Analysis of the Outsourcing Models and Recommendation: Case of Outworks

Literature Survey

As business services get more industrialized, activities are being split into smaller units for servicing, and a services supply chain is beginning to emerge. With sourcing becoming more strategic, risk management has become more complex and critical. As managers explore ways to improve efficiency and efficacy of business activities, three broad options emerge:

• 1.

  Optimize activities locally through initiatives such as re-engineering;

• 2.

  Leverage scale and expertise of an external vendor; and

• 3.

  Or relocate activities to exploit geographic advantages.

Global sourcing of business services is increasing in scale and scope, and firms are now demanding more than mere cost savings. As firms focus on their core, learn to manage across geographies and multiple vendors, and as vendor/country capabilities increase, a services supply chain spanning multiple geographies and companies is being formed. However, a high percentage of global sourcing efforts are failing to meet corporate expectations. A variety of recent developments, such as innovations in Information Technology (IT) and newer managerial practices have enabled unbundling of production and consumption of these services. Firms can now unbundle their value chain, distribute unbundled discrete processes to optimal service teams/locations and then assemble “serviced” processes. This unbundling can be either “vertical” – of processes that are input to firm’s product/service in the market, or “horizontal” – of corporate processes such as Finance and Accounting (F&A) (Sako, 2006) (see Figure 2).

Figure 2.

Global IT service industry dimensions

The off-shoring of the work has its impact in terms of the time-zone differences (Espinosa & Pickering, n.d.). How time separation influences which mechanisms team members use to coordinate and how the use of these mechanisms affects coordination outcomes. The most salient findings are that: (1) time separation has a strong impact on coordination costs, particularly delay and effort, but this increased effort helps teams achieve coordination success; (2) as more time zones are involved in project collaboration, the challenges and effort required to achieve success escalate rapidly; (3) coordination mechanisms can be substituted interchangeably, yet there is no clear indication of which coordination mechanism is more effective overall, although the effectiveness of these mechanisms may vary depending on the nature of the task; (4) however, co-location, distance and time separation have a substantial impact in the availability of these mechanisms.