ORGANIZATIONAL STRUCTURE AND ABSORPTIVE CAPACITY IN OFFSHORE OUTSOURCING

The offshore outsourcing (offshoring) posits a high level of risk because of time zone difference, cultural difference and client’s need for more controls over quality and schedule, etc. Knowledge gap between clients and vendors is one of the key challenges for outsourcing success. Offshoring vendors need to continuously acquire external knowledge from clients, assimilate and internalize the new knowledge to apply to outsourcing tasks. Offshoring vendors often have to re-structure project teams to adapt to clients’ needs. This paper aims to investigate how organizational structure attributes impact vendor absorptive capacity. A case study approach is used to develop a preliminary set of propositions. Vendors are expected to consider the propositions, skillfully design and implement organizational structure to develop absorptive capacity. Future stage of this research study is discussed. Limitations and future research is addressed at the end

The Role of Technological Complexity and Absorptive Capacity in Internalization Decision

Technology transfer costs have a profound influence on the firm’s entry mode into a production sharing relationship. To explore this nexus, we associate technological complexity of the off-shored input with the organizational mode of international production sharing by extending the Antràs (2005) model. We modify the Antràs model by proposing that the low-tech input, as qualified within the model, cannot be produced in the low wage south without costly technology transfer. The cost of technology transfer in turn depends on three factors, which are the technological complexity of this input, the absorptive capacity of the host country and the wages of the host country. Our model refines the results obtained in Antràs (2005). We find that 1. For high-tech goods, intra-firm transfer is preferred vis-à-vis outsourcing only for intermediate range of technological complexity of the off-shored input, 2. On the other hand, for low-tech goods, where the likelihood of outsourcing is higher in Antràs, intra-firm offshore contract is still possible for low range of technological complexity. Our model has policy suggestions for host countries which aspire to maximize their benefits from the exploding global production phenomenon. As the wage gap between the source and the host country falls, cost considerations for offshoring disappear. New sources of comparative advantage should therefore be created in the host country by subsidizing technology investment and higher education to build higher absorptive capacity.Outsourcing, Foreign Direct Investment, Technology Transfer, Absorptive Capacity.

Internet of things security implementation using blockchain for wireless technology

Blockchain is a new security system which group many data into a block or so called classifying the data into a block. The block can have many types and each of them content data and security code. By using a decentralize mechanism, one security code protect all the data. That could happen at the server. In this research, a network of wireless sensor technology is proposed. The transmission of sensor data is via the Internet of things (Internet of Thing) technology. As many data transmitted, they have to classified and group them into a block. All the blocks are then send to the central processing unit, like a microcontroller. The block of data is then processed, identified and encrypted before send over the internet network. At the receiver, a GUI or Apps is developed to open and view the data. The Apps or GUI have an encrypted data or security code. User must key in the password before they can view the data. The password used by the end user at the Apps or GUI must be equivalent to the one encrypted at the sensor nodes. This is to satisfy the decentralized concept used in the Blockchain. To demonstrate the Blockchain technology applied to the wireless sensor network, a MATLAB Simulink function is used. The expected results should show a number of block of data in cryptography manner and chain together. The two set of data. Both have the data encrypted using hash. The black dots indicate the data has been encrypted whereas the white dot indicate indicates the data is not encrypted. The half white and half black indicates the data is in progress of encrypted. All this data should arrange in cryptography order and chain together in a vertical line. A protocol called block and chain group the data into the block and then chain then. The data appears in the blocks and send over the network. As seen in the simulation results, the yellow color represents the user data. This data has a default amplitude as 1 or 5. The data is chained and blocked to produce the Blockchain waveform Keywords: Blockchain, Internet of things, Wireless Sensor Network and MATLAB Simulin

Offshoring of Application Services in the Banking Industry – A Transaction Cost Analysis

Gaining economic benefits from substantially lower labor costs has been reported as a major reason for information systems (IS) offshoring. However, many offshoring projects have failed to achieve expected cost savings, indicating that labor cost savings are offset by additional costs that arise in offshoring projects in certain situations. While previous research on IS offshoring has mostly focused on management issues in offshoring, the focus of this paper is to improve our understanding why the realization of economic benefits varies substantially between offshored software projects. Based on a conceptual framework from transaction cost economics and empirical data from an in-depth case study involving six software development and maintenance projects that were offshored to software vendors in India by a major German financial services organization, two research questions are studied. First, what types of additional costs may arise in offshored software projects? Second, how and why do additional costs vary between projects, considering both task and offshore characteristics? The findings from our analysis indicate that offshoring can lead to increased effort on the client side, both in terms of production costs (requirements specification, knowledge transfer, conceptual development) and transaction costs (vendor coordination, and control). These additional costs are particularly high when the outsourced function is highly asset specific. Moreover, offshore country characteristics such as cultural differences, geographic distance as well as vendor characteristics such as the degree of personnel fluctuation and lack of absorptive capacity can lead to cost add-ons at the client side – in particular when a high degree of human asset specificity is involved in the offshored software projects

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 Influencing Knowledge Transfer in Onshore Information Systems Outsourcing in Ethiopia

Knowledge transfer in onshore information systems (IS) outsourcing projects in Africa is an important but under-researched phenomenon. This study focuses on the client-vendor perspective and examines the factors that influence knowledge transfer in onshore information systems outsourcing in Ethiopia. Conceptually, knowledge-based perspectives of IS outsourcing is used to identify an initial set of factors to frame the empirical study. This is followed by semi-structured interviews with ten project managers. The findings indicate that five key factors, namely mutual absorptive capacity, mutual learning intent, mutual trust, mutual disseminative capacity and project staff turnover influence knowledge transfer in outsourced IS projects. The results suggest that development and management of the resources, processes and behaviors implied by these factors are vital to ensure successful inter-organizational knowledge transfer and to reverse or minimize the failure rates of outsourced IS projects. The study concludes with implications for research and practice