A deluge of research studies on nearly every aspect of outsourcing has been conducted during the past decade, ever since it gained recognition as a strategic business tool to gain competitive advantage and became one of the top ten issues for survival in the 1990s. You’ve no doubt read many of them. Practitioners and academics alike have researched and analyzed such topics as how to monitor supplier performance, how to incentivize suppliers, advantages vs. risks, whether to use a long-term or short-term contract, and single vs. multi-vendor approaches.
Although the findings are not inaccurate, we need to bear in mind that research study results can be molded by the self-serving organizations funding the research. Since they don’t aim at the same targets, those organizations’ perspectives usually color the results. Often, the findings from studies and analysis conflict on the complex issues in outsourcing. How, then, can we be assured of the relevance of one study as opposed to another? How are we to understand the value of outsourcing research? Should we not aim to produce research studies that present a broader perspective?
Jae-Nam Lee, an assistant professor with the Department of Information Systems, City University of Hong Kong, pokes at the crux of the matter when he says, “I cannot find any papers that provide an intuitive view.” Lee extensively studied outsourcing research for the past six years and has recently published “The Evolution of Outsourcing Research: What is the Next Issue?” He received the Best Paper Award from the 33rd Hawaii International Conference on System Sciences in 2000. In his review paper, Lee presents a framework for interpreting previous outsourcing research and provides insights in the direction and focus of future outsourcing research.
He classifies previous research in two stages. The first stage was the client view. The research during this stage presented outsourcing as a hierarchical relationship and a win-lose strategy. Lee believes much of the research done at this time was overly optimistic because it took place during the honeymoon phase of relationships shortly after the contracts were signed. As he points out, outsourcing did not always bring about the desired results. Few organizations, however, wanted to disclose their outsourcing failures to the public, so many issues during this stage were not presented realistically.
The second stage presented outsourcing issues from both the client and provider views. It put forward the basis of an equal relationship and a win-win strategy. It began, he says, with the effort to record the difficulties in forming and managing productive relationships. Clients, he says, wanted long-term, collaborative relationships with their providers. They wanted partnership alliances, rather than strict customer-vendor relationships. As the scope of the deals increased, the providers were willing to take on more responsibility.
“So in the second stage, new characteristics of outsourcing research emerged,” says Lee. “For instance, outsourcing analysis was based on the provider’s perspective and on building mutual trust. Organizations recognized the necessity to move away from focusing on self-interest and change their relationships to win-win situations in order to gain a competitive advantage. Studies of relationships were based on the perspective of developing and sustaining a high-quality partnership over time.”
Even though the research had evolved at this point to a more realistic and constructive view, Lee says the focus was mainly on the motivation of partnership strategy. “There was really nothing behind it. In my paper, I cite second-stage research issues as being partnership motivation, partnership scope, partnership or not, partnership performance and partnership contracts.”
Points of Perspective
Partnership motivation will still be a relevant issue in outsourcing research for the future, according to Lee; however, it needs to be presented from mixed views – the client and vendor views, as well as the practitioner and academic views. His own research is based on his mixed background as a practitioner (Outsourcing Manager with an alliance between EDS and LG Groups in Korea) and as an academic.
Furthermore, he categorizes past outsourcing research into three basic perspectives: strategy management, economic and social. Strategy management is concerned with how to formulate and implement a strategy to accomplish a desired goal, he explains. Unfortunately, this perspective does not consider how to manage the relationship or the external environment. “Realistically,” he points out, “how can an organization use the strategy management perspective or theory regarding its internal resources without any consideration as to the situation?”
The economic perspective treats each sourcing decision as an independent event. Lee sees this theory as inappropriate because it does not consider the parties’ obligations for future transactions with each other. The social perspective assumes that the client and provider will be working together over time. They demonstrate their trustworthiness and understand that their relationship is a dynamic process.
“Although I think these three perspectives can provide some criteria to classify research, they do not provide an intuitive view to add to the understanding,” Lee says.
Approaching Mixed Research
Lee advocates a model for future research, which is based on mixing outsourcing research with other important topics. For example, he says it would be good to mix outsourcing research and knowledge management research. He believes researchers in IS outsourcing should not focus purely on outsourcing research but should try to mix it with other important IS topics. Researchers could also combine ERP system research with outsourcing research.
He cites another example of mixed research for the future. “Global outsourcing is popular for many organizations. But when there are many locations, we need some group support systems and negotiation systems. This can provide more understanding for the provider’s situation and the business process. So we could conduct studies mixing outsourcing research and group support system research.”
Lee says that an integrated approach to research studies will help us grapple with complex issues from a broader, intuitive framework.” Lee, whose doctoral dissertation topic was outsourcing research, has had papers published in the Journal of Management of Information Systems, Journal of Strategic Information Systems and International Journal of Information Management.
Lessons from the Outsourcing Primer:
- Existing outsourcing research does not provide an intuitive view.
- Future research needs to be presented from the combined perspectives of the buyer and the supplier.
- The best model for future outsourcing research is to mix it with other important topics. This integrated approach to research will study complex issues from a broader, intuitive framework.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].