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2 - Global services outsourcing overview

Published online by Cambridge University Press:  05 June 2012

Ronan McIvor
Ronan McIvor
Affiliation:
University of Ulster
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Summary

Introduction

Services outsourcing has become an important feature of the global economy. Globalisation and advances in technology have allowed companies to transfer information technology, human resource, legal and accounting services to local and foreign vendors. Services outsourcing poses considerable challenges, and is more complex than manufacturing outsourcing. The unique features of services, such as the involvement of the customer in service delivery, service customisation and the need for physical contact, make services outsourcing extremely challenging. However, organisations have been pursuing a range of strategies to reduce the risks, and achieve the benefits that services outsourcing offers. Organisations have been redesigning business processes to retain customer contact services locally and to outsource routine, labour-intensive back-office services. This has involved adopting sourcing models with vendors to maintain control over critical outsourced processes, whilst leveraging the lower costs of vendors in emerging economies. Moreover, organisations have been increasingly looking beyond labour cost advantages and using global services outsourcing to access highly qualified staff in knowledge-intensive services.

This chapter provides an overview of the global services outsourcing phenomenon. A background to the growth in business services is outlined. An overview of services outsourcing is presented, which includes the types of outsourcing arrangement being adopted by organisations, stages in the outsourcing process, drivers of services outsourcing and the arguments for and against services outsourcing. The influence of service design principles on services outsourcing is examined.

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Chapter
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Global Services Outsourcing , pp. 7 - 44
Publisher: Cambridge University Press
Print publication year: 2010

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References

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Porter, M. E. (1980). Competitive Strategy, New York: Free Press.Google Scholar
Chandler, A. (1977). The Visible Hand: The Managerial Revolution in American Business, Cambridge, Mass.: Harvard University Press.Google Scholar
Womack, J., Jones, D. T. and Roos, D. (1990). The Machine that Changed the World, New York: Rawson Associates.Google Scholar
Loh, L. and Venkatraman, N. (1992). Diffusion of Information Technology Outsourcing: Influence Sources and the Kodak Effect, Information Systems Research, 3(4), 334–58.CrossRefGoogle Scholar
Farrell, D. and Agarwal, V. (2003). Offshoring and Beyond, McKinsey Quarterly, 4, 24–35.Google Scholar
Levy, D. (2005). Offshoring in the New Political Economy, Journal of Management Studies, 42(3), 685–93.CrossRefGoogle Scholar
Sako, M. (2006). Outsourcing and Offshoring: Implications for Productivity of Business Services, Oxford Review of Economic Policy, 22(4), 499–512CrossRefGoogle Scholar
Sawhney, M., Balasubramanian, S. and Krishnan, V. (2004). Creating Growth with Services, Sloan Management Review, 45(2), 34–43.Google Scholar
Kedia, B. and Lahiri, S. (2007). International Outsourcing of Services: Expanding the Research Agenda, Journal of International Management, 13, 22–37.CrossRefGoogle Scholar
Metters, R. and Verma, R. (2008). History of Offshoring Knowledge Services, Journal of Operations Management, 26(2), 141–7.CrossRefGoogle Scholar
Robinson, M. and Kalakota, R. (2005). Offshore Outsourcing: Business Models, ROI and Best Practices, 2nd edn, Alpharetta, Ga.: Mivar Press.Google Scholar
Rottman, J. and Lacity, M. (2004). Proven Practices for IT Offshore Outsourcing, Cutter Consortium, 5(12), 1–27.Google Scholar
Youngdahl, W. and Ramaswamy, K. (2008). Offshoring Knowledge and Service Work: A Conceptual Model and Research Agenda, Journal of Operations Management, 26(2), 212–21.CrossRefGoogle Scholar
Jagersma, P. and Gorp, D. (2007). Redefining the Paradigm of Global Competition: Offshoring of Service Firms, Business Strategy Series, 8(1), 35–42CrossRefGoogle Scholar
Vestring, T., Rouse, T. and Reinert, U. (2005). Hedge Your Offshoring Bets, Sloan Management Review, 46(3), 27–9.Google Scholar
Aron, R. and Singh, J. V. (2005). Getting Offshoring Right, Harvard Business Review, 83(12), 135–43.Google ScholarPubMed
Rottman, J. and Lacity, M. (2006). Proven Practices for Effectively Offshoring IT Work, Sloan Management Review, 47(3), 56–63.Google Scholar
Hammer, M. (2002). Process Management and the Future of Six Sigma, Sloan Management Review, 43(2), 26–32.Google Scholar
Davenport, T. (2005). The Coming Commoditization of Processes, Harvard Business Review, 83(6), 100–8.Google Scholar
Mani, D., Barua, A. and Whinston, A. (2006). Successfully Governing Business Process Outsourcing Relationships, MIS Quarterly Executive, 5(1), 15–29.Google Scholar
Kotabe, M., Mol, M. and Murray, J. (2008). Outsourcing, Performance, and the Role of E-Commerce: A Dynamic Perspective, Industrial Marketing Management, 37, 37–45.CrossRefGoogle Scholar
Karmarkar, U. (2004). Will You Survive the Services Revolution?Harvard Business Review, 82(6), 101–7.Google ScholarPubMed
Evans, P. and Wurster, T. (1999a). Getting Real About Virtual Commerce, Harvard Business Review, 77(6), 85–94Google ScholarPubMed
Evans, P. and Wurster, T. (1999b). Blown to Bits: How the New Economics of Information Transforms Strategy, Boston: Harvard Business School Press.Google Scholar
Stiglitz, J. (2002). Globalisation and its Discontents, London: PenguinGoogle Scholar
Thompson, J. (2001). Globalisation: Its Defenders and Dissenters, Business and Society Review, 106(2), 170–9.CrossRefGoogle Scholar
Javalgi, R., Dixit, A. and Scherer, R. (2009). Outsourcing to Emerging Markets: Theoretical Perspectives and Policy Implications, Journal of International Management, 15, 156–68.CrossRefGoogle Scholar
Bergh, D., Johnson, R. and Dewitt, R. (2008). Restructuring through Spin-off or Sell-off: Transforming Information Asymmetries into Financial Gain, Strategic Management Journal, 29, 133–48CrossRefGoogle Scholar
Pettigrew, A., Whittington, R., Melin, L., Sanchez-Runde, C., Bosch, F. and Numagami, T. (2003), Innovative Forms of Organizing, London: Sage.Google Scholar
Shi, Y. (2007). Today's Solution and Tomorrow's Problem: The Business Process Outsourcing Risk and Management Puzzle, California Management Review, 49(3), 27–44.CrossRefGoogle Scholar
Apte, U. and Mason, R. (1995). Global Disaggregation of Information-Intensive Services, Management Science, 41(7), 1250–62CrossRefGoogle Scholar
Schmenner, R. (1986). How can Service Business Survive and Prosper? Sloan Management Review, 27(3), 21–32Google Scholar
Shostack, G. (1984). Designing Services that Deliver, Harvard Business Review, 62(1), 133–9Google Scholar
Chase, R. (1981). The Customer Contact Approach to Services: Theoretical Bases and Practical Extensions, Operations Research, 21(4), 698–705.CrossRefGoogle Scholar
Blinder, A. (2006). Offshoring: The Next Industrial Revolution? Foreign Affairs, 85(2), 113–28.CrossRefGoogle Scholar
Stack, M. and Downing, R. (2005). Another Look at Offshoring: Which Jobs are at Risk and Why? Business Horizons, 48, 513–23.CrossRefGoogle Scholar
Shao, B. and David, J. (2007). The Impact of Offshore Outsourcing on IT Workers in Developed Countries, Communications of the ACM, 50(2), 89–94.CrossRefGoogle Scholar
Stringfellow, A., Teagarden, M. and Nie, W. (2008). Invisible Costs in Offshoring Services Work, Journal of Operations Management, 26(2), 164–79CrossRefGoogle Scholar
Looy, B., Gemmel, P. and Dierdonck, R. (2003). Services Management: An Integrated Approach, London: FT Prentice Hall.Google Scholar
Allen, S. and Chandrashekar, A. (2000). Outsourcing Services: The Contract is Just the Beginning, Business Horizons, 43(2), 25–34.CrossRefGoogle Scholar
Parasuraman, A., Zeithaml, V. and Berry, L. (1985). A Conceptual Model of Service Quality and Implications for Further Research, Journal of Marketing, 49, Fall, 45–50CrossRefGoogle Scholar
Parasuraman, A., Zeithaml, V. and Berry, L. (1988). Servqual: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality, Journal of Retailing, 64, Spring, 12–40Google Scholar
Buttle, F. (1996). Servqual: Review, Critique, Research Agenda, European Journal of Marketing, 30(1), 8–32.CrossRefGoogle Scholar
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free PressGoogle Scholar
Porter, M. E. (1980). Competitive Strategy, New York: Free Press.Google Scholar
Chandler, A. (1977). The Visible Hand: The Managerial Revolution in American Business, Cambridge, Mass.: Harvard University Press.Google Scholar
Womack, J., Jones, D. T. and Roos, D. (1990). The Machine that Changed the World, New York: Rawson Associates.Google Scholar
Loh, L. and Venkatraman, N. (1992). Diffusion of Information Technology Outsourcing: Influence Sources and the Kodak Effect, Information Systems Research, 3(4), 334–58.CrossRefGoogle Scholar
Farrell, D. and Agarwal, V. (2003). Offshoring and Beyond, McKinsey Quarterly, 4, 24–35.Google Scholar
Levy, D. (2005). Offshoring in the New Political Economy, Journal of Management Studies, 42(3), 685–93.CrossRefGoogle Scholar
Sako, M. (2006). Outsourcing and Offshoring: Implications for Productivity of Business Services, Oxford Review of Economic Policy, 22(4), 499–512CrossRefGoogle Scholar
Sawhney, M., Balasubramanian, S. and Krishnan, V. (2004). Creating Growth with Services, Sloan Management Review, 45(2), 34–43.Google Scholar
Kedia, B. and Lahiri, S. (2007). International Outsourcing of Services: Expanding the Research Agenda, Journal of International Management, 13, 22–37.CrossRefGoogle Scholar
Metters, R. and Verma, R. (2008). History of Offshoring Knowledge Services, Journal of Operations Management, 26(2), 141–7.CrossRefGoogle Scholar
Robinson, M. and Kalakota, R. (2005). Offshore Outsourcing: Business Models, ROI and Best Practices, 2nd edn, Alpharetta, Ga.: Mivar Press.Google Scholar
Rottman, J. and Lacity, M. (2004). Proven Practices for IT Offshore Outsourcing, Cutter Consortium, 5(12), 1–27.Google Scholar
Youngdahl, W. and Ramaswamy, K. (2008). Offshoring Knowledge and Service Work: A Conceptual Model and Research Agenda, Journal of Operations Management, 26(2), 212–21.CrossRefGoogle Scholar
Jagersma, P. and Gorp, D. (2007). Redefining the Paradigm of Global Competition: Offshoring of Service Firms, Business Strategy Series, 8(1), 35–42CrossRefGoogle Scholar
Vestring, T., Rouse, T. and Reinert, U. (2005). Hedge Your Offshoring Bets, Sloan Management Review, 46(3), 27–9.Google Scholar
Aron, R. and Singh, J. V. (2005). Getting Offshoring Right, Harvard Business Review, 83(12), 135–43.Google ScholarPubMed
Rottman, J. and Lacity, M. (2006). Proven Practices for Effectively Offshoring IT Work, Sloan Management Review, 47(3), 56–63.Google Scholar
Hammer, M. (2002). Process Management and the Future of Six Sigma, Sloan Management Review, 43(2), 26–32.Google Scholar
Davenport, T. (2005). The Coming Commoditization of Processes, Harvard Business Review, 83(6), 100–8.Google Scholar
Mani, D., Barua, A. and Whinston, A. (2006). Successfully Governing Business Process Outsourcing Relationships, MIS Quarterly Executive, 5(1), 15–29.Google Scholar
Kotabe, M., Mol, M. and Murray, J. (2008). Outsourcing, Performance, and the Role of E-Commerce: A Dynamic Perspective, Industrial Marketing Management, 37, 37–45.CrossRefGoogle Scholar
Karmarkar, U. (2004). Will You Survive the Services Revolution?Harvard Business Review, 82(6), 101–7.Google ScholarPubMed
Evans, P. and Wurster, T. (1999a). Getting Real About Virtual Commerce, Harvard Business Review, 77(6), 85–94Google ScholarPubMed
Evans, P. and Wurster, T. (1999b). Blown to Bits: How the New Economics of Information Transforms Strategy, Boston: Harvard Business School Press.Google Scholar
Stiglitz, J. (2002). Globalisation and its Discontents, London: PenguinGoogle Scholar
Thompson, J. (2001). Globalisation: Its Defenders and Dissenters, Business and Society Review, 106(2), 170–9.CrossRefGoogle Scholar
Javalgi, R., Dixit, A. and Scherer, R. (2009). Outsourcing to Emerging Markets: Theoretical Perspectives and Policy Implications, Journal of International Management, 15, 156–68.CrossRefGoogle Scholar
Bergh, D., Johnson, R. and Dewitt, R. (2008). Restructuring through Spin-off or Sell-off: Transforming Information Asymmetries into Financial Gain, Strategic Management Journal, 29, 133–48CrossRefGoogle Scholar
Pettigrew, A., Whittington, R., Melin, L., Sanchez-Runde, C., Bosch, F. and Numagami, T. (2003), Innovative Forms of Organizing, London: Sage.Google Scholar
Shi, Y. (2007). Today's Solution and Tomorrow's Problem: The Business Process Outsourcing Risk and Management Puzzle, California Management Review, 49(3), 27–44.CrossRefGoogle Scholar
Apte, U. and Mason, R. (1995). Global Disaggregation of Information-Intensive Services, Management Science, 41(7), 1250–62CrossRefGoogle Scholar
Schmenner, R. (1986). How can Service Business Survive and Prosper? Sloan Management Review, 27(3), 21–32Google Scholar
Shostack, G. (1984). Designing Services that Deliver, Harvard Business Review, 62(1), 133–9Google Scholar
Chase, R. (1981). The Customer Contact Approach to Services: Theoretical Bases and Practical Extensions, Operations Research, 21(4), 698–705.CrossRefGoogle Scholar
Blinder, A. (2006). Offshoring: The Next Industrial Revolution? Foreign Affairs, 85(2), 113–28.CrossRefGoogle Scholar
Stack, M. and Downing, R. (2005). Another Look at Offshoring: Which Jobs are at Risk and Why? Business Horizons, 48, 513–23.CrossRefGoogle Scholar
Shao, B. and David, J. (2007). The Impact of Offshore Outsourcing on IT Workers in Developed Countries, Communications of the ACM, 50(2), 89–94.CrossRefGoogle Scholar
Stringfellow, A., Teagarden, M. and Nie, W. (2008). Invisible Costs in Offshoring Services Work, Journal of Operations Management, 26(2), 164–79CrossRefGoogle Scholar
Looy, B., Gemmel, P. and Dierdonck, R. (2003). Services Management: An Integrated Approach, London: FT Prentice Hall.Google Scholar
Allen, S. and Chandrashekar, A. (2000). Outsourcing Services: The Contract is Just the Beginning, Business Horizons, 43(2), 25–34.CrossRefGoogle Scholar
Parasuraman, A., Zeithaml, V. and Berry, L. (1985). A Conceptual Model of Service Quality and Implications for Further Research, Journal of Marketing, 49, Fall, 45–50CrossRefGoogle Scholar
Parasuraman, A., Zeithaml, V. and Berry, L. (1988). Servqual: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality, Journal of Retailing, 64, Spring, 12–40Google Scholar
Buttle, F. (1996). Servqual: Review, Critique, Research Agenda, European Journal of Marketing, 30(1), 8–32.CrossRefGoogle Scholar

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