innovation as a paradigm that assumes that firms can and should use both external and internal ideas and internal and external paths to market. He considers that industrial R&D is undergoing a paradigm shift from the closed to the open model. Information and communication technologies and especially web 2.0 technologies accelerate this shift in so far they provide access to collective and distributed intelligence disseminated in the “crowd”. This phenomenon named “crowdsourcing” is defined by Jeff Howe as “the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined - and generally large - network of people in the form of an open call.”Though this approach may sound appealing to firms and R&D organizations, there is little research available about the strategic use of crowdsourcing for innovation processes. In this paper we develop the argument that crowdsourcing raises a certain number of strategic issues that we discuss on the basis of a real size crowdsourcing experiment. We were associated in the project from the very outset up to the strategic analysis of a start-up: Crowdspirit. The company's concept is based on the outsourcing of the entire R&D process to a community of designers and users, in the domain of consumer electronics. Our data is made up of the minutes of three strategic workshops with the managers that we completed step by step by additional theoretical study and some benchmarking of crowdsourcing experiments on the web. Although we started this collaboration mainly to help the company design its optimal business model, this action research process has led us to address the following research questions: how can a firm create and capture value by means of a strategy based on crowdsourcing? What are the main strategic issues to be considered when a firm intends to open its innovation process through crowdsourcing? Due to the action research approach used, we do not dissociate the theoretical part from the empirical data, but rather to present our research process step by step. We therefore successively present four main phases of the strategic analysis carried out with the Crowdspirit team: (1) The emergence of the Crowdspirit business model; (2) The value creation process related to profiles of crowdspirit community of contributors (3) The challenging of the company's initial business model and (4) The creation of a new business model successively open and closed models. In the discussion we summarize the main strategic issues that emerged during the work on Crowdspirit's strategy with its managers, and interpret them on the basis of existing literature on open innovation. This leads us to complete Chesbrough's open innovation approach and Nambissan and Sawney network-centric innovation model by introducing new options for companies whose strategy is based on crowdsourcing.Open innovation, crowdsourcing, business models

Outsourcing the Human Resource Function: Environmental and Organizational Characteristics that Affect HR Performance

A theoretical model is presented that identifies environmental and organizational characteristics that affect human resource (HR) performance in an organization. Specifically, we address the issue of when and under what circumstances does HR outsourcing contribute value to the firm by attempting to identify environmental and organizational characteristics that affect HR department performance and how HR outsourcing mediates that relationship. We propose that supplier competition in the HR provider market has a direct effect on the amount of HR outsourcing which in turn has a direct effect on HR performance. Environmental uncertainty (primary, competitive, and supplier) is proposed to moderate the relationship between amount of HR outsourcing and HR performance while asset specificity is proposed to moderate the relationship between supplier competition and amount of HR outsourcing. An earlier version of this paper was presented at the Southwest Academy of Management meeting in Houston, Texas, March, 2003, and received the 2003 Irwin/McGraw-Hill Distinguished Paper Awar

A Study On Influencing Factors And Performance Of Logistics Outsourcing Practices Among Electrical And Electronics Firms In Malaysia

Penyumberluaran aktiviti logistik telah menjadi strategi popular bagi kebanyakan organisasi dalam memburu kecemerlangan operasi di era persaingan sengit pasaran global. Logistics outsourcing has been growing as a popular strategy for many organizations in pursuit of operational excellence despite the fierce competitive market globally