A value and risk analysis of offshore outsourcing business models: an exploratory study

Abstract

Growing competition and choice in the offshore outsourcing field has gradually altered the way organisations select and approach outsourcing contracts. In declining economic conditions organisations are even more concerned than before about the value proposition and risk involved in signing over their information systems and technology activities to third party organisations. This paper is based on an exploratory study of four offshore outsourcing vendors and the risks and value propositions of the different offshore outsourcing models they offer. The findings suggest that although offshore outsourcing offers new business opportunities for vendors, much of the outsourced work continues to be in areas of low risk and low value to client businesses. This research concludes that the main challenge for outsourcing vendors is therefore to develop strategies that facilitate low cost, high value contracts, without incurring additional risk. From the client side, being able to identify and assess the value and risks of the different offshore outsourcing business models helps organisations to make better choices during the decision making process when selecting vendors.

Keywords:

• offshore outsourcing
• outsourcing
• risk
• value
• value analysis model

Acknowledgement

The authors wish to thank Ms Naurine Khan for her valuable contribution to this research.