ISM Approach to Model Offshore Outsourcing Risks
In an effort to achieve a competitive advantage via cost reductions and improved market responsiveness, organizations are increasingly employing offshore outsourcing as a major component of their supply chain strategies. But as evident from literature number of risks such as Political risk, Risk due to cultural differences, Compliance and regulatory risk, Opportunistic risk and Organization structural risk, which adversely affect the performance of offshore outsourcing in a supply chain network. This also leads to dissatisfaction among different stake holders. The main objective of this paper is to identify and understand the mutual interaction among various risks which affect the performance of offshore outsourcing. To this effect, authors have identified various risks through extant review of literature. From this information, an integrated model using interpretive structural modelling (ISM) for risks affecting offshore outsourcing is developed and the structural relationships between these risks are modeled. Further, MICMAC analysis is done to analyze the driving power and dependency of risks which shall be helpful to managers to identify and classify important criterions and to reveal the direct and indirect effects of each criterion on offshore outsourcing. Results show that political risk and risk due to cultural differences are act as strong drivers.
Ambroggi, M. de., & Trucco, P. (2011). Modelling and assessment of dependent performance shaping factors through Analytic Network Process. Reliability Engineering and System Safety, 96(7): 849-860 http://dx.doi.org/10.1016/j.ress.2011.03.004
Aron, R., Bandyopadhyay, S., Jayanty, S., & Pathak, P. (2008). Monitoring process quality in off-shore outsourcing: A model and findings from multi-country survey. Journal of Operations Management, 26(2): 303-321. http://dx.doi.org/10.1016/j.jom.2007.02.014
Aron, R., Clemons, E. K., & Reddi, S. (2005). Just Right Outsourcing: Understanding and Managing Risk. Journal of Management Information Systems, 22(2): 37-55.
Aron, R., & Singh, J. V. (2005). Getting offshoring Right. Harvard Business Review, Dec 2005.
Bachlechner, D., Thalmann, S., & Maier, R. (2013). Security and compliance challenges in complex IT outsourcing arrangements: A multistakeholder perspective. Computers & Security, 40: 38-59. http://dx.doi.org/10.1016/j.cose.2013.11.002
Benlian, A., & Hess, T. (2011). Opportunities and risks of software-as-a-service: Findings from a survey of IT executives. Decision Support Systems, 52(1): 232-246. http://dx.doi.org/10.1016/j.dss.2011.07.007
Cai, S., Ci, K., & Zou, B. (2011). Producer Services Outsourcing Risk Control Based on Outsourcing Contract Design: Industrial Engineering Perspective. Systems Engineering Procedia, 2: 308-315. http://dx.doi.org/10.1016/j.sepro.2011.10.043
Cappelli, P. (2011). HR Sourcing Decisions and Risk Management. Organizational Dynamics, 40(4): 310-316. http://dx.doi.org/10.1016/j.orgdyn.2011.07.008
Carmel, E., Agarwal, R., (2002). The maturation of offshore sourcing of information technology work. MIS Quarterly Executive Vol. 1 No. 2.
Chou, D. C., & Chou, A. Y. (2009). Information systems outsourcing life cycle and risks analysis. Computer Standards & Interfaces, 31(5): 1036-1043. http://dx.doi.org/10.1016/j.csi.2008.09.032
Chou, D. C., & Chou, A. Y. (2011). Innovation outsourcing: Risks and quality issues. Computer Standards & Interfaces, 33(3): 350-356. http://dx.doi.org/10.1016/j.csi.2010.10.001
Currie, W. L., Michell, V., & Abanishe, O. (2008). Knowledge process outsourcing in financial services: The vendor perspective. European Management Journal, 26(2): 94-104. http://dx.doi.org/10.1016/j.emj.2007.11.002
Datta, P. P. & Roy, R. (2011). Incentive issues in performance-based outsourcing contracts in the UK defence industry: a simulation study. Production Planning & Control, 1-16, iFirst.
Doh, J. P. (2005). Offshore Outsourcing: Implications for International Business and Strategic Management Theory and Practice. Journal of Management Studies, 42(3): 695-704. http://dx.doi.org/10.1111/j.1467-6486.2005.00515.x
Dossani, R., & Kenney, M. (2007).The next wave of globalization: relocating service provision to India. World Development, 35(5): 772-791. http://dx.doi.org/10.1016/j.worlddev.2006.09.014
Ellram, L. M., Tate, W. L., & Billington, C. (2008). Offshore outsourcing of professional services: A transaction cost economics perspective. Journal of Operation Management, 26(2): 148-163. http://dx.doi.org/10.1016/j.jom.2007.02.008
Fel, F., & Griette, E. (2012). An Analysis of the Offshoring Decision Process: The Influence of the Company's Size. Procedia - Social and Behavioral Sciences, 58, 596-605.
Fleming, L., Sorenson, O., (2001). Technology as a complex adaptive system: evidence from patent data. Research Policy, 30(7): 1019-1039. http://dx.doi.org/10.1016/S0048-7333(00)00135-9
Forte, D. (2009). State of the art security management. Computer Fraud & Security, 10: 17-18.
Frank, S. J. (2005). Source Out, Risk In. IEEE Spectrum, April 2005.
Goo, J., & Huang, C. D. (2008). Facilitating relational governance through service level agreements in IT outsourcing: An application of the commitment–trust theory. Decision Support Systems, 46(1): 216-232. http://dx.doi.org/10.1016/j.dss.2008.06.005
Govindan, K., Palaniappan, M., Zhu, Q., & Kannan, D. (2012). Analysis of third party reverse logistics provider using interpretive structural modelling. Int. J. Production Economics, 140(1): 204-211. http://dx.doi.org/10.1016/j.ijpe.2012.01.043
Graham, N. (2004). Data protection and business sales – risks and solutions?. Computer Law & Security Report, 20(4): 306-309. http://dx.doi.org/10.1016/S0267-3649(04)00053-6
Hahn, E. D., & Bunyaratavej, K. (2010). Services cultural alignment in offshoring: The impact of cultural dimensions on offshoring location choices. Journal of Operations Management, 28(3): 186-193. http://dx.doi.org/10.1016/j.jom.2009.10.005
Harmancioglu, N. (2009). Portfolio of controls in outsourcing relationships for global new product development. Industrial Marketing Management, 38(4): 394-403. http://dx.doi.org/10.1016/j.indmarman.2009.04.001
Henderson, R.M., & Clark, K. B. (1990). Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms. Administrative Science Quarterly, 35(1), Special Issue: Technology, Organizations, and Innovation, pp. 9-30.
Herath, T., & Kishore, R. (2009). Offshore Outsourcing: Risks, Challenges, and potential Solutions. Information Systems Management, 26(4): 312- 326. http://dx.doi.org/10.1080/10580530903245549
Honeycutt, E. D. Jr., Magnini, V. P., & Thelen, S. T. (2012). Solutions for customer complaints about offshoring and outsourcing services. Business Horizons, 55(1): 33-42. http://dx.doi.org/10.1016/j.bushor.2011.09.001
Jensen, P. D. Ø. (2012). A passage to India: A dual case study of activities, processes and resources in offshore outsourcing of advanced services. Journal of World Business, 47(2): 311-326. http://dx.doi.org/10.1016/j.jwb.2011.04.018
Jiang, B., Belohlav, J. A., & Young, S. T. (2007). Outsourcing impact on manufacturing firms' value: Evidence from Japan. Journal of Operations Management, 25(4): 885-900. http://dx.doi.org/10.1016/j.jom.2006.12.002
Krishnamurthy, K., Jegen, D., & Brownell, B. (2009). Strategic Out-Tasking: Creating ''win–win'' outsourcing partnerships. Information & Management, 46(1): 42-51. http://dx.doi.org/10.1016/j.im.2008.11.004
Lacity, M.C., Willcocks, L.P. & Rottman, J.W. (2008). Global outsourcing of back office services: lessons, trends, and enduring challenges. Strategic Outsourcing: An International Journal, 1(1): 13-34.
Lacity, M., Willcocks, L., & Khan, S. (2011). Beyond Transaction Cost Economics: Towards an endogenous theory of Information Technology Outsourcing. Journal of Strategic Information Systems, 20(2): 139-157. http://dx.doi.org/10.1016/j.jsis.2011.04.002
Li, Y., Liu, Y., Li, M., & Wu, H. (2008). Transformational offshore outsourcing: Empirical evidence from alliances in China. Journal of Operations Management, 26(2): 257-274. http://dx.doi.org/10.1016/j.jom.2007.02.011
Lo, Chi-C., Chen, & Wan-J. (2012). A hybrid information security risk assessment procedure considering interdependences between controls. Expert Systems with Applications, 39(1): 247-257.
Lockamy III, A., & McCormack, K. (2010). Analyzing risks in supply networks to facilitate outsourcing decisions. International Journal of Production Research, 48(2): 593-611. http://dx.doi.org/10.1080/00207540903175152
Luo, Y., Zheng, Q., & Jayaraman, V. (2010). Managing Business Process Outsourcing. Organizational Dynamics, 39(3): 205-217. http://dx.doi.org/10.1016/j.orgdyn.2010.03.005
Mao, Ji-Y., Lee, Jae-N., & Deng, Chun-P. (2008). Vendors' perspectives on trust and control in offshore information systems outsourcing. Information & Management, 45(7): 482-492.
Mathew, S. K., & Chen, Y. (2013). Achieving offshore software development success: An empirical analysis of risk mitigation through relational norms. Journal of Strategic Information Systems, 22(4): 298-314. http://dx.doi.org/10.1016/j.jsis.2013.03.001
Nakatsu, R. T., & Iacovou, C. L. (2009). A comparative study of important risk factors involved in offshore and domestic outsourcing of software development projects: A two-panel Delphi study. Information & Management, 46(1): 57-68. http://dx.doi.org/10.1016/j.im.2008.11.005
Nassimbeni, G., Sartor, M., & Dus, D. (2012). Security risks in service offshoring and outsourcing. Industrial Management & Data Systems, 112(3): 405-440. http://dx.doi.org/10.1108/02635571211210059
Overby, S. (2003). The hidden costs of offshore outsourcing, CIO Magazine, September 1.
Pfannenstein, L.L. & Tsai, R.J. (2004): Offshore Outsourcing: Current and Future Effects on American IT Industry. Information Systems Management, 21(4): 72-80. http://dx.doi.org/10.1201/1078/44705.21.4.20040901/84190.9
Prasad, S., & Babbar, S. (2000): International operations management research. Journal of Operations Management, 18(2): 209-247. http://dx.doi.org/10.1016/S0272-6963(99)00015-7
Quélin, B., & Duhamel, F. (2003). Bringing Together Strategic Outsourcing and Corporate Strategy: Outsourcing Motives and Risks. European Management Journal, 21(5): 647-661. http://dx.doi.org/10.1016/S0263-2373(03)00113-0
Raiborn, C. A., Butler, J. B., & Massoud, M. F. (2009). Outsourcing support functions: Identifying and managing the good, the bad, and the ugly. Business Horizons, 52(4): 347-356. http://dx.doi.org/10.1016/j.bushor.2009.02.005
Raj, T., Shankar, R., & Suhaib, M. (2008). An ISM approach for modelling the enablers of flexible manufacturing system: the case for India. International Journal of Production Research, 46(24): 6883-6912. http://dx.doi.org/10.1080/00207540701429926
Rao, M.T. (2004). Key issues for global IT sourcing: country and individual factors. Information Systems Management, 21(3): 16-21. http://dx.doi.org/10.1201/1078/444126.96.36.19940601/82472.3
Sambharya, R. B., & Rasheed, A. A. (2012). Global risk in a changing world: New paradigms and practice. Organizational Dynamics, 41(4):308-317.http://dx.doi.org/10.1016/j.orgdyn.2012.08.006
Shang, J. S., Tjader, Y., & Ding, Y. (2004). A Unified Framework for Multi criteria Evaluation of Transportation Projects. IEEE Transactions on Engineering Management, 51(3): 300-313. http://dx.doi.org/10.1109/TEM.2004.830848
Shekhar, S. (2008), Benchmarking knowledge gaps through role simulations for assessing outsourcing viability. Benchmarking: An International Journal, 15(3): 225-241.
Søderberg, A. M., Krishna, S., & Bjørn, P. (2013). Global Software Development: Commitment, Trust and Cultural Sensitivity in Strategic Partnerships. Journal of International Management, 19(4): 347-361. http://dx.doi.org/10.1016/j.intman.2013.04.004
Stratman, J. K. (2008). Facilitating offshoring with enterprise technologies: Reducing operational friction in the governance and production of services. Journal of Operations Management, 26(2): 275-287. http://dx.doi.org/10.1016/j.jom.2007.02.006
Stringfellow, A., Teagarden, M. B., & Nie, W. (2008). Invisible costs in offshoring services work. Journal of Operations Management, 26(2):164-179. http://dx.doi.org/10.1016/j.jom.2007.02.009
Subramanian, N., & Ramanathan, R. (2012). A review of applications of Analytic Hierarchy Process in operations management. Int. J.Production Economics, 138(2): 215-241. http://dx.doi.org/10.1016/j.ijpe.2012.03.036
Tayauova G. (2012). Advantages and disadvantages of outsourcing: analysis of outsourcing practices of Kazakhstan banks. Procedia – Social and Behavioral Sciences, 41:188-195.
Tjader, Y. C., Shang, J. S., & Vargas, L. G. (2010). Offshore outsourcing decision making: A policy-makers perspective. European Journal of Operational Research, 207(1): 434-444. http://dx.doi.org/10.1016/j.ejor.2010.03.042
Tjader, Y., May, J.H., Shang, J., Vargas, L. G. & Gao, N. (2013). Firm-level outsourcing decision making: A balanced scorecard-based analytic network process model. International Journal of Production Economics. 147: 614-623 http://dx.doi.org/10.1016/j.ijpe.2013.04.017
Varadarajan, R. (2009). Outsourcing: Think more expansively. Journal of Business Research, 62(11): 1165-1172. http://dx.doi.org/10.1016/j.jbusres.2008.09.006
Wei, Chun-C., Chien, Chen-F., & Wang, Mao-Jiun J. (2005). An AHP-based approach to ERP system selection. Int. J. Production Economics, 96(1): 47-62.
Wright, T. (2005). Outsourcing - Financial Services Authority report on offshoring. Computer Law & Security Report, 21: 500-504. http://dx.doi.org/10.1016/j.clsr.2005.08.008
Youngdahl, W., & Ramaswamy, K. (2008). Offshoring knowledge and service work: A conceptual model and research agenda. Journal of Operations Management, 26(2): 212-221. http://dx.doi.org/10.1016/j.jom.2007.02.007
Youngdahl, W.E., Ramaswamy, K., & Dash, K. C. (2010). Service offshoring: the evolution of offshore operations. International Journal of Operations & Production Management, 30(8): 798-820. http://dx.doi.org/10.1108/01443571011068171
Metrics powered by PLOS ALM
Cited-By (articles included in Crossref)
This journal is a Crossref Cited-by Linking member. This list shows the references that citing the article automatically, if there are. For more information about the system please visit Crossref site
1. Probabilistic risk analysis in manufacturing situational operation: application of modelling techniques and causal structure to improve safety performance.
Jose Cristiano Pereira, Gilson Brito Alves Lima
International Journal of Production Management and Engineering vol: 3 issue: 1 first page: 33 year: 2015
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives- 4.0 International License
Universitat Politècnica de València
e-ISSN: 2340-4876 ISSN: 2340-5317 https://doi.org/10.4995/ijpme