Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of illustrations
- Acknowledgements
- 1 Introduction
- 2 Global services outsourcing overview
- 3 Making the services outsourcing decision
- 4 Location and sourcing model choice in global services outsourcing
- 5 Managing global services outsourcing arrangements
- 6 Creating shared services arrangements
- 7 Services outsourcing and performance management
- 8 Services outsourcing and the spin-off arrangement
- 9 Learning from failure and strategies for recovery in business process outsourcing
- 10 Conclusion
- Glossary
- Index
- References
4 - Location and sourcing model choice in global services outsourcing
Published online by Cambridge University Press: 05 June 2012
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of illustrations
- Acknowledgements
- 1 Introduction
- 2 Global services outsourcing overview
- 3 Making the services outsourcing decision
- 4 Location and sourcing model choice in global services outsourcing
- 5 Managing global services outsourcing arrangements
- 6 Creating shared services arrangements
- 7 Services outsourcing and performance management
- 8 Services outsourcing and the spin-off arrangement
- 9 Learning from failure and strategies for recovery in business process outsourcing
- 10 Conclusion
- Glossary
- Index
- References
Summary
Introduction
The conventional view of location choice is that it involves a comparison of the relative advantages of a number of locations, with labour costs being the dominant criterion. Outsourcing can be a very attractive option, with labour cost differentials between developed economies and emerging economies as high as 60 per cent. Senior executives transfer IT and HR tasks and processes to lower-cost locations, and expect cost savings to mirror closely those of the perceived labour differentials. However, some executives have been disappointed with the savings, and seen labour costs and labour turnover rise in some locations. These experiences are primarily driven by insufficient analysis, and a lack of understanding of the dynamics of the location decision. The attractiveness of some locations in terms of labour costs can diminish as increasing demand for services drives up the cost of labour and leads to skills shortages. In addition, some companies in the USA and UK have chosen India as their preferred location for services outsourcing, following the lead of competitors, rather than understanding the underlying factors that influence its attractiveness both currently and in the future.
The emphasis on costs means that insufficient emphasis is placed on factors such as language, culture and geographical differences. These factors have proved to be significant barriers to managing global services operations effectively. Cultural and geographic distance hinders communication and the development of trust between the client and vendor.
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- Chapter
- Information
- Global Services Outsourcing , pp. 79 - 113Publisher: Cambridge University PressPrint publication year: 2010
References
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and (2009). Understanding Offshoring: A Research Framework Based on Disintegration, Location and Externalisation Advantages, Journal of World Business, 44, 250–61.CrossRefGoogle Scholar
and (2005). The Co-evolution of Capabilities and Transaction Costs: Explaining the Institutional Structure of Production, Strategic Management Journal, 26, 395–413.CrossRefGoogle Scholar
(2001). Dynamic Boundaries of the Firm: Are Firms Better Off Being Vertically Integrated in the Face of Technological Change?Academy of Management Journal, 44, 1211–28.CrossRefGoogle Scholar
(1991). Comparative Economic Organisation: The Analysis of Discrete Structural Alternatives, Administrative Science Quarterly, 36, 269–96.CrossRefGoogle Scholar
, and (1998). Does Trust Matter? Exploring the Effects of Inter-organisational and Inter-personal Trust on Performance, Organisation Science, 9, 141–59.CrossRefGoogle Scholar
and (1994). Trustworthiness is a Source of Competitive Advantage, Strategic Management Journal, 15, 175–90.CrossRefGoogle Scholar
(1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, 17, 99–120.CrossRefGoogle Scholar
and (2007). International Outsourcing of Services: A Partnership Model, Journal of International Management, 13, 22–37.CrossRefGoogle Scholar
, and (2005). The Governance of Global Value Chains, Review of International Political Economy, 12(1), 78–104CrossRefGoogle Scholar
(2001). Cultural Distance Revisited: Towards a More Rigorous Conceptualisation and Measurement of Cultural Differences, Journal of International Business Studies, 32, 519–35.CrossRefGoogle Scholar
(2004). Key Issues for Global IT Sourcing: Country and Individual Factors, Information Systems Management, 21(3), 16–21.CrossRefGoogle Scholar
, and (2008). Invisible Costs in Offshoring Services Work, Journal of Operations Management, 26(2), 164–79.CrossRefGoogle Scholar
and (2005). Offshoring Information Technology: Sourcing and Outsourcing to a Global Workforce, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
, and (2008). International Business: Strategy, Management, and the New Realities, Upper Saddle River, N.J.: Pearson.Google Scholar
and (2004). Proven Practices for IT Offshore Outsourcing, Cutter Consortium, 5(12), 1–27Google Scholar
and (2008). Embracing Realism and Recognising Choice in IT Offshoring Initiatives, Business Horizons, 51(5), 429–40CrossRefGoogle Scholar
and (2005). Offshore Outsourcing: Business Models, ROI and Best Practices, 2nd edn, Alpharetta, Ga.: Mivar Press.Google Scholar
(2007). Building a Successful Captive Services Centre in the Financial Services Sector, London: TPI Research ReportGoogle Scholar
and (2008). History of Offshoring Knowledge Services, Journal of Operations Management, 26(2), 141–7.CrossRefGoogle Scholar
and (2005). Validating Measures of Information Technology Outsourcing Risk Factors, Omega, 33, 175–87.CrossRefGoogle Scholar
, and (2008). Knowledge Process Outsourcing in Financial Services: The Vendor Perspective, European Management Journal, 26, 94–104.CrossRefGoogle Scholar
, and (2007). Knowledge Process Offshoring (KPO): A Balanced View of an Emerging Market, London: TPI Research ReportGoogle Scholar
and (2007). Is the World Flat or Spiky? Information Intensity, Skills, and Global Service Disaggregation, Information Systems Research, 18(3), 237–59.CrossRefGoogle Scholar
and (2001). The Use of Modular Organisational Forms: An Industry Level Analysis, Academy of Management Journal, 44(6), 1149–68Google Scholar
(2000). Towards a General Modular Systems Theory and its Application to Inter-firm Product Modularity, Academy of Management Review, 25(2), 312–34.CrossRefGoogle Scholar
, and (2007). The Choice of Sourcing Mechanisms for Business Processes, Information Systems Research, 18(3), 280–99.CrossRefGoogle Scholar
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