Operational capabilities development in mediated offshore software services models

Abstract

Offshore outsourcing, or offshoring, involves crossing national boundaries to purchase services. Although offshoring includes both activities contracted to independent third parties abroad and international insourcing to foreign subsidiaries, here we will only consider the former. Offshoring of services is critically dependent on a supply of providers (vendors) that have operational capabilities to offer comparative cost advantage, satisfactory quality, and on-time delivery despite the distances involved, and the differences in time zones and cultures (Carmel and Tjia 2005). Yet the literature on information technology (IT) offshoring as well as on outsourcing of IT services more generally has largely focused on customers (particularly in the U.S. and Europe; e.g., Willcocks and Lacity 2000; Goles 2001; Willcocks and Lacity 2007). The vendor perspective has been much less studied (Levina and Ross 2003; Feeny et al. 2005; Borman 2006). In the context of offshoring, research is largely limited to India-based providers and the business models they use with their U.S. customers (e.g., Rajkumar and Mani 2001; Kaiser and Hawk 2004; Vashistha and Vashistha 2006; Oshri et al. 2007).