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Information Systems Outsourcing pp 37–64Cite as

Strange Bedfellows No More: Researching Business Process Outsourcing and Dynamic Innovation

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Part of the book series: Progress in IS ((PROIS))

Abstract

This chapter answers the question: How do clients and BPO service providers work together to foster dynamic innovation? The chapter is based on research conducted in 2011 and 2012 and includes 202 survey responses and 48 in-depth interviews in 24 client organizations. Dynamic Innovation is a process by which clients incent providers to deliver many innovations each year that improve the client’s performance in terms of operational efficiency, process effectiveness and/or strategic impact. The research finds that leadership pairs are key drivers of dynamic innovation. Leadership pairs jumpstart the dynamic innovation process by starting with innovation incentives. The most effective innovation incentives are mandatory productivity targets, innovation days, and gainsharing at the project level. Threat of competition and special governance arrangements for innovation also positively influence innovation. The least successful incentives for innovations were found to be innovation funds, gainsharing at the relationship level, what has been called ‘painsharing’, and benchmarking. Delivering innovations requires acculturation that is, establishing a collaborative culture. This acts as a foundation for practices that inspire, fund, and inject cycles of innovations in the client organization.

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Notes

  1. 1.

    See Willcocks, L. Lacity, M. and Craig, A. (2012). Becoming Strategic—South Africa’s BPO Service Advantage. LSE Outsourcing Unit Research Paper 12/3, LSE, London. This should be compared with a more optimistic forecast of J. Harris, K. Hale, R. Brown, A. Young and C. Morikawa, “Outsourcing Worldwide: Forecast Database.” Gartner, September 13, 2010. http://www.gartner.com/id=486175. They suggested a market of $309 billion revenues in 2012.

  2. 2.

    Willcocks, Lacity and Craig (2012) op. cit. See also IDC, 2012 BPO Market Size, http://www.idc.com.

  3. 3.

    In fourth quarter 2011, we administered a survey to respondents representing 84 client organizations that purchase ITO and BPO services. Nine countries are represented, but the data primarily capture US client responses. Overall, we found that client organizations are not changing their buying patterns because of anti-offshoring pressures. Instead, client respondents report strong satisfaction with offshore outsourcing of IT and business services and favorably reported on the costs savings and increased flexibility with offshore ITO and BPO. See: S. Khan, and M. Lacity, “Survey Results: Are Client Organizations Responding to Anti-Offshoring Pressures?” Strategic Outsourcing: An International Journal, Vol. 5, 2, (2012) 166–179.

  4. 4.

    The estimates come from reviewing our high performance case research for 2012/2013 and considering also the following studies. Our most comprehensive data comes from Lacity et al., (2012) op.cit. which reviews 1,356 findings from 254 academic research studies. Most of this research is based on large-sample surveys of outsourcing clients or in-depth case studies at client sites. Many academic studies examined specifically the extent to which outsourcing engagements resulted in positive outcomes from the client’s perspective. Aggregating results across all BPO empirical studies reveals that BPO clients reported positive outcomes from outsourcing business processes 56 % of the time, negative outcomes 11 % of the time, and no changes in performance as a consequence of outsourcing business processes 33 % of the time. (ITO clients, by comparison, reported positive outcomes from outsourcing 63 % of the time.) A further source is Willcocks, L. Lacity, M., Simonsen, E., Sutherland, C., Hindle, J and Mindrum, C. (2012), Achieving High Performance in BPO: Research Report. Accenture, London. The BPO survey conducted by Everest Group in this research identified 20 percent of respondents as “best-in-class” scoring strongly on at least three must-have attributes, and in the top quartile on seven additional attributes. A further 20 percent were “potential” high performers meeting one or other of these two criteria; 60 % were typical BPO performers meeting neither criteria. Note that typical here covers a wide spectrum of performance from normal to poor. The research found that levels of performance were independent of industry, geography, size of deal, tenure of BPO relationship and business function outsourced.

  5. 5.

    We have been conducting BPO case studies since 2000. Some of our first BPO case studies are published in Willcocks, L., and Lacity, M. (2006), Global Sourcing of Business and IT Services, Palgrave, United Kingdom. Our most recent BPO work is found in: Lacity, M., and Willcocks, L. (2012), Advanced Outsourcing Practice: Rethinking ITO, BPO, and Cloud Services, Palgrave, London. We also use the data from a 26 organizations study of outsourcing and collaborative innovation. See Whitley, E. and Willcocks, L. (2011) “Achieving Step-Change in Outsourcing Maturity: Towards Collaborative Innovation,” MISQ Executive, Vol. 10, 3, 95–107.

  6. 6.

    The eight practices are available Accenture (2012) Achieving High Performance in BPO: Research Report. Accenture, London available at http://www.accenture.com/Microsites/highperfbpo/Pages/home.aspx.

  7. 7.

    OCR = Optical Character Recognition.

  8. 8.

    Bidault and Castello (2010) found that very low levels of trust and very high levels of trust are detrimental to innovation. They found that the optimal level of trust is somewhere in between.

  9. 9.

    See Lacity, M., and Willcocks, L. (2012), “Mastering High-Performance: The Case of Microsoft’s OneFinance” available at http://www.accenture.com/Microsites/highperfbpo/Pages/who-got-it-right.aspx.

  10. 10.

    See Accenture (2012) Achieving High Performance in BPO: Research Report. Accenture, London available at http://www.accenture.com/Microsites/highperfbpo/Pages/home.aspx.

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Acknowledgements

A shorter executive version of this chapter was first published in Lacity, M. and Willcocks, L. (2013), “Beyond Cost Savings: Outsourcing Business Processes for Innovation,” Sloan Management Review, Spring Issue. We also thank and acknowledge our research sponsors, Accenture, Orbys, and BPeSA.

This chapter has previously been published in Strategic Outsourcing: An International Journal.

Author information

Authors and Affiliations

  1. College of Business, University of Missouri-St. Louis, One University Boulevard, St. Louis, MO, 63121, USA

    Mary C. Lacity

  2. Department of Management, Information Systems and Innovation Group, London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, UK

    Leslie P. Willcocks

Authors
  1. Mary C. Lacity
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  2. Leslie P. Willcocks
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Correspondence to Mary C. Lacity .

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Editors and Affiliations

  1. Business Administration, Louisiana State University, Baton Rouge, Louisiana, USA

    Rudy Hirschheim

  2. LS ABWL und Wirtschaftsinformatik I, Universität Mannheim, Mannheim, Germany

    Armin Heinzl

  3. Institute for Information Systems Dept of Information Engineering, University of Bern, Bern, Switzerland

    Jens Dibbern

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Lacity, M.C., Willcocks, L.P. (2014). Strange Bedfellows No More: Researching Business Process Outsourcing and Dynamic Innovation. In: Hirschheim, R., Heinzl, A., Dibbern, J. (eds) Information Systems Outsourcing. Progress in IS. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-43820-6_3

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