Outsourcing and Offshoring: Implications for Productivity of Business Services

Abstract

This paper reviews the implications of outsourcing and offshoring for the productivity of business services in the UK. Official statistics indicate that business-service productivity has grown by over 20 per cent in the last 7 years at the same time as employment grew by 20 per cent. The paper considers possible factors that account for the simultaneous growth of employment and productivity. First, we discuss outsourcing and offshoring, and their role in enhancing productivity through greater specialization, standardization, and consolidation of business processes, and a shift to higher value-added services. Outsourcing of business services is interpreted as part of corporate restructuring, namely as the unbundling of corporate functions as well as vertical disintegration. Second, as some services become more like products, both low-skilled and high-skilled jobs are subjected to productivity growth through standardization and digitization. It is argued, however, that the future of business-service productivity is on a knife-edge, depending on the mix of two sources of productivity enhancement-namely greater standardization and capturing value from customized solutions.

Global delivery models: The role of talent, speed and time zones in the global outsourcing industry

“…At the same time, the processing of tasks can be accelerated by operating across different time zones. For example, prior research indicates that providers have become very proficient in organizing services into customized 'front-ends' and modularized 'back-ends' (Sako, 2006). Thus, potential speed advantages of decentralizing processes are enhanced when locating these sub-processes in different time zones.…”

“…By commoditization we mean the extent to which a task or a service is standardized, modular and unspecific to a particular client or industry (Davenport, 2005;Sako, 2006;Tanriverdi et al, 2007).…”

Os desafios de Startups na utilização da estratégia de offshoring

“…Para Lewin, Massini e Peeters (2009), offshoring se refere ao processo de terceirização ou deslocamento de atividades e processos que atravessam as fronteiras de um país para outro, ocorrendo, particularmente, de países desenvolvidos para países emergentes de menor custo. (MANNING;LEWIN, 2008;METTERS;VERMA, 2008;SAKO, 2006). O fenômeno de offshoring pode ser visto como uma nova forma de internacionalização na qual a empresa distribui sua cadeia de fornecimento em múltiplos locais, sendo possível explorar processos e capacidades potenciais que são ofertados por terceiros (LEWIN; MASSINI; PEETERS, 2009).…”

The offshore services value chain: upgrading trajectories in developing countries

“…However, in the late 1990s many MNCs decided to sell these operations to third-party providers to further reduce costs. In this process, a great deal of knowledge transfer occurred and developing countries benefited significantly from this new type of corporate reorganisation (Sako, 2006). The decline of these captive centres gave way to the division of the market into two groups of large firms that dominate the supply of offshore services.…”

“…Information technology (IT) now allows for quick and easy information transfer. Companies looking to improve their efficiency levels in the global economy, reduce costs and increase flexibility (Lopez et al, 2008) unbundled their corporate functions, such as human resource management, customer support, accounting and finance, and procurement operations, and 'offshored' these activities (Gospel and Sako, 2008;Sako, 2006). This reduced the burden of support activities and allowed firms to focus on their core business.…”