Abstract
(1) Background: To obtain sustainable performance through outsourcing, organizations must balance the inherent tension between pursuing cost-saving initiatives (i.e., efficiency) and pursuing innovative initiatives (e.g., developing new products). This study aims to explore this tension by exploring different ways that organizations can pursue both efficiency and innovativeness, through their IT outsourcing (ITO) and business process outsourcing (BPO). (2) Methods: This study utilizes a configurational approach in two inductive studies, both using qualitative comparative analysis (QCA). The first study qualitatively compares 27 firms currently doing ITO, while the second study compares 60 firms doing either ITO or BPO. (3) Results: Our findings suggest three configurations, or combination of conditions, that enable efficiency and innovation through ITO and BPO. For ITO, firms can use a best-of-breed or a mediated multi-outsourcing configuration to enable innovation; however, firms can only use a direct multi-outsourcing configuration to enable innovation through BPO. (4) Conclusions: The study is among the first to explore both ITO and BPO practices that enable innovation and efficiency simultaneously (sustainable performance). In contrast with prior studies, all three aforementioned configurations suggest that having detailed outsourcing contracts is a necessary but not sufficient condition for innovation through outsourcing.
Highlights
Accepted: 10 February 2022In a global economy, modern organizations have increasingly used outsourcing as a strategy to reduce operational costs and leverage external capacities [1,2]
IT outsourcing (ITO) and business process outsourcing (BPO) configurations that can lead to innovation; (2) while prior studies suspect detailed contracts as a culprit for killing innovation in outsourcing relationships, we show that detailed contracts are necessary, but not sufficient, conditions for innovation
While elements of detailed contracts can hinder innovation [3], not using detailed contracts will certainly lead to the lack of innovation; (3) we show the possibility of a substitutive relationship between diversified suppliers and majority outsourcing, plus extendable contracts in the case of ITO, but the relationship is complementary in the case of BPO
Summary
Accepted: 10 February 2022In a global economy, modern organizations have increasingly used outsourcing as a strategy to reduce operational costs and leverage external capacities [1,2]. There is the challenge of maintaining sustainable performance, when organizations have to balance the tensions between pursuing efficiency and innovation. There is the challenge of creating sustainable interorganizational relationships, when organizations have to balance the tensions coming from cost-driven outsourcing models with their suppliers [4]. Due to the focus on cost savings, organizations tend to create a “race to the bottom” situation, in which suppliers bid on the lowest service prices, while sacrificing long-term investments and meaningful partnerships. Facing this challenge, researchers have started to identify situations where organizations successfully
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