Abstract
What is the impact of business process standardization on business process outsourcing (BPO) success? This paper argues that there is a direct impact of process standardization on BPO success, due to production cost economies, and also an indirect effect via improved contractual and relational governance resulting from better monitoring opportunities and facilitated communication and coordination. This threefold impact of standardization on BPO success is empirically confirmed using data from 335 BPO ventures in 215 German banks.
Similar content being viewed by others
References
Anderson, J., & Narus, J. (1990). A model of distributor firm and manufacturer firm working partnerships. Journal of Marketing, 54(1), 42–58.
Ang, S., & Straub, D. (1998). Production and transaction economies and IS outsourcing: A study of the U.S. banking industry. MIS Quarterly, 4, 535–552.
Aron, R., Clemons, E. K., & Reddi, S. (2005). Just right outsourcing: Understanding and managing risk. Journal of Management Information Systems, 22(2), 37–55.
Aubert, B. A., Patry, M., & Rivard, S. (1998). Assessing the risk of IT outsourcing. In 31st Hawaii International Conference on System Sciences, 1998.
Aubert, B. A., Patry, M., Rivard, S., & Smith, H. (2001). IT outsourcing risk management at British Petroleum. In 34th Hawaii International Conference on System Sciences, 2001.
Aubert, B. A., Houde, J.-F., Patry, M., & Rivard, S. (2003). Characteristics of IT outsourcing contracts. In 36th Hawaii International Conference on System Sciences, Hawaii, 2003.
Auguste, B. G., Hao, Y., Singer, M., & Wiegand, M. (2002). The other side of outsourcing. McKinsey Quarterly, 2002(1), 52–63.
Bagozzi, R. P. (1979). The role of measurement in theory construction and hypothesis testing: Toward a holistic model. In O. C. Ferrell, S. W. Brown, & C. W. Lamb (Eds.), Conceptual and theoretical developments in marketing (pp. 15–32). Chicago: American Marketing Association.
Bagozzi, R. P., & Phillips, L. (1982). Representing and testing organizational theories: A holistic construal. Administrative Science Quarterly, 27, 459–489 September.
Bagozzi, R. P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science, 16, 74–94.
Baumol, W. J., Panzar, J. C., & Willig, R. D. (1982). Contestable market and the theory of industry structure. New York: Harcourt Brace Jovanovich.
Blau, P. M. (1964). Exchange and power in social life. New York: Wiley.
Borman, M. (2006). Applying multiple perspectives to the BPO decision: A case study of call centres in Australia. Journal of Information Technology, 21, 99–115.
Braun, M. (2004). Vom IT- zum business process outsourcing. Bankmagazin, 53(2), 22.
Cachon, G., & Harker, P. (2002). Competition and outsourcing with scale economies. Management Science, 48(10), 1314–1333.
Chin, W. W. (1998). The partial least squares approach to structural equation modeling. In G. A. Marcoluides (Ed.), Modern methods for business research (pp. 295–336). London: Lawrence Erlbaum Associates.
Churchill, G. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing, 16, 64–73 February.
Cohen, J., Cohen, P., West, S. G., & Aiken, L. S. (2003). Applied multiple regression/correlation analysis for the behavioral sciences. London: Lawrence Erlbaum Associates.
Davenport, T. (2005). The coming commoditization of processes. Harvard Business Review, 83, 100–108 June.
Davenport, T. H., & Short, J. E. (1990). The new industrial engineering: Information technology and business process redesign. Sloan Management Review, 31(4), 11–27.
Dayasindhu, N. (2004). Information technology enabled process outsourcing and reengineering: Case study of a Mortgage Bank. In Proceedings of the Americas Conference on Information Systems, New York, 2004.
de Toni, A., & Panizzolo, R. (1993). Product and process standardization in intermittent and repetitive production. Journal of Production Research, 31(6), 12–32.
de Vries, H. (1999). Standardization. Boston: Kluwer.
Donaldson, L. (2001). The contingency theory of organizations. Thousand Oaks: Sage.
Dwyer, F. R., Schurr, P. H., & Oh, S. (1987). Developing buyer-seller relationships. Journal of Marketing, 51(2), 11–27.
Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.
Earl, M. J. (1996). The risks of outsourcing IT. Sloan Management Review, 37, 26–32 Spring.
Emerson, R. M. (1972). Exchange theory Part I and II. In J. M. BergerZelditch, & B. Anderson (Eds.), Sociological theories in progress (pp. 38–87). Boston: Houghton-Mifflin.
Feenstra, R. C., & Hanson, G. H. (2003). Ownership and control in outsourcing to China: Estimating the property rights theory of the firm. The Quarterly Journal of Economics, 120(2), 729–761.
Feeny, D. F., Willcocks, L. P., & Lacity, M. C. (2003). Business process outsourcing: The promise of the ‘enterprise partnership’ model. Templeton executive briefing. Oxford: Templeton College, University of Oxford.
Fomin, V., & Lyytinen, K. (2000). How to distribute a cake before cutting it into pieces: Alice in Wonderland or radio engineers’ gang in the Nordic countries? In Information technology standards and standardization: A global perspective (pp. 222–239). Hershey: IGI.
Ford, D., & Farmer, D. (1986). Make or buy—A key strategic issue. Long Range Planning, 19(5), 54–62.
Gewald, H. (2006). Assessing the benefits and risks of business process outsourcing in the German Banking Industry. Dissertation, University of Frankfurt, Frankfurt am Main.
Gewald, H., Wüllenweber, K., & Weitzel, T. (2006). The influence of perceived risks on banking managers’ intention to outsource business processes—A study of the German banking and finance industry. Journal of Electronic Commerce Research, 7(2), 78–96.
Goles, T. (2001). The impact of the client–vendor relationship on information systems outsourcing success p. 230. Houston: University of Houston.
Goles, T., & Chin, W. W. (2002). Relational exchange theory and IS outsourcing: Developing a scale to measure relationship factors. In R. Hirschheim, A. Heinzl, & J. Dibbern (Eds.), Information systems outsourcing (pp. 221–250). Berlin: Springer.
Goles, T., & Chin, W. W. (2005). Information systems outsourcing relationship factors: Detailed conceptualization and initial evidence. The DATA BASE for Advances in Information Systems, 36(4), 47–67.
Goo, J., Kim, D. J., & Cho, B. (2006). Structure of service level agreements (SLA) in IT outsourcing: The construct and its measurement. In Twelfth Americas Conference on Information Systems, Acapulco, Mexico, 2006.
Gottfredson, R., Puryear, R., & Phillips, S. (2005). Strategic sourcing from periphery to the core. Harvard Business Review, 83(2), 132–139.
Govindarajan, V., & Fisher, J. (1990). Strategy, control systems, and resource sharing: Effects on business-unit performance. Academy of Management Journal, 33(2), 259–285.
Grover, V., Cheon, M., & Teng, J. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12(4), 89–116.
Gurbaxani, V. (1996). The new world of information technology outsourcing. Communications of the ACM, 39, 45–46 (7 (July).
Halvey, J. K., & Melby, B. M. (1996). Information technology outsourcing transactions: Processes, strategies, and contracts. New York: Wiley.
Hansen, M. T. (2002). Knowledge networks: Explaining effective knowledge sharing in multiunit companies. Organization Science, 13(3), 232–248.
Hart, O., & Moore, J. E. (1990). Property rights and the nature of the firm. Journal of Political Economy, 98(6), 1119–1158.
Heide, J. B., & John, G. (1992). Do norms matter in marketing relationships? Journal of Marketing, 56(2), 32–44.
Henderson, J. C. (1990). Plugging into strategic partnerships: The critical IS connection. Sloan Management Review, 31(3), 7–18.
Kanter, R. (1994). Collaborative advantage: The art of alliances. Harvard Business Review, 72(4), 96–108.
Kern, T., & Willcocks, L. P. (2000). Exploring information technology outsourcing relationships: Theory and practice. Journal of Strategic Information Systems, 9, 321–350.
Kern, T., & Willcocks, L. (2002). Exploring relationships in information technology outsourcing: The interaction approach. European Journal of Information Systems, 11, 3–19.
Kirsch, L. J. (1996). The management of complex tasks in organizations: Controlling the systems development process. Organization Science, 7(1), 1–21.
Lancellotti, R., Schein, O., Spang, S., & Stadler, V. (2003). ICT and operations outsourcing in banking. Wirtschaftsinformatik, 45(2), 131–141.
Langlois, R. (1995). Capabilities and coherence in firms and markets. In C. A. Montgomery (Ed.), Resource-based and evolutionary theories of the firm: Towards a synthesis (pp. 71–100). Boston: Kluwer.
Lee, J.-N., & Kim, Y.-G. (1997). Information systems outsourcing strategies for affiliated firms of the Korean Conglomerate Groups. Journal of Strategic Information Systems, 6(3), 203–229.
Lee, J.-N., & Kim, Y.-G. (1999). Effect of partnership quality on IS outsourcing success: Conceptual framework and empirical validation. Journal of Management Information Systems, 15(4), 29–61.
Lee, J. N., Miranda, S., & Kim, Y.-M. (2004). IT outsourcing strategies: Universalistic, contingency, and configurational explanations of success. Information Systems Research, 15(2), 110–131.
Loh, L., & Venkatraman, N. (1992). Determinants of information technology outsourcing: A cross-sectional analysis. Journal of Management Information Systems, 9(1), 7–24.
Loh, L., & Venkatraman, N. (1995). An empirical study of information technology outsourcing: Benefits, risk and performance implications (pp. 277–288). In Sixteenth International Conference on Information Systems, Amsterdam, 1995.
Macaulay, S. (1963). Non-contractual relations in business: A preliminary study. American Sociological Review, 28(1), 55–67.
Macneil, I. R. (1974). The many futures of contracts. Southern California Law Review, 47(3), 691–816.
Mani, D., Barua, A., & Whinston, A. B. (2006). Successfully governing business process outsourcing relationships. MIS Quarterly Executive, 5(1), 15–29.
Manrodt, K. B., & Vitasek, K. (2004). Global process standardization: A case study. Journal of Business Logistics, 25(1), 1–23.
Milgrom, P., & Roberts, J. (1992). Economics, organization and management. Englewood Cliffs: Prentice-Hall.
Mohr, J., & Spekman, R. (1994). Characteristics of partnership success: Partnership attributes, communication behavior, and conflict resolution techniques. Strategic Management Journal, 15(2), 135–152.
Murray, J. D., & White, R. W. (1983). Economies of scale and economies of scope in multiproduct financial institutions: A study of British Columbia credit unions. Journal of Finance, 38, 887–902.
Nam, K., Rajagopalan, S., Rao, H. R., & Chaudhurry, A. (1996). A two-level investigation of information systems outsourcing. Communications of the ACM, 39(7), 37–44.
Narus, J., & Anderson, J. (1987). Distribution contributions to partnerships with manufacturers. Business Horizons, 30, 34–42.
Ouchi, W. G. (1979). A conceptual framework for the design of organizational control mechanisms. Management Science, 25(9), 833–848.
Peter, J. (1981). Reliability: A review of psychometric basics and recent marketing practices. Journal of Marketing Research, 16, 6–17 (February).
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations. Boston: Pittman.
Phelps, R. (2006). Process standards: Pursuing best practices. Controlling Engineering, 53, 69–74 May.
Podsakoff, P. M., Mackenzie, S. B., Lee, J.-Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903.
Poppo, L., & Zenger, T. (1998). Testing alternative theories of the firm: Transaction cost, knowledge-based, and measurement explanation for make-or-buy decisions in information services. Strategic Management Journal, 19(9), 853–877.
Poppo, L., & Zenger, T. (2002). Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23(8), 707–725.
Porter, M. E. (1985). Competitive advantage. New York: Free Press.
Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68, 79–91 May–June.
Ramakumar, A., & Cooper, B. (2004). Process standardization proves profitable. Quality, 43(2), 42–45.
Ring, P., & Van de Ven, A. H. (1994). Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19(1), 90–118.
Rouse, A. C., & Corbitt, B. (2004). IT-supported business process outsourcing (BPO): The good, the bad and the ugly. In Eight Pacific Asia Conference on Information Systems, Shanghai, China, 2004.
Sambamurthy, V., & Zmud, R. W. (1999). Arrangements for information technology governance: A theory of multiple contingencies. MIS Quarterly, 23(2), 261–290.
Saunders, C., Gebelt, M., & Hu, Q. (1997). Achieving success in information systems outsourcing. California Management Review, 39(2), 63–80.
Swaminathan, J. M. (2001). Enabling customization using standardized operations. California Management Review, 43(3), 125–135.
Uzzi, B. (1997). Social structure and competition in interfirm networks: The paradox of embeddedness. Administrative Science Quarterly, 42(1), 35–67.
Weitzel, T., Beimborn, D., & König, W. (2006). A unified economic model of standard diffusion: The impact of standardization cost, network effects, and network topology. MIS Quarterly, 30, 489–514.
Willcocks, L. P., Lacity, M. C., & Kern, T. (1999). Risk mitigation in IT outsourcing strategy revisited: Longitudinal case research at LISA. Journal of Strategic Information Systems, 8(3), 285–314.
Willcocks, L., Hindle, J., Feeny, D. F., & Lacity, M. C. (2004). IT and business process outsourcing: The knowledge potential. Information Systems Management, 21, 7–15 Summer.
Williamson, O. E. (1975). Markets and hierarchies: analysis and antitrust implications. A study in the economics of internal organization. London: Free Press.
Wold, H. (1985). Partial least squares. New York: Wiley.
Wüllenweber, K., & Weitzel, T. (2007). An empirical exploration of how process standardization reduces outsourcing risk. In Proceedings of the 40th Hawaii International Conference on System Sciences (HICSS40), Hawaii, USA, 2007.
Acknowledgements
We are greatly indebted to Jens Dibbern for his thoughtful comments and suggestions that helped us to substantially improve this paper. Also, we would like to thank Rudy Hirschheim, Armin Heinzl, and the participants of the ICOIS 2007 conference for their valuable support. We are also grateful for the financial support of the E-Finance Lab.
Author information
Authors and Affiliations
Corresponding author
Additional information
An earlier version of this paper (“Business Process Outsourcing: The Challenge of Process Standardization”) was presented at the Intl. Conference on Outsourcing of Information Systems (ICOIS) in Heidelberg in 2007.
Appendix
Appendix
Rights and permissions
About this article
Cite this article
Wüllenweber, K., Beimborn, D., Weitzel, T. et al. The impact of process standardization on business process outsourcing success. Inf Syst Front 10, 211–224 (2008). https://doi.org/10.1007/s10796-008-9063-x
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10796-008-9063-x