Explaining Variations in Client Extra Costs between Software Projects Offshored to India

Gaining economic benefits from substantially lower labor costs has been reported as a major reason for offshoring labor-intensive information systems (IS) services to low-wage countries; however, if wage differences are so high, why is there such a high level of variation in the economic success between offshored IS projects? This study argues that offshore outsourcing involves a number of extra costs for the client organization that account for the economic failure of offshore projects. The objective is to disaggregate these extra costs into its constituent parts and to explain why they differ between offshored software projects. The focus is set on software development and maintenance projects that are offshored to Indian vendors. A theoretical framework is developed a priori based on transaction cost economics (TCE) and the knowledge-based view of the firm, complemented by factors that acknowledge the specific offshore context. The framework is empirically explored using a multiple case study design including six offshored software projects in a large German Financial Service institution. The results of our analysis indicate that the client incurs post contractual extra costs for four types of activities: (1) requirements specification and design, (2) knowledge transfer, (3) control, and (4) coordination. In projects that require a high level of client-specific knowledge about idiosyncratic business processes and software systems, these extra costs were found to be substantially higher than in projects were more general knowledge was needed. Notably, these costs most often arose independently from the threat of opportunistic behavior, challenging the predominant TCE logic of market failure. Rather, the client extra costs were particularly high in client-specific projects because the effort for managing the consequences of the knowledge asymmetries between client and vendor were particularly high in these projects. Prior experiences of the vendor with related client projects were found to reduce the level of extra costs but could not fully offset the increase in extra costs in highly client-specific projects. Moreover, cultural and geographic distance between client and vendor as well as personnel turnover were found to increase client extra costs. Slight evidence was found, however, that the cost increasing impact of these factors was also leveraged in projects with a high level of required client-specific knowledge (moderator effect)

FACTORS THAT INFLUENCE THE DECISION TO OUTSOURCE MONITORING SERVICE TO CLOUD

Purpose – The purpose of this thesis work is to help firms understand values that cloud based IT asset monitoring service brings and find factors that influence the decision to order cloud based monitoring service. Monitoring solutions can predict or detect a system failure and report them so that business critical IT systems are fixed on time before business is interrupted. Traditional on-premise systems continue to get harder to manage in-house because of maintenance cost and complexity. When monitoring service is migrated to cloud, it will inherit many characteristics of cloud that will be discussed in this paper. Design/methodology/approach – Articles on cloud services as well as monitoring services were reviewed. Transaction cost economics theory was used to guide this thesis work. Qualitative interviews were conducted and evaluated using thematic analysis approach. Findings – Monitoring service inherits a lot of benefits and barriers of cloud. Security concerns are however not that realistic because monitoring service does not store user confidential information. Service level agreements are risk factors because of third party infrastructure and the Internet dependencies. However, cost related benefits and technology innovations are found to be significant factors that help decision to adopt cloud base monitoring services

Service Outsourcing and Procurement in Service Supply Chain： Perspective of Service Buyers

Along with increasing servitization of business, more and more companies today are shifting from selling only products to suffering integrated and customized products and services that deliver value in use. This change reflects, on one hand, the changing strategies of suppliers and their efforts to stay competitive in the market; on the other hand, it also reflects a change in the attitude of their customers to incorporate service procurement in their business, apart from the traditional goods-approach procurement. This change requires customers to have a systematic framework to handle their relationship with suppliers, and to have a clear picture of the services they need. In this chapter, we will explore, from the perspectives of service buyers, the determining factors behind service procurement and the level of outsourcing. We will also walk through the different forms of service procurement and outsourcing

Teollisuuden palveluyrityksen pysyvä kilpailuetu

Over the last 20 years, Finland’s industrial service business – specifically its electrical and telecom network services and industrial services – has undergone a remarkable transformation. Network owners have outsourced these functions to newly established service companies, and a remarkable new service industry has resulted. After undergoing a rapid growth phase, it has faced numerous challenges, such as decreasing volumes and profitability, as well as new competitors. However, this service business transformation has not yet been the subject of theoretical nor practical research. This thesis examines this transformation from the perspective of service companies and their customers. The research questions are as follows: How can a sustainable competitive advantage for industrial service businesses be created? Do conflicts between service providers’ and customers’ targets exist? Can a win–win position be found? The research utilized theoretical approaches that were based primarily on deductive theory development, qualitative and quantitative methodologies, and a cross-sectional time horizon. The theoretical aspect of the research related to firm strategies, models of competitive and sustainable competitive advantage, conceptual frameworks, and methods and tools, all of which are applicable to the achievement of a sustainable advantage. The information was collected via questionnaires, in-depth interviews, and public reports. Based on the results, customers were very satisfied with service outsourcing and the larger service packages to come. However, service company volumes and profitability decreased, marginal business and competence development methods and investments were applied, and there was no service differentiation between competitors. Conflicts between service providers’ and customers’ competitive advantage targets were marginal and related solely to financials. A sustainable competitive advantage business model called ‘Smart Service’ was developed, and it comprises four sub-processes: profitability/growth, market analysis/customer proximity, critical competence/ resource, and service business development plans. The researched industrial service companies need to employ these new business approaches to recover their sustainable and profitable service business.Sähkö- ja televerkkojen sekä teollisuuden kunnossapitopalvelujen rakenne on muuttunut merkittävästi viimeisen 20 vuoden aikana Suomessa. Verkkoyhtiöt ovat ulkoistaneet näitä palveluliiketoimintoja uusille perustetuille palveluyhtiöille. Uusi merkittävä palvelutoimiala on syntynyt. Nopean kasvujakson jälkeen palveluyhtiöt ovat kohdanneet monia haasteita kuten liikevaihdon ja kannattavuuden laskemisen sekä uusien kilpailijoiden tulon markkinoille. Tämä väitöskirja tutkii tätä liiketoimintamuutosta sekä palveluyhtiöiden että niiden asiakkaiden näkökulmasta. Tutkimuskysymykset ovat: miten kehittää palveluyritysten pysyvä kilpailuetu; ovatko palveluyhtiöiden ja niiden asiakkaiden tavoitteet ristiriidassa keskenään ja voidaanko yhteinen win-win asetelma luoda? Väitöskirja rakentuu teoreettiseen deduktiiviseen viitekehitykseen, kvantitatiiviseen ja kvalitatiiviseen analyysiin sekä poikittaistutkimusmenetelmään. Teoriaosa koostuu yritysstrategiaosuudesta, yrityksen johtamisteoria osasta, kilpailuetu- ja pysyvän kilpailuedun malleista sekä pysyvän kilpailuedun menetelmistä ja työkaluista. Lähtötietojen keruussa käytettiin kyselyjä, syvähaastatteluja sekä julkisia yritysten tietolähteitä. Tutkimustyön päätulokset olivat: asiakkaat olivat erittäin tyytyväisiä palveluliiketoimintojen ulkoistukseen ja jatkossa isompia palvelukokonaisuuksia siirtyy palveluyrityksille. Palveluyritysten liikevaihdot ja kannattavuudet ovat laskeneet, liiketoimintojen ja osaamisen kehittämiseen ei panosteta juuri ollenkaan eikä erottautumista palveluissa kilpailijoiden kesken ole tapahtunut. Palveluyhtiöiden ja niiden asiakkaiden tavoitteissa ei ole juurikaan eroavaisuuksia, taloustavoitteissa luonnollisesti jonkun verran. Väitöskirjassa kehitettiin pysyvän kilpailuedun liiketointamalli, joka pohjautuu tutkittuun teoreettiseen ja konseptuaaliseen viitekehykseen ja työkaluihin sekä tutkimuksen empiirisiin tuloksiin. Liiketoimintamalli sai nimen ’Älykäs palvelu -työkalu’. Se koostuu neljästä osaprosessista: Kannattavuus/Kasvu, Markkina-analyysi/Asiakasläheisyys, Kriittiset Osaamiset/Resurssit ja Palvelujen Kehittämissuunnitelmat. Tutkittu palveluliiketoiminta selkeästi tarvitsee uutta liiketoimintamallia parantaakseen pysyvää kilpailukykyä ja kannattavuutta.fi=vertaisarvioitu|en=peerReviewed

Gains and pains from the open innovation framework

While firms increasingly adopt open innovation, little is known about whether firms gain or lose from this innovation approach. Motivated by this research gap in the literature, the thesis explores the antecedents and performance implications of open innovation strategies, particularly collaboration and contractual forms of relationships for innovation (i.e. innovation cooperation and R&D outsourcing/external R&D). The thesis is empirical and relates the various results to the data used. The first one with German Community Innovation Survey (CIS), the second one with Danish CIS and the third one with the patent enhanced German CIS. The empirical analyses suggest that a value-enhancing objective rather than a cost-minimization purpose is the main factor that stimulates companies to engage in open innovation strategies. The research also reveals that firms engage in various innovation strategies simultaneously (i.e. international external R&D, innovation cooperation partnerships and internal R&D), but they fail to combine these instruments successfully for product innovation, implying that the single innovation strategy is performing better than combining different knowledge sourcing strategies in open innovation. Furthermore, the thesis provides evidence that sourcing R&D inputs from a domestic R&D provider can be a risky strategy when a firm aims to generate breakthrough product innovations. Instead, the firm should seek to acquire knowledge inputs from international marketplaces. The research also indicates that those firms outsourcing R&D activities are more likely to generate inventions than their counterparts that do not invest in this R&D strategy. However, this positive performance implication of R&D outsourcing does not appear to hold for invention quality

Transaction Cost Management

All organizations, institutions, business processes, markets and strategies have one aim in common: the reduction of transaction costs. This aim is pursued relentlessly in practice, and has been perceived to bring about drastic changes, especially in the recent global market and the cyber economy. This book analyzes and describes “transactions” as a model, on the basis of which organizations, institutions and business processes can be appropriately shaped. It tracks transaction costs to enable a scientific approach instead of a widely used “state-of-the-art” approach, working to bridge the gap between theory and practice. This open access book analyzes and describes “transactions” as a model..

ADMINISTRATIVE RELATIONSHIPS, AGENCY THEORY, AND THE SUMMER WORK TRAVEL PROGRAM: 2012-2013

This study discusses the ability of the Summer Work Travel Program (SWTP) to meet the objectives outlined in its authorizing legislation, the Mutual Educational and Cultural Exchange Act of 1961. These goals include educational exchange between participants and the U.S. community, cultural exchange between participants and the U.S. community, and the promotion of peace exemplified by SWTP operators and the U.S. community. The study adopts agency and transaction cost theory to guide its discussion of the administrative relationship between the U.S. State Department and those designated as Summer Work Travel Sponsors. This study\u27s findings include instances of informational and preference asymmetry between administrative actors. The use of intermediary placement agents by SWTP sponsors was found to be a source of opportunism. Policy and program recommendations are presented to realign the actions of the SWTP administrative actors with respect to accountability and effective methods of contracting

APPLICATION OUTSOURCING IN THE BANKING INDUSTRY – ITO MODEL

Information Technology Outsourcing (ITO) in terms of the replacement of the in-house production of IT activities by the use of third party suppliers had already started in the 1960s and has increased considerably. For 2013, the Gartner Group expected that the global ITO market would reach a volume of 288 bn US dollars. Until 2017, the market should grow on average about 5.4% yearly. Despite the rich set of experiences companies have already had with ITO, the chances of success are seen as at best 50:50. Currently, the dramatic growth of ITO is accompanied by backsourcing of formerly outsourced IT functions or reports about dissatisfaction and problems with ITO. Scientists put ITO failures or problems down to a lack of modelling of all the possible factors affecting ITO success and demand a specific ITO theory as a basis for better explaining and predicting successes and failures in an IT sourcing context. This thesis takes up this research gap. The aim of this thesis is to develop a novel ITO Model which aids organisations in planning and implementing ITO solutions by guiding them through the ITO process steps of preparation, selection, contract, transition, execution, and post-deal comprising a comprehensive picture of the weighted aspects relevant to ITO success and their interdependencies. In order to achieve this aim, the following objectives were established for this thesis: raising the topical level of scientific knowledge of the last decades about successinfluencing factors in the ITO field based on an extensive literature survey of 48 scientific articles deriving ITO success factors from empirical research work; structuring of this success factor knowledge by the development of two ITO taxonomies (taxonomy of success factors and taxonomy of success factor interdependencies); testing its practical applicability on the basis of 8 real long-running application outsourcing cases in the banking industry; further development of the success factor knowledge by identification of weightings and the temporal relevance of relevant success factors / success factor interdependencies within the ITO process. Design of the novel ITO Model based on the empirical knowledge gained by development of rules for relevant success factors and success factor interdependencies, by arrangement of these rules in temporal order within the ITO process and by assignment of these rules to four levels of environment

Essays on antecedents and consequences of cloud computing capabilities in organizations: an empirical analysis of field data

Cloud computing is widely recognized as a potential disruptive paradigm that changes how IT is consumed and business is conducted in various industries. Managerial and academic literature has shown that cloud computing may benefit firms in various ways such as cost savings, fast project development, and business innovation. Nevertheless, there are many different interpretations and perceptions of cloud computing about how to better prepare for and use it in the information systems (IS) literature. A systematic analysis is necessary to clarify the equivocal issues around cloud computing and guide managers to better understand and utilize cloud computing in practice. This dissertation addresses several important relationships around cloud computing using theoretical models and empirical data as a representation of how the questions about cloud computing may be investigated in the IS literature and how the findings may benefit organizations in using cloud computing. Therefore, the dissertation comprises three connected chapters that address one important antecedent of cloud computing adoption – internal IT modularity within firms and two important consequences – firm performance and strategic alliance formation. It is found that in order to better prepare for cloud computing adoption, firm users can do something themselves by modularizing their internal IT systems. Firms also need to know whether and how cloud computing, after all, can benefit their firm performance or other activities such as strategic alliance formation. The findings show that cloud computing overall and its various specific cloud services may promote firm performance directly or complementarily with internal enterprise resources. Cloud computing and its specific cloud services may also exert different effects on strategic alliance formation. This dissertation systematically addresses the issues around cloud computing in the IS literature and sheds lights on how such a study can be applied to help managers and decision makers in industries to better understand and use cloud computing to achieve their business goals