Cross-Cultural Knowledge Management Practices to Support Offshore Outsourcing

Background

The concept of transferring the operational ownership and execution of one or more business processes is referred to as Business Process Outsourcing (BPO). Due to the current globalization trends and improvements in computer and telecommunications networks, US firms are pursuing offshore outsourcing to remote countries like India and China. Offshore outsourcing allows the US firms to tap into large pools of offshore workers at significantly lower labor costs. Additionally, US firms benefit by getting access to large overseas markets for products and services in the foreign countries and take advantage of time zone difference to staff round the clock operations.

In strategic outsourcing, core processes in the primary value chain of the client (such as customer support or supply chain management) are off-shored. Core processes differentiate firms in the marketplace and hence cannot be modularized. Moreover, core processes are usually connected to other process in the client organization and are a source of unique value. Research indicates that, to support the outsourcing of these core processes, complex and customized inter-organizational systems need to be deployed (Carmel and Agarwal, 2002). While modularized tools and procedures can easily support non core processes such as human resources or benefits management (Lacity and Willcocks, 1998), outsourcing of core processes often require differentiated procedures and the integration of tacit knowledge from both organizations to run effectively. Several knowledge management initiatives, such as balanced scorecard metrics, real time dashboards and identifying subject matter experts were identified as part of a list of 20 best practices that help overcome the problems inherent in offshore outsourcing (Rottman and Lacity, 2004). Extensive tacit knowledge needs to be utilized in the case of complex technical support processes such as telecommunications network design, installation and management (as in this case study). This tacit knowledge can be situated among personnel on either the client side or the vendor side. Specifically, product design knowledge may reside on the client side, while local customer and infrastructure knowledge may reside with the vendor. Such knowledge exchanges can be for several situations – (1) addressing unexpected situations when codified explicit knowledge does not exist to handle an issue, (2) learning to understand the complexity and interdependency of various support scenarios – ie, becoming fully mindful of the undocumented “ripple effect” of various technical approaches, and (3) enhancing the client worker’s understanding of the offshore infrastructure and customer environment and (4) enhancing the vendor worker’s understanding of the technical nuances of each product’s features/capabilities. In such cases, KM systems are needed to support bi-directional tacit knowledge sharing to allow the outsourced processes to run efficiently.