Offshore outsourcing of professional services: A transaction cost economics perspective |
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Authors: | Lisa M. Ellram Wendy L. Tate Corey Billington |
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Affiliation: | 1. Colorado State University, Department of Management, 212 Rockwell Hall, Fort Collins, CO 80523-1275, United States;2. University of Tennessee, Department of Marketing and Logistics, 343 Stokely Management Center, 916 Volunteer Blvd., Knoxville, TN 37996-0001, United States;3. IMD, Ch. de Bellerive 23, P.O. Box 915, CH-1001 Lausanne, Switzerland |
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Abstract: | This research utilizes the framework of transaction cost economics (TCE) to develop an understanding of how firms manage the costs and risks of offshore outsourcing of professional services. This research examines the perspectives of eight organizations through interviews with 10 high-ranking supply management executives. The paper first explores the rationale for offshore outsourcing among the organizations studied. Using the tenants of TCE, this paper postulates that fixed costs of establishing the relationship dominate the variable costs of day-to-day transactions, and that organizations will not offshore outsource areas where there is high perceived degree of unmanageable risk. The paper expands on themes provided by TCE and offers some lessons learned, and guidelines for managing and controlling offshore outsourced services relationships. |
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Keywords: | Business process outsourcing Professional services Transaction costs Case studies Service purchasing Offshoring |
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