Information systems offshore outsourcing. A descriptive analysis
| Pages | 1233-1248 |
| DOI | https://doi.org/10.1108/02635570610712555 |
| Published date | 01 December 2006 |
| Date | 01 December 2006 |
| Author | Reyes Gonzalez,Jose Gasco,Juan Llopis |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Information systems offshore
outsourcing
A descriptive analysis
Reyes Gonzalez, Jose Gasco and Juan Llopis
Department of Business Organisation, University of Alicante, Alicante, Spain
Abstract
Purpose – The present paper has as its aim to deepen in the study of information systems offshore
outsourcing, proposing three essential steps to make this decision: weighing up the advantages and
risks of offshore outsourcing; analysing the taxonomy of this phenomenon; and determining its
current geography.
Design/methodology/approach – With that objective in mind, it was decided to base the research
work on the literature about this topic and the review of reports and statistics coming from different
sources (consultants, the press, public institutions, etc.).
Findings – Offshore outsourcing has grown vertiginously in recent years. Its advantages exceed
even those of onshore outsourcing, though it also involves greater risks derived from the (cultural and
physical) distance existing between customer and provider. Various types of services and
customer-provider relationships hide under the umbrella of offshore outsourcing; i.e. it is not a
homogeneous phenomenon. The main offshore outsourcing customers can be found in the USA and
Europe, mainly in the UK but also in other countries such as Germany and France. As for provider
firms, most of them are located in Asia 2outstandingly in India but also in China and Russia. At
present, there are important providers scattered in other continents as well.
Originality/value – The conclusions suggest that the range of potential offshore outsourcing
destinations must be widened and that the search for a provider cannot be based exclusively on cost
savings; other considerations such as quality, security and proximity of the provider must also be
taken into consideration. That is precisely the reason why the study of new countries like Spain as
offshore outsourcing destinations is proposed.
Keywords Information syste ms, Outsourcing, Benefits, Risk man agement
Paper type General review
Introduction: offshore outsourcing
Information systems (IS) outsourcing has experienced a considerable growth in the last
few years, to such an extent that this market moved over e185 billion all over the world
in 2005 (IDATE Foundation, 2005). Within this trend, it is necessary to highlight
specifically the growth of offshore outsourcing (OffOut), sometimes referred to as
Global Outsourcing, because global has less negative connotations than the term
offshore (Carmel and Agarwal, 2002), normally associated with the loss of jobs in the
country which outsources its services. IS OffOut implies contracting all or part of an
enterprise’s information technology (IT) functions with a provider located in a foreign
country (Rao, 2004) that will help the customer through the provision of tangible or
intangible, human or non-human resources (Kumar and Palvia, 2002) (Table I).
The factors which explain the emergence and growth of IS OffOut in recent years
are very varied and mutually interrelated:
The current issue and full text archive of this journal is available at
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The authors would like to thank the editor and the anonymous reviewers for their suggestions.
Information
systems offshore
outsourcing
1233
Industrial Management & Data
Systems
Vol. 106 No. 9, 2006
pp. 1233-1248
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610712555
.Economic and market globalisation is one of them (Beulen et al., 2005; Bobek
and Korez Vide, 2005). During the last 30 years, firms in the textile, automobile
and steel industries amongst others have outsourced work to foreign countries.
OffOut can be seen as one more aspect within this globalisation and
delocalisation process (Kliem, 2004).
.The cost savings offered by this type of outsourcing are another determining
factor, in fact one of the most relevant ones. For example, a programmer who can
earn up to 100,000$ in California will earn 30,000$ or less in India (Menon, 2005).
.The shortage of qualified labour in the USA and even in Europe was directly
related to the emergence of OffOut (Erber and Sayed-Ahmed, 2005; Tafti, 2005).
That shortage was partly caused by the technological boom of the late 1990s and
the need for technicians for the new e-businesses. To that was added the
adjustment of computer programs for the 2000 effect (2YK), which made IT staff
salaries grow and led to a shortage of that staff (Chen and Lin, 1998; Carmel and
Nicholson, 2005). In Europe, programs also had to be adjusted to the new
European currency – the euro – which, combined with the 2000 effect,
contributed to the shortage of professionals.
.The need to shorten the development time cycle of IS projects is another factor to
be considered (Sobol and Apte, 1995). IT products and services have an
increasingly short life cycle; a circumstance which has significantly increased
the demand for more flexibility for IT enterprises, which do not have enough
time to create and maintain adequately trained human resources that can cope
with the volatility of the demand and the heterogeneity of its projects. Immediate
access to these offshore resources is another growth factor.
.Finally, the development of telecommunications and the generalisation of the
internet are other facilitating factors that must be taken into account.
As OffOut has evolved and acquired more importance, the literature on this is sue has
grown too, which leads us to think that this is a suitable moment to reflect on it.
The present paper seeks to deepen in the analysis of OffOut, proposing three essential
steps in the adoption of this decision: weighing out the advantages and risks associated
with OffOut; analysing its taxonomy; and determining its current geography, that is,
the location of the enterprises which supply these services. In relation to the latter, we
Gartner (2004) “As a result of the trend toward Global Outsourcing, Gartner predicts that up to
25% of the traditional IT work in many developed countries will be situated in
emergent markets in 2010”
King (2005) “The Software Engineering Institute estimates that nearly 40% of the
higher-level software companies are located in India”
Palvia (2003) “According to Forrester Research, at least 3.3 million white-collar jobs and 136
billion dollars worth of salaries will leave the USA and go to other low-cost
countries in 2015. 14% of these 3.3 million will be related to IS work”
UNCTAD (2004) “One cannot predict the magnitude that service delocalisation will reach; it is
believed that the fastest growth will take place in the services facilitated by IT.
Forecasts say that they will pass from one billion dollars in 2002 to 24 billion in
2007”
Table I.
IS OffOut: some figures
IMDS
106,9
1234
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