Living with Offshoring: The Impact of Offshoring on the Evolution of Organizational Configurations

Abstract

This paper argues that while in principle offshoring allows firms to pursue greater flexibility at lower costs, in practice it presents firms with major structural and managerial challenges. Adopting the activity configuration perspective, we argue that offshoring often disrupts the development of an internally consistent and cohesive activity configuration. Using a longitudinal case study of Tiscali, a European telecommunications firm, we argue that offshoring creates a tension between the advantages managers derive from using this as a strategy to improve the competitive position of the firm, and the negative impact this may have on the cohesion and consistency of internal organizational activity configuration. This tension tends to rise as organizations move from low to high value-creating activities, and struggle to resolve the conflict between trying to offshore interlocking value-creating activities while at the same time maintaining the cohesion and consistency of their internal configuration.

Keywords: IT Outsourcing, Offshoring, Organization Configurations, Activity Interdependence, Strategic Decision Making