Offshore Outsourcing: A Dynamic, Operation Mode Perspective

Abstract

While the extant literature on offshore outsourcing at the firm level basically deals with this operation mode in isolation, in this paper we address the issue of outsourcing in the context of the broader question of how companies choose and use outsourcing as part of their operation mode development in foreign markets. Based on a case study of the Danish company SimCorp and the development of its operations in Kiev, Ukraine, we analyze offshore outsourcing in a broader, longitudinal foreign operation mode context, and how it may contribute to mode change in the host country over a certain span of time. The case study approach allowed us to explore the dynamic processes in depth. The study shows that involvement in the foreign market generates learning in various forms that provide a foundation for eventual mode development or change – beyond outsourcing specific learning. At the same time, restrictions on 3rd parties’, that is, independent vendors’ access to confidential client data, as well as protection of specific investments in human assets, may eventually become a driver for mode change, as in the SimCorp case, to ensure more effective control of the foreign operation. Finally, the case study shows how outsourcing can be used proactively as a springboard to deeper and changed operation mode activities in a foreign market.

Keywords: outsourcing, offshoring, foreign operation mode dynamics, case study