The Outsourcing of It-Enabled Business Processes: A Conceptual Model of the Location Decision
Journal of International Management, 11(2), 253-268, 2005
16 Pages Posted: 20 Nov 2012
Date Written: 2005
As business process outsourcing (BPO) becomes more widespread, customers, the general public and politicians have increasingly questioned and criticized firms’ outsourcing decisions to foreign locations. In this paper, we develop and apply theory to improve understanding of the outsourcing location decision for IT-enabled business processes. We do this by adding a human capital imension and moderating factors to the Dunning framework of infrastructure, country risk and government policy. The inclusion of a human capital dimension is justified due to the nature of IT-enabled business processes, with their inherent tradeoffs between high tech and high touch. The model also incorporates firm-specific moderating factors, such as the firm’s outsourcing objectives and experience, and situation-specific moderators including the nature of the business process and customer expectations. The model provides a way for firms and researchers to take a more systematic and comprehensive approach to outsourcing location decisions. We conclude with a discussion of the managerial and research implications.
Keywords: outsourcing, IT, tech-touch tradeoffs
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