Offshoring Propensity in Information Technology Services: A Firm and Country Level Analysis

Zusammenfassung

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This conceptual paper examines the dynamics of the offshoring of information technology (IT) service work. It considers this important emerging phenomenon from multiple lenses, especially those of international business theories. Research propositions are developed based on the perspectives of home country firms, host nation and the dynamic interactions between the two. Questions for future research are suggested. Already established nations in the field get more opportunities than the new entrants to increase their competitiveness from experience-based knowledge gained as a result of the imitative actions of home country firms.

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Auszug

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Offshoring Propensity in Information Technology Services: A Firm and Country Level Analysis

Introduction

The offshoring of services is a phenomenon that has grown dramatically in size, scope, and economic impact (Parkhe 2007). Unlike most services where consumption and production are co-located, Lovelock and Yip (1996) suggest that one type of services namely, the information-based services, are amenable to internationalization because these services require less direct contact of the customer with service personnel. This view is consistent with the observation that offshoring of IT services has been growing very rapidly (Parkhe 2007). Matloff (2004) references a Gartner study projecting that "25 percent of all U.S. IT jobs will move overseas by 2010, up from 5 percent today". As early as 2001, more than 40 percent of Fortune 500 companies were reportedly engaged in offshore outsourcing (Carmel/Agarwal 2002). Given that offshoring is growing so rapidly, it is important for international business scholars to develop a thorough understanding of its dynamics.

Offshoring is defined as locating an activity to a wholly owned company or an independent service provider in another, usually a low cost country (Lewin/Peeters 2006). Offshoring can occur through varied mechanisms including (a) creating a subsidiary in another country and moving work between organizational units, (b) contracting directly with individual workers in another country, (c) contracting with a service firm in another country, (d) contracting with a multinational organization having offices in the offshoring firm's home country with sources of labors across nations, and (e) acquiring a subsidiary in another country. In this paper, we are primarily concerned with market-driven offshoring rather than with the movement of work between hierarchical units. We would expect that the dynamics of hierarchical movement of labor between workplaces, for example among...

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