The Evolution of Models in Outsourcing and Offshoring

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Supervisors:

Dr. Stefanie Reissner | Dr. Rudi de Vries

The Evolution of Models in Outsourcing and Offshoring

Master’s Dissertation

December 2018

Nicole Nonnenmacher

B7062252 | S3595196 NBS8199 | EBM091A25

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Acknowledgements

Thank you to my supervisors for their guidance throughout the entire process. Thank you to my friends and the Newcastle-Groningen cohort who became my friends this past year for the continuous support and laughter. Thank you to my family, especially my parents and

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List of Figures

Figure 1. Outsourcing and Offshoring Matrix ... 15

Figure 2. Strategic Roles and Evolution of Services Offshoring ... 27

Figure 3. Example of the 24-Hour Knowledge Factory ... 29

Figure 4. Model Introduction in Literature and Derivation Analysis ... 35

Figure 5. Scenario 1 – Robotic Process Automation Model ... 38

Figure 6. Scenario 2 – Indefinite Model ... 40

List of Tables

Table 1. Summary of Presented Models ... 20

Table 2. Summary Analysis of Models... 22

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Abstract

Offshoring and outsourcing are present in every industry in business and the research on these two topics spans many academic fields from supply chain management to information systems to international business. The research conducted in outsourcing and offshoring is deeply rooted in practice which this work shows. In this study, outsourcing and offshoring models were identified and selected through a literature search and then analyzed to understand how they have evolved. Understanding the evolution of outsourcing and

offshoring models contributes to the theoretical review that the field desperately needs which is seen in the lack of critique in the field. This study found that the traditional models of outsourcing and offshoring still exist since the many years they were originally presented but that new ones have been introduced. Over time, the new models introduced have become more complex. It was also found that there is no uniformity in how models are introduced and that much less work has been done in offshoring. From the analysis, two future scenarios including two possible future models of outsourcing and offshoring were developed and discussed with experts in the field. Their applicability for practice and relevance to theory was examined and while one model was quite similar to other models that exist in practice, the other included a major factor for the future of the field which is robotic process

automation. The future of the outsourcing and offshoring field is in further researching the impact of robotic process automation and what models will look like as the field continues to shift.

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1. Introduction

In the 1960s, multiple people would all share one computer as a way of saving money and this was called time-sharing (Fredkin, 1963). Time-sharing is considered by some to be the beginning of outsourcing and offshoring (Sobol and Apte, 1995). The academic literature on outsourcing and offshoring began in the 1990s and the core of the literature is the

disaggregation of services. The disaggregation of services is “when one or more components of a value chain of service activities, that were traditionally carried out within an organization at a single location, are disaggregated (i.e. decomposed or dispersed) in a manner that

transcends both the organizational and geographic bounds” (p. 1250, Sobol and Apte, 1995). From there, it can be seen how the concept breaks down into outsourcing which goes beyond the organization and offshoring which goes beyond geography.

Outsourcing and offshoring have distinct definitions and represent distinct

relationships, although are often confused (St. John et al., 2016). Offshoring is “the relocation of operations from the home nation to a foreign location” (p. 1418, Contractor et al., 2010) and in its purest form, under the same company. Outsourcing, as also defined by Contractor et al. (2010), is “organizational restructuring of some activities…to external providers” (p.1417) which can be done in the home nation or internationally. Outsourcing and offshoring began as business progressed to a point where the physical component and the information component of tasks could be pulled apart and some information tasks were able to be utilized or created anywhere (Youngdahl and Ramaswamy, 2008). As well as that, companies fine-sliced tasks to make separate sourcing decisions on each (Contractor et al., 2010)

For outsourcing and offshoring, most of the work has been done on the decision to offshore or outsource and the factors that go into it which is called the sourcing decision (Pisani and Ricart, 2016). Work has also been done on what models are present in practice (Foerstl, Kirchoff and Bals, 2016; Vitasek, 2016) but going forward, “a more dynamic and comprehensive perspective on offshoring is needed to better understand more recent trends” (p. 37-39, Manning, Massini and Lewin, 2008) which I intend to address with this research. This includes that more research needs to be done into emerging models (Jahns, Hartmann and Bals, 2006; Lacity, Khan and Yan, 2017) but so far, no research has been done on analyzing what models have been presented in literature and how they have evolved over time.

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7 simplified and aggregated representation of the relevant activities of a company” (p. 39-40). They are not just a visual means of showing the strategy of the company but also a way to explore how the company is doing its business. For the outsourcing and offshoring field, business models show the various ways that companies are able to carry out these

relationships and thus are integral for understanding both practice and theory of this field. Each offshoring and outsourcing model presents a different relationship with its own strengths, risks, and opportunities.

Based on the relevant gaps in the field of outsourcing and offshoring as well as utilization of business models as a means for research, I present the research question: “How

have outsourcing and offshoring models evolved?” The answer to the research question will

help to understand outsourcing and offshoring both in practice and in theory. For this, I have used a methodology similar to Lyons and Brennan (2014) where I conducted a literature search and identified and selected outsourcing and offshoring models based on a set of criteria. This resulted in analysis of ten models from 1995 to 2017.

The analysis lead to a number of findings of which the most important one is that outsourcing and offshoring models have become more complex over time. This increased complexity is particularly seen in the outsourcing models that have been introduced within the last five years. The introduction of these complex outsourcing models is a shift from the early 2000s when hybrid models of outsourcing and offshoring (for example

quasi-outsourcing and built-operate-transfer) were primarily being introduced in the field. Another finding is that there has been significantly less work on offshoring models compared to outsourcing models.

This analysis lead to the development of two scenarios and a proposed model for each that theorize where the future of the outsourcing and offshoring field will be. These two scenarios were discussed with two experts in the field to understand their applicability in practice as well as their relevance for theory. From the discussion, it was found that the first model addressed a large element of the future which is robotic process automation. The second model was similar to an existing model in practice.

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2. Understanding the Field of Offshoring and Outsourcing

To fully understand models of outsourcing and offshoring, first the academic literature must be reviewed as a means of gaining context for the research and identifying what is relevant for developing a theoretical understanding for the evolution of sourcing models. A limited introduction into outsourcing and offshoring models will be presented as they relate to a wider body of literature which will be followed by a deeper evaluation of them in Chapter 4.

As stated in the introduction, disaggregation of services can be done through offshoring which is changing the location of where tasks are performed (for example, a company in the Netherlands transferring a customer support call center to their office in Estonia) or outsourcing which changes the organizational or ownership component (for example a company hiring a third-party firm to design their website). If we consider what the relationship looks like with outsourcing and offshoring, they are completely different.

Outsourcing is a client-vendor relationship which includes the companies holding each other at arm’s-length. There is no such distinction with offshoring as it is all within one company. Offshoring is even different from the traditional headquarter-subsidiary relationship because in the case of knowledge flow, knowledge does not just flow down but must be continually going back and forth (Chen, McQueen and Sun, 2013).

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9 Similarly, Barthélemy (2003) presented interconnected ‘deadly sins’ of outsourcing and five of them cannot be applied to offshoring. The deadly sins are mistakes that firms make that can cause the outsourcing relationship to fail. When analyzing the five non-applicable worst practices, most do not have relevance for offshoring because unlike with outsourcing, the company maintains control over the activity. These sins include outsourcing activities that should not be outsourced, selecting the wrong vendor, and losing control over the outsourced activity. These all speak to giving power and knowledge to a third-party which in turn introduces risk that is not present in offshoring. The other sins that are not applicable to offshoring are writing a poor contract and failing to plan an exit strategy which refers to when a contract ends but no contract is present for offshoring. The two sins that have some relevance are overlooking personnel issues and overlooking hidden costs. Hidden costs are present in every change a business makes and that includes the possibility of losing personnel due to the changes.

With all of these differences, both large and nuanced, it becomes evident that what holds for outsourcing cannot automatically be applied to offshoring. As important as the separation of the concepts of offshoring and outsourcing is, many academic works do not always make a clear distinction of the terminology and thus will confuse offshoring and outsourcing or use these terms interchangeably. This large issue with the literature is

troubling considering that separating them is crucial for understanding (Jahns, Hartmann and Bals, 2006; St. John et al., 2016). An easy example of how blurred the terms can be is that offshoring can be rephrased as international insourcing (Lewin, Massini and Peeters, 2009). At this point, with the existing ambiguity in the literature, it is not possible to have the findings from research separated by outsourcing and offshoring. With this study specifically, it is also not possible because some models are a hybrid between the two and thus

outsourcing and offshoring must be considered together.

2.1 The Sourcing Decision

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10 determining whether a particular component should be made in-house or purchased” (p. 40, Balakrishnan and Cheng, 2005). In terms of services sourcing, the literature originally posed the sourcing decision as should a company offshore the task and keep it within the company or outsource it to another. Now the question can be more complex in that the decision can span a variety of models for both offshoring and outsourcing.

The reasons for why the sourcing decision question has arisen are increased global competition, technological improvements, and an emerging global workforce. Some advantages to sourcing outside of a company or its home location include cost reduction, a larger potential talent network (Apte and Mason, 1995) and achieving economies of scale (Bunyaratavej et al., 2011). The main driver for some companies when offshoring and

outsourcing is to access new markets (Jahns, Hartmann and Bals, 2006) and human resources especially for science and engineering talent (Manning, Massini and Lewin, 2008; Lewin, Massini and Peeters, 2009) and because the firm experiences strong home country labor protection (Gorp, Jagersma and Livshits, 2007; Weng and Peng, 2018). A newer variable in the sourcing decision is sustainability including factors like social diversity and the

environmental regulations of the host country (Dou and Sarkis, 2010). There is also the consideration of the customer for service industries including how much does the customer interact with employees (Stringfellow, Teagarden and Nie, 2008).

All these considerations cannot completely account for the invisible costs that still exist as well as external factors that may impact the sourcing decision. Invisible costs are costs that are not immediately apparent for example, finding new customers after the old ones left due to having to deal with an offshore call center (Stringfellow, Teagarden and Nie, 2008). There are also external context variables that go into the sourcing decision like institutions, culture, and risk (Bunyaratavej et al., 2011). An example of the influence of culture is if the end product needs cultural understanding, like an application for a cellphone, then the company may consider an international outsourcer in a culturally close country (Krishna, Sahay and Walsham, 2004). Another way that the factors of the sourcing decision play out is that call centers do not necessarily go for the lowest wages but to countries where the required language is more common and that have strong information communication technology (ICT) (Doh, Bunyaratavej and Hahn, 2009).

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11 advantages are more likely to use international outsourcing and those seeking strategic

resources are more likely to choose offshoring through greenfield (Gorp, Jagersma and Livshits, 2007). Dedrick et al. (2011) found something similar and were able to also show that companies who sought cost reductions were likely to have more cost reduction than firms that were motivated by other factors. This is important to note because of the invisible costs that are present which could lead to this not being the case. The strength of the motivation for the type of sourcing used as well as its outcomes also highlights how great the impact of these two factors, cost reduction and labor sourcing, are on the field of outsourcing and offshoring.

Stemming from the sourcing decision is a fundamental shift that occurred with the literature. At the beginning, researchers always advocated that companies should not move core activities neither offshore nor to outsourcers (St. John et al., 2016). Now the tone of the literature has shifted to where companies look at outsourcers as business enablers more than just for cost cutting and are looking to building innovation into their contracts (Deloitte, 2016). Lacity et al. (2011) referred to there being three levels of work based on complexity and business criticality. It was most common to offshore or outsource “white chip” work which is not very complex and not very critical to the company. Now, “blue chip” work, highly complex and critical, is commonly outsourced and offshored. The other trend is that outsourcing and offshoring are not simply just going to India anymore despite the fact that there are strong cluster capabilities which are the knowledge spillovers that have lead the industry to group in that area (Zaheer, Lamin and Subramani, 2009). Labor in India has gotten more expensive and more technology companies are turning to domestic outsourcing rather than offshoring or international outsourcing (Lohr, 2017). This reflects the shift which has led to companies making the sourcing decision again. As Hartman et al. (2017) found, it is not a strategy but a trigger event, such as looking for additional cost savings, that is causing companies to go through the sourcing decision again. The most recent type of sourcing

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2.2 Field Foundations

Beyond the sourcing decision, there are other elements of outsourcing and offshoring relationships that have been explored in the literature including the management and role of experience in the relationship as well as culture and the political and economic impacts of it.

Outsourcing and offshoring models ultimately represent relationships and they are something that must be managed. There is the relationship between the firm and either the outsourcer or the inhouse group in an international location to think about. Väyrynen and Kinnula (2012) identified some success factors in outsourcing which include trust,

communication, a good contract, and personnel. On the other side, there is less literature on the failures of outsourcing (Barthélemy, 2003) but some management issues that have been identified include performance and success factors, innovation and knowledge transfer, and organizational governance (Bunyaratavej et al., 2011). Performance and success factors relate to how the outcome of the relationship is measured be it by service level agreements (SLAs) from a contract or a certain dollar figure of cost savings. Innovation and knowledge transfer refer to the sharing of data, tacit knowledge, and new ideas between both parties.

Organizational governance is the management of the relationship through managers, how the firm(s) is aligned in terms of teams, and with a contract just for outsourcing. One factor from the sourcing decision that influences the management of these relationships is time

differences, which can also hinder globally distributed work. This aspect of the relationship can be managed through control mechanisms like knowledge management and organization design which is how the team is comprised (Willcocks et al., 2011).

Experience is a crucial element in the management of an outsourcing or offshoring relationship. The longer the relationship is for the two parties, the more experience is

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13 responses which once again shows the importance of understanding the motivation of the sourcing decision.

From the beginning of international outsourcing as well as offshoring, culture has played a significant role. Culture’s impact on international sourcing has been studied primarily as a possible barrier but it is still an underexplored component in the literature (Clampit et al., 2015). For managing cross-cultural relationships, training on culture is important for both sides. Other ways are to have people who can bridge the cultures, so a few people who have work and cultural experience in both places, or to have a negotiated culture perspective where both sides modify work behaviors to meet in the middle of the cultures. Something important is the use of similar ICT systems (Krishna, Sahay and Walsham, 2004) but this is more relevant for outsourcing than offshoring because offshoring is still the same company where the systems are most likely already unified.

When reviewing the research for offshoring and outsourcing at a global level, there is more to be considered than just culture and a number of trends are found. The most important one to note is that most of the literature has a strong western bias which results in US or European companies going to eastern countries, primarily India, being the most studied context which does not reflect the total global movement of sourcing work. Due to the fact that the research my study is based on being primarily from the US and Europe, there is an inherent Western bias in it too. Another consideration is that international outsourcing is more common in some countries than in others. It is not as common for Spanish firms (Reyes, Jose and Juan, 2008) as compared to French and German firms of which 40-50% have outsourced at least one Information Technology (IT) function (Barthélemy and Geyer, 2001). On a nation state basis, it can also be that certain models of outsourcing and offshoring are more or less common such as Germany which offshores more than it outsources to

countries in Eastern Europe (Marin, 2006).

The macro-level issues of the political and economic impacts of outsourcing and offshoring which have been well documented in the media must also be discussed.

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14 (Khan and Lacity, 2012). Some researchers believe that companies only consider offshoring or international outsourcing as part of a follow-the-leader situation (Horn, Schiele and Werner, 2013) and that there should be a mass reevaluation of sourcing decisions away from outsourcing and offshoring (Tate and Bals, 2017). However, when companies are asked how they are responding to anti-offshore pressures, they are still pleased with their international outsourced information technology (IT) and business processing activities (Khan and Lacity, 2012). Changes in the economic and political sphere could possibly impact models that companies use.

2.3 Research Gaps

There are three main areas of research gaps that exist in the literature. The first can be identified through the visual representation of a matrix and is shown in section 2.3.1. The other two are more theoretical in nature and are discussed in section 2.3.2.

2.3.1 Outsourcing-Offshoring Matrix

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15 Figure 1. Outsourcing and Offshoring Matrix

Source: Adapted from Foerstl et al. 2016

The matrix is also an easy way to conceptually show the complexity in the field of outsourcing and offshoring as it shows how a lot of the terminology is combined to label different ways that companies do business. Many other researchers have used matrices to help explain the field as well (Apte and Mason, 1995; Contractor et al., 2010; Bunyaratavej et

al., 2011; Foerstl, Kirchoff and Bals, 2016) with various outsourcing and offshoring models

and variations included. Foerstl et al. (2016) present their matrix with make-or-buy for the organizational dimension, referring to the well-known production decision which is

sometimes used when considering outsourcing and offshoring. Some of the current models and variations are shown in Figure 1 as adapted from Foerstl et al. because the matrix they present is one of the most in depth ones in the literature. Though the matrix only includes a limited selection, it does begin to highlight how the field has expanded from just outsourcing and offshoring into hybrid models and variations. A complete table for outsourcing and offshoring model and variation terminology based on organizational/ownership and location is presented in Appendix A. Variations are not wholly new models but distinguish slight differences based on the location or organizational/ownership dimension. These slight differences mean that elements like the motivation for choosing it or a possible disadvantage of using it are not different from the model that it is derived from.

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16 traditional model of work is domestic inhouse where the work done by the company is

performed within it in its home country. Moving along both axes of Figure 1 outwards leads to nearshore and hybrid. Hybrid is used as a mix of ownership (Foerstl, Kirchoff and Bals, 2016) and include joint ventures which are labeled as partnerships. An example is cosourcing which is a joint venture in the same home country but in another location (Jahns, Hartmann and Bals, 2006) which would be included under domestic partnership. Nearshore refers to work done internationally but close to the firm’s home country’s borders, the most well-known example being from the USA to Mexico. Within the nearshore inhouse label is nearshoring, a variation on offshoring. Nearshoring specifically refers to offshoring where production or services are moved to a country outside the home one and are still performed inhouse (Tate and Bals, 2017). Continuing outward along the axes, there is domestic

sourcing, international outsourcing, and offshore inhouse. These incorporate the basic models of offshoring (offshore inhouse) and outsourcing (which can either be domestic sourcing or international outsourcing). Something important to note is that no single model is better on any scale (cost savings, innovation creation) than another because it depends on the task that is offshored or outsourced (Contractor et al., 2010).

The largest gap that the matrix shows is that there has been more work on developing an understanding of the variety of outsourcing models as compared to offshoring models as can be seen by the six outsourcing models presented in the matrix in contrast to only two offshoring models. This lack in offshoring is unlikely to be representative of practice and that there are more offshoring models that exist but have not been introduced in literature which is problematic for both academics and practice.

2.3.2 Theoretical Gaps

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17 outsourcing, Watjatrakul (2005) found that they can be conflicting when businesses decide about how to source specific tasks and in these cases, they should not always outsource. Doh (2005) did a large theoretical review and considered the OLI theory which states that firms make strategic decisions like where to invest based on three variables: ownership,

localization, and internalization. Doh found that the OLI theory both supports and challenges outsourcing and offshoring. This is due to that the decision of ownership might be more important than location unbalancing the three components of the theory. The multiple theoretical conflicts that have been found show how many of the most common theories in international business cannot easily be applied to outsourcing and offshoring once again showing how complex the field is. This also means that more theoretical development is necessary within the field itself (Pisani and Ricart, 2016) which this research begins to address.

Most research on outsourcing and offshoring has been done in the information systems (IS) field followed by operations management (OM), supply chain management, international business, and economics. Not only are the contexts of the research for

outsourcing and offshoring very diverse, but so are the practical contexts it draws from which include manufacturing cases or service cases. Sobol and Apte (1995) found that there is not a big difference in outsourcing rates between these two sectors but the applicability of

manufacturing sourcing research on services sourcing research has not been studied. From a practical perspective, Mudambi and Venzin (2010) studied a telecommunications

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2.4 Conclusion

The review of the literature makes it apparent that the field of outsourcing and offshoring is very volatile (Doh, 2005) and that there is still a lot of work that has to be done in the field (Youngdahl and Ramaswamy, 2008). The volatility and complexity of the field can also be seen in the sourcing models which have to be understood for a full

comprehension of the field. This can start with understanding the evolution of the sourcing models. Important concepts can be drawn from the literature particularly the sourcing

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3. Methodology

Coming to a better understanding of what has been going on in practice but from a theoretical perspective can be achieved by reviewing the models that have been presented in the literature which leads to the research question, “How have outsourcing and offshoring

models evolved?”. To answer the research question, I have followed a similar methodology

used by Lyons and Brennan (2014) for finding and selecting models. For the analysis, which is an oft used word but very rarely defined in research, it is deriving a new understanding of data, in this case of outsourcing and offshoring models. This will be through “careful thinking about evidence, understanding limitations of information available, developing assumptions, and identifying just how the new understanding is useful in compelling ways” (p. 10, Winner, 2013).

The first step for identifying models is by finding articles though a literature search (Lyons and Brennan, 2014). The search was carried out using two databases, Google Scholar and Newcastle University Library Search. Google Scholar was chosen because it has indexed approximately 100 million scholarly articles (Khabsa and Giles, 2014) and the Newcastle University Library Search was used in conjunction as no one database can be exhaustive. For conducting the searches, keywords including: “offshore”, “offshoring”, “outsource”,

“outsourcing”, and all terms in combination with “models” were used. These keywords were used to include the widest array of literature that was still relevant to the field of this research.

The literature that the searches returned was then sorted for relevance. As with Lyons and Brennan (2014), all outsourcing and offshoring contexts were deemed relevant in the search including IS, OM, and Business Process Outsourcing (BPO) to include as many models as possible. This is also because most models are only presented in one context but are still relevant to other contexts. Which lead to the criterion for selecting models that Lyons and Brennan (2014) labelled generality where the model must not be specific to any one context. This allows for the most thorough analysis and for the findings of the research to also be applicable to all of these contexts. Another criterion was that only models that

represent the organization of the relationships of outsourcing and offshoring were included as other types of models, like those representing the sourcing decision, do not pertain to the research question. From these criteria, various models and variations of models were identified (a full list is in Appendix A).

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20 distinguish slight differences from models as opposed to wholly new relationships which would lead to redundant analysis. The exclusion of variations is also because a suitable analysis of the models alone should provide an answer to the research question. Once variations were excluded, eleven models remained of the ones initially found during the literature search. For a model to be selected for analysis, there had to be a sufficient amount of research on it to be analyzed including a definition of the model and then analysis on the benefits and disadvantage of the model. This meant one model identified had to be excluded. The model identified but not included is third-party outsourcing which is when a third-party vendor is used to help set up or manage the outsourcing relationship (Khan and Fitzgerald, 2004). This then left ten models to be analyzed which are summarized in Table 1. These ten models were all selected because they were the ones identified through the literature search process and that met all the criteria.

Table 1. Summary of Presented Models Year of

Introduction

Authors Model(s)

1995 Apte & Mason Outsourcing & Offshoring 2001 Barthélemy & Geyer Quasi-Outsourcing

2006 Jahns, Hartmann, & Bals Offshore Development Center 2008 Youngdahl & Ramaswamy Evolutionary

2008 Lampel & Bhalla Built-Operate-Transfer

2012 Gupta et al. 24 Hour Knowledge Factory

2015 Manning, Larson, & Bharati Global Delivery Model

2016 Vitasek Sourcing Continuum

2017 Manning Project Network Organizations

The structure of the analysis of these models performed in Chapter 4 is done by reviewing each model chronologically based on the year of publication for when the model was first introduced in academic literature as a unique model. At the end of Chapter 4, findings will be presented. To review each model, first it will be described, then how it has developed from outsourcing and offshoring will be covered, and then analysis will be conducted to understand the key elements of it. The key elements include: the main

motivation for its development, the number of example companies cited for the model, and the goal of the paper. For four models (outsourcing, offshoring, quasi-outsourcing and offshore development center), information is also presented from academic works that were published after their initial introduction as a means of presenting a more complete

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21 for the research question to be answered in two ways. The first is the evolution component through the chronological presentation method that allows for the element of time to be

introduced. The second is through systematic analysis from the logical presentation approach. Following the analysis, two scenarios are developed and introduced in Chapter 5 and each scenario includes a possible future model of outsourcing and offshoring. The

development of the scenarios is based on the literature review in Chapter 2 and the analysis of the models in Chapter 4. The scenarios advance what the field of outsourcing and offshoring may look like in practice in the future. They will be discussed with two experts in

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4. Analysis

In this chapter, the ten models identified and selected through the methodology described in Chapter 3 will be analyzed. For each model, a brief description of it and the relationship it represents will be given and then and how the model has developed within outsourcing and offshoring will be presented. From this, analysis will be conducted based on the key elements. A summary of the key elements for each model is in Table 2 and a

complete table can be found in Appendix B. The end of the chapter, section 4.2, will be a discussion of the findings of the analysis.

Table 2. Summary Analysis of Models

Year Model Goal of

Paper # of and Other Models Described Main Motivation for Development # of Example Companies Cited 1995 Offshoring DP 2: Aggregated service & telecommuting Cost reduction or labor access 7

1995 Outsourcing DP Cost reduction or

labor access 4 2001 Quasi-Outsourcing DP 1: International

outsourcing Greater control 0 2006 Offshore

Development Center DP & TD

2: Offshoring & international outsourcing Greater control 1 2008 Evolutionary TD None Gain experience to complete more complex tasks 6 2008 Built-Operate-Transfer DP & TD 3:Offshoring, ODC, & outsourcing

Cost and risk

sharing 2 2012 24-Hour Knowledge Factory DP None Utilize time differences for continuous work production 7 2015 Global Delivery Model TD None Continuous availability 4 2016 Sourcing Continuum TD None Trust in the

relationship 1 2017 Project Network Organizations DP None Efficiently coordinate complex projects 2

For Goal of Paper: DP = Describe Practice; TD = Theory Development

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23 table also shows the main motivation for the development of the model and if any other models were also presented in the paper. These three elements give context as to why the paper was written and why the model has been developed. With the number of example companies cited included, it begins to show how much of the introduction of outsourcing and offshoring models is rooted in practice. The grounding of the field in practice can be an advantage to business because the relevance for managers is easily seen but it can be a disadvantage too because there is a lack of theoretical development. Theory is what helps to give meaning to what is able to be seen and is incredibly important for academic research as it helps to motivate new research and the perspective of that research (Johnston, 2014). With the strong emphasis of practice in offshoring and outsourcing, both in the introduction of the models as seen in Table 2 and in the field as a whole (Doh, 2005), it becomes apparent how much theory is lacking in this field. There is a clear need for a review to address what has been done from a theoretical perspective. This research begins to address this need through the analysis of the models starting with the models of outsourcing and offshoring.

4.1 Model Analysis

In this section, all ten models will be presented and analyzed beginning with outsourcing and offshoring.

4.1.1 Disaggregation of Services – Outsourcing and Offshoring

Apte and Mason’s (1995) paper titled Global Disaggregation of Information-intensive Services presented six models based on the ownership (insourcing or outsourcing) and

location dimensions. This is a central paper in international business outsourcing and

offshoring literature (Pisani and Ricart, 2016) and thus why the analysis begins here. As both models were examined in Chapter 2, I will keep the description of the models brief. For offshoring, Apte and Mason (1995) describe it as when insourcing is done globally at multiple locations which they call global multi-location insourcing or wholly owned

subsidiary. With this model, the international location may do part of a business process for the home country or own the whole process. For outsourcing, they actually present three different models with the differentiation being based on location, whether it is domestic or international. Due to there not being any difference in the models of outsourcing they present besides location, the three models will be analyzed together as just one, outsourcing.

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24 provide numerous examples of outsourcing including Kodak outsourcing all of its

information services to IBM, DEC, and Business Land which is an often cited outsourcing example from the 1980s (Sobol and Apte, 1995; Barthélemy, 2003; Lyons and Brennan, 2014). Apte and Mason also use airlines outsourcing food service activities to companies like Marriott and data entry as examples of outsourcing.

To analyze the models Apte and Mason (1995) present, one of the first things to note is that they did not delve into any particular model. Examples were given for each but there was no depth of information on particular advantages or disadvantages to any of the models and no key differences between them were discussed. Apte and Mason did go through the benefits and disadvantages of the concept of disaggregation and what tasks are appropriate for it which they found to be low-skill, standardized work. The models were presented to help with the sourcing decision to explore all options that were considered to be available to companies at the time. They saw motivation for the development of the models as based on the sourcing decision meaning what were companies outsourcing and offshoring for which at that time was cost reduction and access to labor.

In a more recent review of offshoring and outsourcing (Contractor et al., 2010), many of the same elements that Apte and Mason (1995) discuss are still examined. Both papers take the perspective of a company considering its sourcing decision and the reasons provided for offshoring or outsourcing are similar such as access to new markets. One reason for offshoring and outsourcing that only Contractor et al. (2010) give is access to knowledge which is coming from new talent that a firm can access. This gaining of knowledge from disaggregation is part of the shift that outsourcing and offshoring saw in regard to the type of work that can be moved from basic tasks to those that impact the core capabilities of the firm. Contractor et al.’s work shows that the traditional models that Apte and Mason presented are still being considered in practice.

4.1.2 Quasi-Outsourcing

Barthélemy and Geyer (2001) first introduced quasi-outsourcing which is when a company sets up a subsidiary separating it from the internal group and has it act like a

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25 the major advantage is control because companies are able to retain more of it through the activities being kept within the same company (Barthélemy and Geyer, 2005). The firm can maintain this control all while allowing the new part of their firm to have more control over itself too, allowing it to do things like innovate. They found three determinants within IT for quasi-outsourcing as compared to outsourcing. The first is that quasi-outsourcing is more likely for highly asset-specific IT activities due to the need for control over them. The second is that the larger the IT department, the more likely the firm will use quasi-outsourcing. This is related to economies of scale which when the firm is large, can already be achieved within the company but if small, then an outsourcer will be the one to achieve economies of scale. The third is when an IT department is a profit center, then quasi-outsourcing is more likely which is as opposed to the IT department being a cost center. Profit centers have performance measures and thus need to be efficient to hit their goals. They are also given incentives all of which is similar to a quasi-outsourcing situation.

Värynen and Kinnula (2012) also studied quasi-outsourcing compared to outsourcing. To understand the success factors in these relationships, they did a case study of two

companies one who domestically outsourced and one who used the quasi-outsourcing model. Some factors that are less challenging for quasi-outsourcing relationships are trust, IT

requirements (understanding the systems in place which is not an issue because they are most likely the same across the company), and contractual governance which includes

confidentiality because this may not be as strong at a vendor who has other clients in the same industry. Some factors that are more challenging for quasi-outsourcing are employees’ awareness of costs, requirements engineering, and structuring communication and interaction processes. These all point to that in a quasi-outsourcing relationship there is no need to immediately define anything, including communication or requirements, because it is all dealt with in the same company. Quasi-outsourcing relationships might be quicker to set up than outsourcing ones because of this fact, there is not as much of a need to define everything before beginning.

Both Barthélemy and Geyer (2001) and Värynen and Kinnula (2012) discuss quasi-outsourcing as compared to quasi-outsourcing really developing how the two models differ with the key difference being control. Quasi-outsourcing is used to maintain control within the

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4.1.3 Offshore Development Center

The first hybrid model introduced was offshore development center. These are joint ventures traditionally between a company and an outsourcing vendor in a country outside of the company’s home hence the offshore in the name (Jahns, Hartmann and Bals, 2006). The company and outsourcer work together to acquire resources which gives both more access to resources for a similar budget as just outsourcing or offshoring. Höfner and Mani (2007) studied a German firm starting an offshore development center in India. They found that some of the success factors in this relationship were that there was a shared development plan for agreement of milestones, that the center requested feedback, and that lessons learned workshops were held for what worked well and what went wrong. When they compared it to offshoring, they point out that there is less already existing cooperation. A disadvantage with offshore development centers is that they can feel a larger impact from attrition than

outsourcing vendors because there is a greater training investment in offshore development center employees since there is one specific client. Attrition also greater affects offshore development centers because there is no spare capacity with resources (Höfner and Mani, 2012).

This model is considered to be in between a make decision and a buy decision making it a hybrid (Jahns, Hartmann and Bals, 2006). It is typically chosen for tasks that have a medium degree of asset-specificity because the company maintains some direct control. The drivers are similar to offshoring in that they consider factors such as wage differentials, education levels, population size, telecommunication technologies, and transportation infrastructure in the country outside of the home one. As compared to outsourcing, offshore development centers do not need as much strategic risk assessment particularly for non-performance and vendor dependency. Non-non-performance is not as large of an issue because the company is involved too and any problem there could fall back on them since there is

supposed to be equality in the relationship. This equality is also why vendor dependence is not as much of an issue, both are equally dependent on each other.

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27 part of their review of the model unlike the paper by Bartélemy and Geyer (2001) for quasi-outsourcing which did not have any specific firms using the model.

4.1.4 Evolutionary

Youngdahl and Ramaswamy’s (2008) evolutionary model describes how a company adapts its work as well as gains knowledge and experience to progress its outsourcing and offshoring. Their key perspective was the separation of back-office and front-office work which is defined by if customer contact is needed (Youngdahl and Ramaswamy, 2008). This is seen in Figure 2 along the bottom and is considered with the knowledge that is needed for a task which they also call embeddedness. At the beginning, a company will have a process center which could for example handle claims paperwork and a contact center, a call center for example. The goal at this level is to reduce costs. As more knowledge is acquired while reducing costs, these two types of centers can be transformed into process and contact solution centers. Solution centers will own the processes that they handle and may redesign them and the goal shifts from cost reduction to innovation. At this point, companies may set up unique capability centers that are for very specific needs that are separate from what is being handled at other centers such as programmers who code in the language COBOL. As more knowledge is gained, process and contact solutions centers can again transform into global service centers which are able to handle any type of work activity from any location.

Figure 2. Strategic Roles and Evolution of Services Offshoring

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28 It primarily deals with how work is offshored but there is some influence from

outsourcing as can be seen in the global service center part. The notion of a model being able to change as a company does is why it is called evolutionary (Youngdahl and Ramaswamy, 2008) and this ability to change introduces dynamism to a model. No models had been

introduced in the literature that were dynamic until this one. It is also a completely theoretical development. Although completely theoretical, it did cite several companies in the insurance, finance, and other industries as using parts of the model. Still, very few specific examples were mentioned in the paper which could call into question the applicability of the model to practice. One other thing that this paper did first is that it did not introduce any other models aside from the evolutionary one.

4.1.5 Built-Operate-Transfer

The same year that the evolutionary model was introduced, the built-operate-transfer (BOT) model also was (Lampel and Bhalla, 2008). With this model, a company will contract an outsourcing vendor to set up a dedicated unit that will at an agreed future date be handed over to the company so that they completely own and operate it. It is a relatively rare model because there are not as many benefits for either party since the outsourcer will have to transfer it and lose the business and then the company does not get the managerial experience from opening it and running it initially. A company that did choose this model is Aviva in the UK who set up BOT centers with three companies in India as a way to minimize risks and test different suppliers (Patel and Ullatil, 2004). Three years later, they did transfer over 5,000 staff members into their own ownership (Aviva, 2006).

One reason a company might choose this model is because it allows them to ramp up their operations internationally more quickly than just offshoring. Other reasons companies choose this model is to achieve cost efficiencies or as a means of strategically entering a new region which are similar to the motivations for other models presented. One major motivation for this model that is different from the others is to share in the costs as wells as risks.

However this is also seen in the other hybrid model offshore development center. These motivations can translate into advantages that can still be achieved upon implementing this model such as cost efficiencies, that the new center can be scalable, and having specialist know-how (Lampel and Bhalla, 2008). The benefits are similar to

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29 problems with transferring knowledge, dependence on an external vendor for training, and lack of visible incentives to innovate for the vendor.

4.1.6 24-Hour Knowledge Factory

The 24-hour knowledge factory was first presented as a unique model by Gupta et al. in 2012. Apte and Mason (1995) actually mentioned a similar idea 17 years prior but did not develop it at all. With this model, there are at least three offices in different locations around the world that all work their local day and together work on one activity handing it off from one office to the other office as that office’s day begins. An example of this is shown in Figure 3. The 24-hour knowledge factory allows for continuous operations and work on a particular task or project to be done non-stop to reduce completion time. Each office incrementally works on the activity and then hands it off at the end of its day. Due to the work being handed off so frequently, the hand-offs are incredibly important to this model as well as communication.

Figure 3. Example of the 24-Hour Knowledge Factory

Source: Gupta et al., 2012 – p. 101

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30 goals. Another difference is that while in traditional outsourcing and offshoring it can be an unequal relationship, this model is actually dependent on equality between offices. Some of the challenges that firms may face in this model are like the ones from traditionally

disaggregated work such as cultural differences and customer reaction.

Similar to other models that have flexibility in the implementation of the model like quasi-outsourcing being able to be international or domestic, the 24-hour knowledge factory can be implemented within the company or externally by an outsourcer. Unlike previous models that have been discussed, this is the first model where the researchers point to more than just low-skill level work as being appropriate for it (Gupta et al., 2012). They discuss that it should still be structured work that can be separated into components like call center activities but also software development. The authors could see this model as being

appropriate for designing cars or the accounting field in the future. The 24-hour knowledge factory was presented with seven company examples across technology, consulting, and manufacturing which is very high compared to other models introduced previously and they may have been included as a means of legitimizing the model.

The article marks a shift in the discussion of offshoring and outsourcing models. It was one of the first that did not discuss other models in the article itself marking the beginning point in the field where the basic models did not need to be covered again to introduce something new. One other earlier paper also did not include any other models which was the evolutionary model but this is still an exception from the previous presentation of models within the field. The evolutionary model is an exception because it seemed to not include other models because it was focusing on theoretical development. This shift of not presenting other models shows a maturing of the field but is still a relatively recent change since the 24-hour knowledge factory was introduced in 2012.

4.1.7 Global Delivery Model

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31 in the same home country or in countries that keep the same business hours as those of the client. An example is an outsourcer having a client in the US whose work is performed in South America. The outsourcer may not just use one or two offices but set up a network of them which also helps to shorten response times by leveraging time differences. GDM, at one point in practice, was more similar to the 24-hour knowledge factory by utilizing an around-the-world working design. At the time of the introduction of the model into literature though, this was no longer the case and the focus is no longer on handing off work separating these two models.

One of the main drivers of GDMs is access to qualified personnel. With this model, outsourcers are able to go more remote and thus farther from large cities and metropolises as they try to tap into other markets for talent particularly with technical capabilities. In the article that introduced GDMs, the researchers performed an empirical test based on questionnaires completed by companies from the Offshoring Research Network (ORN) which is a research collective in the US, Europe, and Australia focusing on offshoring. Through their research, they found that GDMs are not likely set up for cost reductions for firms but more for access to talent and greater response speed (Manning, Larsen and Bharati, 2015). As important as access to resources is to this model, the researchers do not address if this model is able to provide it sufficiently.

From the initial description, it seems like an outsourcing model that is able to address everything that a company may be seeking like cost reduction and access to resources but it still faces similar challenges to outsourcing like coordination. This is amplified by it being a globally distributed team and unlike in the 24-hour knowledge factory, it is not as explicit how work flows.

4.1.8 Sourcing Continuum

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32 are joint ventures. With the model, companies can view sourcing decisions not only as

between two choices but between a series of options.

Table 3. Model Presented by Vitasek

Element Description

Market

Hierarchy

Basic Provider The activity is highly standardized and there is a set price for completing it; this type of relationship is used for achieving lower costs

Approved Provider Prequalified supplier but can be easily changed Preferred Provider Provider has been chosen for multi-year contracts

Performance-based/Managed Services

SLAs or cost reduction targets are given and there are higher levels of collaboration between the client and provider

Vested Business The purpose of the relationship is to create shared value and both are equally committed to each other’s success Shared services One internal unit that is at arm’s length

Equity Partnerships Firm does not have the resources internally, so it looks to mergers and acquisitions or joint ventures to bring them inhouse

Adapted from Vitasek 2016

The main argument made for the sourcing continuum is that sourcing is not just transactional where a company makes a single decision for an outsourcer to perform a single activity (Vitasek, 2016). This is because with sourcing today, the market is unable to self-correct as seen by if one vendor cannot perform the work adequately, a company cannot just find a new vendor to immediately have that work completed. The sourcing decision has become complex due to the variability of activities and the mutual dependency that is typically created with outsourcing. The mutual dependency is based on the customized process that the outsourcer owns and whatever specific assets may be involved. Due to all of this, companies must perform more sophisticated sourcing decisions that create value which is what is necessary now out of these relationships to keep up with business.

The sourcing continuum’s introduction into literature was for theoretical

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4.1.9 Project Network Organizations

Project Network Organizations (PNOs) are “composed of legally independent, yet operationally interdependent individuals and organizations who maintain longer-term collaborative relationships beyond the time limitations of particular projects” (p. 1399, Manning, 2017). Typically, this model is used for inter-organizational projects that are limited in time and have a higher level of complexity such as in industries like film,

construction, and event organization. The networks are held together based on past projects and potential future ones which is something unique to this model. This leads to the

connectivity of the PNO being based on projects and that once one or more have been completed, that specific PNO has gained historical context for future ones.

Within the PNO model, there can be a lot of flexibility (Manning, 2017). This includes geographic concentration, how the projects vary including based on the teams and tasks being performed, and how specialized the PNO is organized. PNOs have no location designation and are farther away from a traditional outsourcing relationship than any other model. The PNO’s flexibility means it can be international or domestic which is similar to other models like the evolutionary model but is set apart from other flexible models based on ownership in that the relationship is strictly outsourcing.

Project network organizations is the first model where more than one external party must be included in the relationship. This may represent where the future of outsourcing will move to, a more complex network of companies performing work together.

4.2 Findings

Business models are dynamic in that they evolve and there can be a need for innovation within them because of changes internally or externally that occur over time (Wirtz et al., 2016) and this is seen in outsourcing and offshoring. They have evolved to become more complex. Outsourcing and offshoring as traditional models still exist but with all of the models and variations that have been introduce since then, companies have more ways than ever to disaggregate services. These have come about as firms have had different motivations and technology has advanced allowing for easier communication. On top of that, firms are making multiple sourcing decisions at once that go in multiple directions (Lampel and Bhalla, 2008; Foerstl, Kirchoff and Bals, 2016). This is even partially seen in models like the

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34 The evolutionary model and the sourcing continuum are also unique in that they are dynamic because they have multiple elements. From the analysis of their dynamism, it can be seen how static other models are which may be why companies have turned to new models as opposed to changing the ones that had already been presented. Other models like quasi-outsourcing and the 24-hour knowledge factory may be static but do present flexibility within the model. With quasi-outsourcing the location can be international or domestic and with the 24-hour knowledge factory, the ownership and organization dimension is flexible meaning it could be implemented inhouse or at an outsourcer.

When reviewing how the models have been presented, it is clear that there is no uniformity. Some models are presented with other models or include lots of examples, some papers thoroughly cover all elements of the models and their advantages and disadvantages while others do not. This lack of standardization may have contributed to the lack of critiques in outsourcing and offshoring. Looking at the elements typically included, there is an

interesting pattern that can be seen in the industries which are cited. The most common industries that were presented as examples with the models were technology and insurance. This may reflect that a lot of the work was done within information systems or because of the dependency of outsourcing and offshoring on technology hence the technology field. Or possibly due to that these two industries have more advanced technology because they have the funds to access it.

Referring to Table 2 at the beginning of the chapter, it is apparent that most of the models were presented to describe practice. The models that were presented for theoretical

development, the evolutionary model and sourcing continuum, were more likely to have multiple components and fewer examples. The lack of theoretical advancement is different from some international business fields like strategy where there is strong practical work and theoretical development. The fact that most academic work in outsourcing and offshoring is to describe practice is may be due to the field moving so quickly. When traditional

international business theories have been applied, the results have been very mixed which was examined in the literature review. Ultimately, the lack of theoretical development may be hurting this academic area because theory offers perspective and helps researchers understand what they see (Johnston, 2014).

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35 slightly more critical drivers like control and cost and risk sharing. It then continued to shift and to further take advantage of unique aspects of these types of relationships like increased trust, more efficient coordination, and continuous availability. The second shift is that in the early years, multiple models were presented in one paper which is not as much the case since 2012. Many papers were covering multiple models including traditional outsourcing and offshoring up until when this shift started. Lyons and Brennon (2014) recognized the same thing when they completed a meta-analysis of outsourcing client-vendor frameworks. A possible reason why multiple models were presented together is because the papers were viewing the models from a firm perspective of going through the sourcing decision. When companies looked at sourcing, they most likely examined multiple models at once. As the field matured, the traditional models were well documented and thus focus could be given to the new models presented.

A visual representation of the evolution of outsourcing and offshoring models is seen in figure 4. The first thing that becomes very apparent is that significantly less work has been done on offshoring. This lack of offshoring models is probably not because there are less offshoring models present in practice but that it may be harder for researchers to access and analyze them since offshoring models are internal relationships in a company and thus kept more private by firms.

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36 Figure 4 shows not only the direct derivations of models but also the indirect derivations and how two distinct groups can be found. The distinct groups are based on that similar types of models were introduced around the same time and the clustering of models that formed from this. The first of the two distinct groupings is from 2006 to 2012 when there was more of a focus on hybrid models (24hr is not technically a hybrid model but because it can be done either under offshoring or outsourcing it has been included). The second group is from 2015 to the present covering what could be considered more complex outsourcing models. These two groupings probably arose based on how the field has become increasingly complex over time.

The dashed lines represent indirect derivation where it is not explicit that one model influences the other but is seen through the analysis of the key elements and the similarities between them with certain models. To begin with, there is indirect influence between part of the evolutionary model and the 24-hour knowledge factory on the global delivery model. The impact of the 24-hour knowledge factory on GDM refers to how GDMs in practice were at one point similar with the global hand-offs being a part of them. As for the impact of the evolutionary model on GDMs, the evolutionary model’s global service center, which was the last component in the model and at the top of Figure 2, was able to handle multiple types of work from multiple locations which is very similar to GDMs. From GDMs, PNOs were indirectly derived because they also deal with large external relationships that can be very complex.

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5. Discussion of the Future of Outsourcing and Offshoring

Based on the review of the literature and the analysis of the models, I am proposing two scenarios that may reflect the future of offshoring and outsourcing. Since models were the means used in my research to understand offshoring and outsourcing, I will present models to illustrate the scenarios. Both scenarios will be presented and then a discussion with two outsourcing and offshoring experts as identified in Chapter 3 will be reviewed to better understand these scenarios applicability for practice and their relevance for theory.

5.1 Robotic Process Automation Scenario

In the literature review, it was found that the type of work that is being offshored and outsourced has shifted over time from low-skill level work to more complex tasks and activities related to companies’ core capabilities (Lacity, Carmel and Rottman, 2011). The next step in this is not just where the work will go, either a foreign location or to another firm, but to what it will go to meaning either a person or a robot. As previously mentioned, 13% of companies are implementing robotic and cognitive process automation (Deloitte, 2016) and by 2021 it is expected to be 22% of companies (Willis Towers Watson, 2018). This makes robotic process automation (RPA) a large area of future research for outsourcing and offshoring. RPA can be realized in a company three ways: autonomously where it

completely manages its own work, to support the work being done by people, and taking over the work being currently performed by people. When companies were polled, 70% saw RPA as a means of supporting work being performed (Willis Towers Watson, 2018).

From the research presented in this paper, a means of understanding how RPA could be integrated into practice may be found. As outsourcing and offshoring started off simply with a single activity being handed to someone else to be done, I believe that this is where RPA will first be used in practice if not how it already actually is in practice. From there, I believe that RPA as a support mechanism will be modelled in companies in a multitude of ways including what I propose in this scenario.

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38 automation which includes machine learning and artificial intelligence (AI). Cognitive

automation handles more complex tasks such as executing more efficient trades in the financial industry(Willis Towers Watson, 2018). Over time, more intricate work including core capabilities would be able to be handled by the RPA while maintaining this model. The two teams work with all of these functionalities and are then able to deliver the work back to the client.

Figure 5. Scenario 1 – Robotic Process Automation Model

The model was developed based on how outsourcing and offshoring was initially implemented in business. In the beginning, simple tasks like data entry were given to an outsourcer or offshored and then more complex work was being disaggregated and with the increasing complexity, new models were introduced. With the model presented in Figure 5, the teams at the beginning are most likely to be using RPA for simple tasks and then working up to completing more difficult work with it. The way RPA is integrated as an equal team is to show how large of a role it will play on top of the amount of work it will be able to handle.

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39 the company and balances proximity with cost for this. In this scenario’s case, it is different from outsourcing because the work being handled can be more intricate. There must be even more trust between the company and outsourcer as even more core activities are given away. Part of the opinion of the expert who felt this scenario was traditional was that it would have been more interesting to see the impact of RPA if it was done within the company and how it will impact the inner workings of a firm. Even though this model is still rooted in traditional outsourcing, both experts agreed that RPA will be a major component in future of

outsourcing and offshoring.

5.2 Indefinite Scenario

As has been discussed, strategy and resources influence business models (Wirtz et al., 2016) and that can especially be seen in outsourcing and offshoring. The purpose of many of the presented models has been giving companies new ways to access human resources. In terms of accessing talent, it is important to note that there is no single model or variation that has been able to completely solve this even though it is one of the two main motivations companies have when considering the sourcing decision. An example of a variation where this is clear is rural outsourcing, which is going on in multiple countries such as the US, China, India, and Israel. Even though it is being used in all of these places, all have still faced the same issue of workforce development (Lacity, Carmel and Rottman, 2011). Another example of companies not being able to solve this sourcing issue is a case study that compared a domestic outsourcer who focuses on employing veterans and an international outsourcer in India (Lacity, Khan and Carmel, 2016). Both faced attrition problems in the case study.

With the second scenario, I would like to address the unanswered need of accessing human resources through presenting an offshoring model. The choice of an offshoring model is to begin to address the fact that there has been much less work in this area. By combining these two elements, the model would allow for companies to have the flexibility to access resources as necessary.

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40 faster delivery on larger projects when time is a concern. In this model, the work is not

handed off but instead completed by whoever has the work. The employee handling the work end-to-end also takes into account that employees find satisfaction in having autonomy (Wheatley, 2017) and thus differing from a model like the 24-hour knowledge factory. The work could be anything from more simple tasks like HR data entry to complex software development projects.

Figure 6. Scenario 2 – Indefinite Model

The key with this model is the single system that can be accessed anywhere in the world. Large conglomerates do not always have uniform systems but with this model, it is necessary. By having it, accessing resources becomes simpler in that it is then just a matter of hiring and training as opposed to that on top of getting all of the systems running and

transferred over. When discussed with the two experts, one thought the implementation of this type of global system would be too difficult for a company.

Interestingly, both interviewees had the same reaction to scenario 2 which is that it is similar to crowdsourcing. As one interviewee put it, “I mean, in a way that is what

crowdsourcing is all about” (Interview 2, Line 45). They also both brought up the same company which is Upwork. Upwork is a web-based platform where “Through Upwork businesses get more done, connecting with freelancers to work on projects from web and mobile app development…” (Upwork, no date). It is an example of crowdsourcing. Estellés-Arolas and González-Ladrón-de-Guevara (2012) define crowdsourcing as “a type of

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41 or company proposes to a group of individuals of varying knowledge, heterogeneity, and number, via a flexible open call, the voluntary undertaking of a task” (p. 197). One

The Evolution of Models in Outsourcing and Offshoring

Supervisors: