Service offshoring: the evolution of offshore operations

Building synergies between operations culture, operational routines, and supplier monitoring: implications for buyer performance

Purpose

Pressured by various stakeholder groups to improve the sustainability performance of their emerging economy suppliers, multinational firms continue to expand their supplier monitoring. Leveraging the strategy literature on alliances and the buyer-supplier relationship management literature, the authors propose that a buyer firm's efforts to proactively develop cultural sensitivity and operations cognizance to understand the operational culture and routines of its suppliers can ameliorate some shortcomings of supplier monitoring, thereby improving the performance of the buyer firm.

Design/methodology/approach

Using primary survey data from a sample of US manufacturing firms, combined with secondary data of supplier monitoring and financial performance, this research examines the relationship between supplier monitoring, cultural sensitivity, operations cognizance, and buyer firm performance.

Findings

Supplier monitoring was associated with positive but diminishing returns for financial and sustainability performance for the buyer. Second, increasing cultural sensitivity and operations cognizance for suppliers in emerging economies were associated with improved buyer performance. Finally, the synergistic use of supplier monitoring and operations cognizance was associated with improved buyer firm financial performance.

Originality/value

While the buyer-supplier relationship literature has mainly treated organizational differences between dyadic supply chain partners as exogenous to the context in which their relationship evolves, the authors posit that buyer firms' efforts to understand such differences can affect the value of buyer-directed interactions, such as supplier monitoring. This research adds to the theoretical understanding of the process of developing relational mechanisms with emerging economy suppliers. In particular, efforts of buyer firms to better understand the operational culture and routines of their suppliers can complement monitoring and are associated with a positive impact on performance.

Can you put too much on your plate? Uncertainty exposure in servitized triads

Purpose

Servitization increases the uncertainty exposure of provider firms due to the operational differences between services and production which is further increased when operations are set in triads. The purpose of this paper is to analyse the uncertainty exposure in servitized triads and explore suitable organisational responses.

Design/methodology/approach

A conceptual frame is defined detailing three uncertainty types (environmental, organisational and relational uncertainty) and suitable organisational responses to these. This frame guided the analysis of in-depth case evidence from a cross-national servitized triad in a European-North African set-up which was collected through 29 semi-structured interviews and secondary data.

Findings

The empirical study identified the existence of the three uncertainty types and directional knock-on effects between them. Specifically, environmental uncertainty created organisational uncertainty which in turn created relational uncertainty. The uncertainty types were reduced through targeted organisational responses where formal relational governance reduced environmental uncertainty, service capabilities reduced organisational uncertainty and informal relational governance reduced relational uncertainty. The knock-on effects were reduced through organisational and relational responses.

Originality/value

This paper makes two contributions. First, a structured analysis of the uncertainty exposure in servitized triads is presented which shows the existence of three individual uncertainty types and the knock-on effects between them. Second, organisational responses to reduce the three uncertainty types individually and the knock-on effects between them are presented.

Understanding the decision to offshore human resource activities: a coevolutionary perspective

Purpose

Offshoring has been studied widely in the literature on strategic management and international business. However, apart from its consideration as an administrative activity, scant attention has been paid to the offshoring of the human resource (HR) function. Research in this regard has instead focussed on outsourcing (Reichel and Lazarova, 2013). The purpose of this paper is to achieve a better understanding of companies’ decisions to offshore HR activities. It adapts the outsourcing model of Baron and Kreps (1999) by including the HR offshoring phenomenon and a dynamic perspective.

Design/methodology/approach

While the analysis is mostly conceptual, the authors ground the author’s arguments in offshoring data from the Offshoring Research Network, to explore whether the drivers for offshoring HR differ from the drivers for offshoring other administrative activities. The idiosyncrasy of the HR function is supported by the authors’ exploratory analysis and also by the descriptive case of a multinational and its experience with offshoring.

Findings

A coevolutionary model is proposed for understanding the behaviour of companies offshoring their HR activities. This study contends that companies should address their decision to offshore HR activities from a dynamic perspective, being aware of three processes that are in constant change: the evolution of the HR function, the evolution of service providers, and the evolution of offshoring decisions.

Originality/value

This study seeks to make a threefold contribution to the international business, strategy, and HR management disciplines.

Direct and indirect value creation in offshored knowledge-intensive services

Purpose

Despite increasing interest in offshoring of knowledge-intensive services, it is still undetermined as to whether the sourcing of services truly creates the anticipated value for clients. Moreover, even less is known about whether value is created for service providers in the process beyond the general service trade. This lack of knowledge is due to the challenges of capturing value creation, the unique production process of the services, and the impact of offshoring on both value creation and the production process. The purpose of this paper is to study offshored service production processes of knowledge-intensive services in order to identify direct and indirect value creation for clients as well as service providers in the process.

Design/methodology/approach

The paper applies a multiple case study method and studies one conglomerate with three offshored service production processes. The chosen method allows for the investigation of the service production process and indirect/direct value creation within the process.

Findings

The study finds that there is direct value creation for the client and the service provider towards the end of the production processes as expected. However, more importantly, it finds additional indirect value creation in various production stages. The indirect value is reflected in enhanced understanding of problems and own operations for the client and increased knowledge about clients and problem-solving approaches for the service provider.

Research limitations/implications

This study contributes to offshoring literature by providing a comprehensive understanding of value creation in service offshoring for clients as well as service providers. It also contributes to the service management literature as a study of direct and indirect value creation in services, particularly within the production process of the services.

Practical implications

The study allows practitioners to gain insights on the value creation logic of offshored services and the value created beyond that logic. More specifically, it allows client firms to gain details of various values and benefits of service offshoring and service provider firms to gain a focused perspective on value creation in their own service production that can lead to competitive advantages.

Originality/value

The paper is novel and original through its approach to study offshoring from a value creation logic perspective, including not only the client but also the service provider perspective. It also applies a service production process perspective that is novel in offshoring literature.

Making the business process outsourcing decision: why distance matters

Purpose

The purpose of this paper is to develop a framework that incorporates both firm- and process-level factors for understanding location distance choice in the business process outsourcing (BPO) decision.

Design/methodology/approach

The research involved undertaking in-depth case study analysis of a number of BPO decisions in six German companies, and employing transaction cost economics (TCE) and the resource-based view (RBV) as a theoretical basis.

Findings

The findings have shown that existing literature in the operations management (OM) literature does not provide a complete understanding of the complexities of location distance choice in the BPO decision. This decision requires an understanding of a range of factors at both the firm- and process-level. The findings here enhance the understanding of how these factors interact to influence the potential distance options.

Practical implications

The findings have shown how organisations can influence the factors that affect the location distance choice including modularising business processes, developing outsourcing capabilities, and supplementing internal skills in areas such as cultural management and performance monitoring.

Originality/value

This is one of the first studies in the OM field to analyse how organisations make the decision in relation to local, nearshore, and offshore location distance options. The paper has highlighted the importance of OM concepts such as performance management and continuous improvement to this phenomenon, and the paper has offered a number of important areas for further research.

Determinants of quality and efficiency performance in service operations

Purpose

– Using arguments from the knowledge-based view and resource-based view of the firm, the purpose of this paper is to propose that external knowledge (as measured by a firm’s customer orientation) and internal knowledge management (through human capital development techniques of job-related training and enhancing employee capability) together contribute to successful service delivery systems.

Design/methodology/approach

– The hypothesized model is tested on a large sample of 249 Chinese service firms using structural equation modeling and hierarchical regression analyses.

Findings

– The results indicate that the knowledge management factors of customer orientation, employee capability and job-related training had a varying influence on quality and efficiency dimensions of service system performance. Also, internal knowledge facets of employee capability and job-related training had complementary effects in inducing improved performance on both quality and efficiency.

Research limitations/implications

– The focus on the key enablers of customer orientation, employee capability and job-related training does not represent a comprehensive set of enablers of service system performance outcomes. Also, a longitudinal examination of capabilities that influence service system performance can also be explored.

Originality/value

– The context of service firms in multiple sectors serves as an important contribution to the emerging literature that bridges human resource management and customer orientation in service settings. Implications of the results for practice and theory development are discussed.

Strategic roles of service sites: application of Ferdows’s model

Purpose

– The purpose of this paper is to examine the applicability to the service business of general models used in the manufacturing environment. This is done by applying Ferdows’s model, “the strategic role of the plant”, in two cases.

Design/methodology/approach

– This study uses the case approach. One case (IBM Nordic) is based on an interview, while the other case (Google) relies on secondary data. In each case the operations are mapped on Ferdows’s model.

Findings

– The cases indicate that the same kind of roles can be found in the service business as in traditional manufacturing environments, and that these roles are widely used. However, for communicative purposes, the model was terminologically slightly modified.

Research limitations/implications

– Although this study presents the findings of only two cases, the knowledge of material available from public sources leads us to believe that these findings are universal. The model is easy to communicate in the service sector and is thus a very valuable tool.

Originality/value

– Models used in the traditional manufacturing and operations management environment have not yet been fully discovered by, nor sufficiently applied in, the service sector. Academics and practitioners are busy trying to create new models in this sector, without noticing that the “old” tools are still usable. Benchmarking against the models used in other sectors might be a worthwhile exercise.

A Historical Review of the Information Technology and Business Process Captive Centre Sector

A captive centre is a business unit that is owned and provides services to the parent firm from an offshore location. In this paper we seek to apply a historical perspective in order to understand what factors shaped its development path. In particular we are interested to document and explain changes that took place in the captive sector vis-a-vis extant country attractiveness frameworks. To achieve this objective, we examine changes that multinationals introduced in their offshore captive investments concerning the type of the captive they set up, the functions they offshored through a captive centre and to which location. Information was collected from secondary sources on offshore captive investments made by Fortune 250 global firms between 1985 and 2010. On the basis of the analysis the paper considers the importance of disrupting factors to the extant country selection literature.