Operational capabilities development in mediated offshore software services models

The paper expands theoretical and empirical understanding of capabilities development in the mediated offshore outsourcing model whereby a small or a medium-sized firm delivers offshore software services to a larger information technology firm that in turn contracts and interfaces with the actual end-client onshore firms. Such a mediated model has received little prior research attention, although it is common particularly among Chinese firms exporting services to Japan, the largest export market for Chinese software services. We conducted case studies in four China-based software companies to understand the mechanisms used to develop their operational capabilities. We focused on client-specific, process, and human resources capabilities that have been previously associated with vendor success. We found a range of learning mechanisms to build the capabilities in offshore firms. Results show that the development of human resources capabilities was most challenging in the mediated model; yet foundational for the development of the other capabilities. This paper contributes to the information systems literature by improving our understanding of the development of operational capabilities in small- and medium-sized Chinese firms that deploy the mediated model of offshore software services.

[1]  R. Davison.  Offshoring information technology: Sourcing and outsourcing to a global workforce , 2006, Electron. J. Inf. Syst. Dev. Ctries..

[2]  Rahul Roy,et al.  Offshore Outsourcing: A Dynamic Causal Model of Counteracting Forces , 2005, J. Manag. Inf. Syst..

[3]  L. Willcocks,et al.  Global Sourcing of Business and IT Services , 2006 .

[4]  Sendil K. Ethiraj,et al.  Where Do Capabilities Come from and How Do They Matter? A Study in the Software Services Industry , 2005 .

[5]  Gabriela Kennedy,et al.  Outsourcing to China - Risks and benefits , 2006, Comput. Law Secur. Rev..

[6]  L. Argote.  Organizational Learning: Creating, Retaining and Transferring Knowledge , 1999 .

[7]  Thomas Y. Choi,et al.  Building deep supplier relationships , 2004 .

[8]  R. Yin.  Yin, Robert K., Case Study Research: Design and Methods, 2nd ed. Newbury Park, CA: Sage, 1994. , 1994 .

[9]  ZolloMaurizio,et al.  Deliberate Learning and the Evolution of Dynamic Capabilities , 2002 .

[10]  Jacqueline Liu,et al.  Outsourcing to China. , 2004, Medical device technology.

[11]  Carol V. Brown,et al.  IT Human Resource Management Configurations and IT Turnover: Theoretical Synthesis and Empirical Analysis , 2005, Inf. Syst. Res..

[12]  Maurizio Zollo,et al.  Deliberate Learning and the Evolution of Dynamic Capabilities , 2002 .

[13]  Natalia Levina.  Collaborating across Boundaries in a Global Economy: Do Organizational Boundaries and Country Contexts Matter? , 2006, ICIS.

[14]  S. Zahra,et al.  A Capabilities Perspective on the Effects of Early Internationalization on Firm Survival and Growth , 2006 .

[15]  Raghu Garud,et al.  Vicious and Virtuous Circles in the Management of Knowledge: The Case of Infosys Technologies , 2005, MIS Q..

[16]  Carol V. Brown.  Horizontal Mechanisms Under Differing IS Organization Contexts , 1999, MIS Q..

[17]  Leslie P. Willcocks,et al.  Managing Dispersed Expertise in IT Offshore Outsourcing: Lessons from Tata Consultancy Services , 2007, MIS Q. Executive.

[18]  Stuart P. Morstead,et al.  Offshore Ready: Strategies to Plan and Profit from Offshore IT-Enabled Services , 2003 .

[19]  T. M. Rajkumar,et al.  Offshore Software Development: The View from Indian Suppliers , 2001, Inf. Syst. Manag..

[20]  Jeanne W. Ross,et al.  From the Vendor's Perspective: Exploring the Value Proposition in Information Technology Outsourcing 1, 2 , 2003 .

[21]  Brian Nicholson,et al.  Some political and cultural issues in the globalisation of software development: case experience from Britain and India , 2001, Inf. Organ..

[22]  Dehua Ju.  China's Budding Software Industry , 1998, IEEE Software.

[23]  R. Baskerville,et al.  Strategy models for enabling offshore outsourcing: Russian short-cycle-time software development , 2005 .

[24]  Yu Chen,et al.  Software outsourcing in beijing: Basics, trends and implications , 2007, 2007 IEEE International Conference on Systems, Man and Cybernetics.

[25]  Leslie P. Willcocks,et al.  Relationships in it outsourcing: a stakeholder perspective , 2000 .

[26]  David P. Lepak,et al.  Human Resource Management, Manufacturing Strategy, and Firm Performance , 1996 .

[27]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[28]  Stephen Hill,et al.  The theory of the growth of the firm , 1981 .

[29]  E. Penrose.  The theory of the growth of the firm twenty-five years after , 1960 .

[30]  Joseph W. Rottman,et al.  Proven Practices for Effectively Offshoring IT Work , 2006 .

[31]  Erran Carmel,et al.  The Maturation of Offshore Sourcing of Information Technology Work , 2002, MIS Q. Executive.

[32]  Chang-Tai Hsieh,et al.  The Impact of Outsourcing to China on Hong Kong's Labor Market , 2005 .

[33]  L. Willcocks,et al.  Taking the measure of outsourcing providers , 2005 .

[34]  John C. Henderson,et al.  Entrepreneur or Intermediary: The Nature of the Relationship Manager's Job , 1995, ICIS.

[35]  Kathleen M. Eisenhardt,et al.  DYNAMIC CAPABILITIES, WHAT ARE THEY? , 2000 .

[36]  R. Yin.  Case Study Research: Design and Methods , 1984 .

[37]  Gordon H. Hanson,et al.  Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm , 2004 .

[38]  Mayuram S. Krishnan,et al.  Measuring Process Consistency: Implications for Reducing Software Defects , 1999, IEEE Trans. Software Eng..

[39]  Kate M. Kaiser,et al.  Evolution of Offshore Software Development: From Outsourcing to Cosourcing , 2004, MIS Q. Executive.

[40]  Till Vestring,et al.  Hedge your offshoring bets , 2005 .

[41]  Ravi Aron,et al.  Getting offshoring right. , 2005, Harvard business review.

[42]  Mark Borman,et al.  Applying multiple perspectives to the BPO decision: a case study of call centres in Australia , 2006, J. Inf. Technol..

[43]  Gary Pan,et al.  A dual-level analysis of the capability development process: A case study of TT&T , 2006, J. Assoc. Inf. Sci. Technol..

[44]  Zhonghua Qu,et al.  What will it take for China to become a competitive force in offshore outsourcing? An analysis of the role of transaction costs in supplier selection , 2003, J. Inf. Technol..

[45]  José L. Gascó,et al.  Information systems outsourcing: A literature analysis , 2006, Inf. Manag..

[46]  S. Zahra,et al.  Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda , 2006 .

[47]  Dehua Ju.  Country Report - China's Budding Software Industry , 2001, IEEE Softw..

[48]  Lei-Yu Wu,et al.  Resources, dynamic capabilities and performance in a dynamic environment: Perceptions in Taiwanese IT enterprises , 2006, Inf. Manag..

[49]  Atul Vashistha,et al.  The Offshore Nation: Strategies for Success in Global Outsourcing and Offshoring , 2006 .

[50]  K. Eisenhardt.  Building theories from case study research , 1989, STUDI ORGANIZZATIVI.

[51]  James D. Herbsleb,et al.  Software quality and the Capability Maturity Model , 1997, CACM.