The strategic choice of contract types in business process outsourcing

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ling Ge ◽  
Xiaoyan Wang ◽  
Zhilin Yang
Keyword(s):  
Transaction Costs ◽  
Business Process ◽  
Strategic Choice ◽  
Probit Model ◽  
Major Theme ◽  
Direct Impact ◽  
Business Process Outsourcing ◽  
Content Type ◽  
Coordination Costs ◽  
Adaptation Costs

PurposeHow to determine the appropriate contractual structure for an outsourcing relationship has been a major theme in the business process outsourcing (BPO) literature. Drawing on transaction cost economics, this study aims to examine how anticipated coordination and adaptation costs in a BPO relationship affect the choice of contract types. Specifically, this research categorizes contracts types (fixed-price, time and materials and hybrid contracts) based on levels of contract design comprehensiveness and flexibility to change.Design/methodology/approachThe research setting is the BPO for a focal firm, involving a contractor. Data from 153 US companies are collected using a structured questionnaire on senior executives of functional areas of marketing, IT and finance. Hypotheses were tested using ordered probit model.FindingsThe results show that maturity is negatively associated with anticipated adaptation costs, while modularity and IT detachability are negatively related to anticipated coordination costs. Furthermore, adaptation costs have a direct impact on the choice, whereas the anticipated coordination costs do not have a significant direct impact on contract choice. The strength of adaptation costs' impact, however, is significantly reduced when coordination costs are high.Originality/valueThis study explicitly examines the role of anticipated coordination and adaptation costs in shaping the strategic choice of contract types in the BPO market. By differentiating the two types of anticipated transaction costs, this research enables a better understanding of the dynamics between transaction characteristics, anticipated transaction costs and contract types in complicated relationships such as BPO relationships.

Understanding knowledge management capability in business process outsourcing

2015 ◽  
Vol 53 (1) ◽  
pp. 124-138 ◽  
Author(s):  
Shan Liu ◽  
Zhaohua Deng
Keyword(s):  
Knowledge Management ◽  
Business Process ◽  
Effective Means ◽  
Firm Characteristics ◽  
Business Process Outsourcing ◽  
Knowledge Application ◽  
Content Type ◽  
Four Dimensions ◽  
Management Capability ◽  
High Knowledge

Purpose – The purpose of this paper is to investigate trends in the dimensions of low, medium, and high knowledge management (KM) capability of business process outsourcing (BPO) firms. It also explores the trends in BPO performance with different levels of KM capabilities of BPO firms. Moreover, the study determines how firm characteristics, such as size, age, industry, and outsourcing age, affect KM capability. Design/methodology/approach – A survey was employed to collect data on managers from 605 firms. K-means cluster analysis was performed on the aggregate measures of the four KM capability dimensions and BPO performance to reveal trends. Subsequently, MANOVA was used to evaluate the effects of four firm characteristics on KM capability, and individual ANOVA tests were performed to examine the specific differences among the four dimensions. Findings – Among the four dimensions of KM capability, knowledge application is the most significant. Knowledge protection is the second highest in terms of expressing the profile for low KM capability firms, but the lowest among the four dimensions of KM capability for medium and high KM capability firms. Each dimension of KM capability affects BPO performance positively. Firm size, age, industry, and outsourcing age differentially affect the dimensions of KM capability. Originality/value – This study presents a theoretical model of firm characteristics, KM capability, and BPO performance. Through the model, ideas are offered: firms with high KM capability significantly differ from those with low and medium KM capabilities; different firms exhibit different KM capabilities; developing knowledge application capability should be the priority in managing BPO; and improving KM capability is an effective means to enhance BPO performance.

An analysis of the application of process improvement techniques in business process outsourcing

2016 ◽  
Vol 33 (3) ◽  
pp. 321-343 ◽  
Author(s):  
Ronan McIvor
Keyword(s):  
Process Improvement ◽  
Business Process ◽  
Current Literature ◽  
Design Methodology ◽  
Case Study Approach ◽  
Business Process Outsourcing ◽  
Content Type ◽  
Case Study Analysis ◽  
Study Approach

Purpose – The purpose of this paper is to enhance the understanding of the application of process improvement techniques (PITs) in the business process outsourcing (BPO) process. The paper focuses on how PITs impact the BPO process, and identifies a number of key enablers of applying PITs in the BPO process. Design/methodology/approach – The paper employs a case study approach. In-depth case study analysis of a number of organisations that have employed a number of PITs in BPO is carried out. Findings – The findings support current literature that highlights the importance of formal contracting, relational contracting, and vendor capabilities for applying PITs in BPO. However, the findings also highlight the importance of additional factors, not widely considered in the current literature. The client must possess internal capabilities in PITs and change management to ensure process improvement occurs. Moreover, the findings here have shown that the client must invest in and develop the resources that enhance its capability to employ PITs in BPO. Originality/value – The findings highlight the importance and relevance of process improvement to BPO, and identify a number of important issues for further research in order to bridge the gap between these two complementary areas.

The transaction costs of intra-organizational captive buying and selling relationships

2019 ◽  
Vol 15 (2) ◽  
pp. 257-277
Author(s):  
Erik de Waard ◽  
Peter de Bock ◽  
Robert Beeres
Keyword(s):  
Transaction Costs ◽  
Operational Effectiveness ◽  
Demand And Supply ◽  
Content Type ◽  
Military Organization ◽  
Internal Customers ◽  
Coordination Costs ◽  
Shared Service ◽  
Research Findings ◽  
Tailored Approach

Purpose A typical governance challenge that has emerged with the introduction of shared service centers and other forms of service-related centralization within organizations is how to balance horizontal integration with vertical accountability. From a transaction costs perspective, this study aims to analyze the relationship between intra-organizational demand and supply linkages, asset specificity and coordination costs. Design/methodology/approach For this purpose, a case study has been conducted within a European military organization that has undergone major budget cuts, forcing it to start following a strategy of functional concentration with captive buying and selling relationships between internal customers and suppliers. Findings The research findings clarify that organizational hybridity may be the result. In a supplier role, the organizational elements are primarily concerned with efficiency, while operational effectiveness predominates when they are in the customer position. Also, the results show that focusing on standardized service delivery may sometime carry too far. When services are treated as being standard, while in reality, they ask for a more tailored approach, productive internal demand and supply collaboration will be put at risk. Moreover, the organizational actions needed to restore the internal supply chain’s efficacy will seriously increase transaction costs. Originality/value Despite being mentioned as a key governance category, actual research on the practicalities of internal captive buying and selling, in relation to the functioning of SSCs, is still lacking. To advance on this topic, the present research introduces knowledge from supply chain management theory, where dedicated inter-organizational buyer–supplier interaction in the automotive industry has already received academic attention.

Information technology (IT) outsourcing by business process outsourcing/information technology enabled services (BPO/ITES) firms in India

2015 ◽  
Vol 28 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Shrinivas Patil ◽  
Winai Wongsurawat
Keyword(s):  
Information Technology ◽  
Business Process ◽  
Holistic Approach ◽  
Third Party ◽  
It Outsourcing ◽  
Successful Outcome ◽  
Depth Information ◽  
Business Process Outsourcing ◽  
Content Type ◽  
Cost Strategy

Purpose – The purpose of this paper is to understand the roles various drivers such as cost, strategy and risk play when business process outsourcing/information technology enabled services (BPO/ITES) firms in India outsource their information technology (IT) functions to third-party vendors. If all key drivers associated with IT outsourcing were understood, and such knowledge of those variables was incorporated into the reasons for outsourcing, there would be a greater probability of a successful outcome. Design/methodology/approach – A “hybrid” (quantitative and qualitative) research methodology was used to gain insight into the IT-outsourcing paradigm by BPO/ITES firms in India. A structured questionnaire related to IT-outsourcing activities conducted from 1999 to 2010 was distributed to nine firms. The resulting data were then analyzed. In addition, two Indian BPO/ITES firms that had outsourced their IT to a third-party vendor to cut cost generously granted in-depth information into their IT-outsourcing paradigm and life cycle. Findings – IT outsourcing is perhaps more complicated than other types of outsourcing. Focussing purely on cost is very risky. Practitioners need to take all three drivers – cost, strategy and risk into consideration. Any degradation of services or responsibilities due to IT outsourcing would mean a very unhappy client or even loss of business. Originality/value – BPO/ITES firms in India tend to focus only on cost reduction from IT outsourcing without taking into consideration other equally important drivers such as strategy and risk. This paper counsels a holistic approach toward IT outsourcing for a successful outcome. In addition, an IT-outsourcing framework and guide is proposed for practitioners.

Making the business process outsourcing decision: why distance matters

2016 ◽  
Vol 36 (9) ◽  
pp. 1037-1064 ◽  
Author(s):  
Martina Gerbl ◽  
Ronan McIvor ◽  
Paul Humphreys
Keyword(s):  
Performance Management ◽  
Business Process ◽  
Operations Management ◽  
Performance Monitoring ◽  
Business Processes ◽  
Transaction Cost Economics ◽  
Business Process Outsourcing ◽  
Content Type ◽  
And Performance ◽  
Process Level

Purpose The purpose of this paper is to develop a framework that incorporates both firm- and process-level factors for understanding location distance choice in the business process outsourcing (BPO) decision. Design/methodology/approach The research involved undertaking in-depth case study analysis of a number of BPO decisions in six German companies, and employing transaction cost economics (TCE) and the resource-based view (RBV) as a theoretical basis. Findings The findings have shown that existing literature in the operations management (OM) literature does not provide a complete understanding of the complexities of location distance choice in the BPO decision. This decision requires an understanding of a range of factors at both the firm- and process-level. The findings here enhance the understanding of how these factors interact to influence the potential distance options. Practical implications The findings have shown how organisations can influence the factors that affect the location distance choice including modularising business processes, developing outsourcing capabilities, and supplementing internal skills in areas such as cultural management and performance monitoring. Originality/value This is one of the first studies in the OM field to analyse how organisations make the decision in relation to local, nearshore, and offshore location distance options. The paper has highlighted the importance of OM concepts such as performance management and continuous improvement to this phenomenon, and the paper has offered a number of important areas for further research.

A transaction cost explanation of the card-or-cash decision among Vietnamese debit card holders

2020 ◽  
Vol 38 (7) ◽  
pp. 1635-1664
Author(s):  
Dung Phuong Hoang ◽  
Thong Huy Vu
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Environmental Uncertainty ◽  
Content Type ◽  
Debit Card ◽  
Willingness To Use ◽  
The Relationship ◽  
Debit Cards ◽  
Adaptation Costs

PurposeThis research provides a new perspective in explaining cardholders' willingness to use debit cards instead of cash by applying the transaction costs economic theory. This study also expands the adaptation of transaction cost economics theory in explaining consumer behaviour by investigating the moderating effects of income and education level on the relationship between perceived transaction costs and willingness to use debit cards.Design/methodology/approachThe conceptual framework was developed primarily from the transaction cost economics theory. An in-depth interview method was employed to further support hypothesis development and the development of measurement scales. A structural equation model linking asset specificity, behavioural uncertainty, environmental uncertainty, frequency of payment, perceived monitoring costs, perceived adaptation costs and willingness to use debit cards was tested using data from a sample of 384 Vietnamese debit card holders.FindingsThis study's results support the transaction cost economics theory that asset specificity, uncertainty and frequency of payment all positively contribute to the perceived transaction costs associated with debit card usage. However, only environmental uncertainty and perceived adaptation costs have significant negative impact on willingness to use debit cards, with the relationship between environmental uncertainty and willingness to use debit cards being totally mediated by perceived adaptation costs. Moreover, the relationship between perceived adaptation costs and willingness to use debit cards becomes less negative among richer and better-educated cardholders.Practical implicationsThe research provides insights into the hidden obstacles for developing cashless economies, thereby supporting policy makers in designing more effective and comprehensive strategies to make debit cards more widely used as a true substitute for cash.Originality/valueThis study provides a new lens in explaining customer willingness to use debit cards, while expanding the transaction costs economics theory by incorporating demographic factors as moderators in the relationship between transaction costs and the card-or-cash choice.

How do transaction costs, capabilities and networks influence the procurement strategies of small agri-food firms? Evidence from the wine industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bruno Varella Miranda ◽  
Brent Ross ◽  
Jason Franken ◽  
Miguel Gómez
Keyword(s):  
New York ◽  
Transaction Costs ◽  
Small Firms ◽  
Probit Model ◽  
Wine Industry ◽  
Implicit Assumption ◽  
Governance Mechanism ◽  
Truncated Regression ◽  
Content Type ◽  
Procurement Strategies

PurposeThe purpose of this study is to disentangle the drivers of adoption of procurement strategies in situations where small agri-food firms deal with constrained organizational choices. More specifically, the authors investigate the role of transaction costs, capabilities and networks in the definition of feasible “make-or-buy” choices in emerging wine regions.Design/methodology/approachThis article analyzes a unique dataset of small wineries from five US states: Illinois, Michigan, Missouri, New York and Vermont. The reported results derive from both a hurdle model (i.e. a probit model and a truncated regression model) and a tobit model.FindingsThe results suggest the importance of trust as a replacement for formal governance structures whenever small firms deal with highly constrained sets of organizational choices. On the other hand, the level of dependence on a limited mix of winegrape varieties and the perception that these varieties are fundamental in building legitimacy help to explain higher rates of vertical integration.Originality/valueThis study is important because it sheds light on organizational constraints that affect millions of farmers across the globe. The study of “make-or-buy” decisions in agri-food supply chains has mostly relied on the implicit assumption that all organizational choices are available to every firm. Nevertheless, limited capabilities and the participation in low-density networks may constrain the ability of a firm to adopt a governance mechanism. Stated organizational preferences and actual organizational choices may thus differ.

Understanding the health behaviors of India’s information technology and business process outsourcing employees

2014 ◽  
Vol 7 (4) ◽  
pp. 213-228 ◽  
Author(s):  
Anita Ram ◽  
Anura Kurpad ◽  
Sumathi Swaminathan
Keyword(s):  
Information Technology ◽  
Health Behaviors ◽  
Business Process ◽  
Healthy Lifestyle ◽  
Call Centers ◽  
Sampling Frame ◽  
Structured Interviews ◽  
Business Process Outsourcing ◽  
Content Type ◽  
Social Habits

Purpose – The purpose of this paper is to investigate the behaviors of India’s information technology (IT) and business process outsourcing (BPO) employees in relation to diet, exercise, sleep, stress, and social habits. Design/methodology/approach – This was a qualitative research study, using in-depth, semi-structured interviews. Descriptive data were collected from a two-stage purposive sample of 28 IT-BPO employees from three IT companies and two BPOs in Bangalore, India. Findings – The majority of interviewees reported having an unhealthy diet and/or sedentary lifestyle. Lack of time due to demanding work schedules was the largest barrier to diet and exercise. Call-centers were described as a social environment with a young workforce. Research limitations/implications – Given the qualitative study design and limited sampling frame, results may not be generalizable. However, the qualitative data suggests that India’s young IT-BPO employees may be at greater risk of lifestyle-related diseases than the general population. The data also suggests that interventions incorporating social influence may be a promising solution, particularly at international call centers. Originality/value – There is a lack of literature on the lifestyle of IT-BPO employees in India. The results from this study provide qualitative insight on the motives for health behaviors of IT-BPO employees, as well as the barriers and facilitators for leading a healthy lifestyle in this industry. The findings provide the framework for future workplace wellness interventions.

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