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Global Multisourcing Strategy: Integrating Learning From Manufacturing Into IT Service Outsourcing Ning Su and Natalia Levina
Abstract—“Multisourcing” has emerged as an important strategy for global information technology (IT) service outsourcing in today’s turbulent business environment. The existing literature on IT service provides only limited insights into this phenomenon. However, in the manufacturing domain, a similar concept, supply base management, has been extensively studied. In this paper, we integrate related research in IT service and manufacturing to explore how firms can successfully pursue global multisourcing strategy in IT service. Specifically, we first conceptualize a firm’s multisourcing supply base along the dimensions of breadth and depth and theorize about the impact of these two dimensions on outsourcing outcomes. Second, based on this framework, we analyze four configurations of multisourcing supply base. Finally, we conduct case studies of two global financial services firms to illustrate the configurations and identify patterns of evolution of global multisourcing strategy in customized information systems development. Index Terms—Information technology (IT) outsourcing, multisourcing strategy, service supply chain, supply base.
I. INTRODUCTION ULTISOURCING” has recently emerged as an important strategy in global information technology (IT) service outsourcing [1]. This strategy is especially relevant in today’s turbulent business environment post global financial crisis. In this environment, organizations tend to engage in outsourcing contracts of smaller scale, but with a larger number of suppliers [2], [3]. Multisourcing is generally understood as combining IT and business services acquired from a select set of internal and external providers to achieve optimal outcome [1]. While the original definition of multisourcing does not require the use of multiple external suppliers, outsourcing practitioners typically refer to using multiple external suppliers as multisourcing. The rise of multisourcing is driven by organizations’ increasing need to achieve cost efficiency, flexibility, speed, and quality in today’s rapidly changing global market [4], [5], and is precipitated by the recent expiration and renegotiation of many firms’ legacy outsourcing contracts [6]. Multisourcing is also increasingly adopted in public sectors for large infrastructure projects, etc. As a strategy, multisourcing may lead to significant
“M
Manuscript received August 31, 2009; revised April 30, 2010; accepted November 1, 2010. Date of publication May 19, 2011; date of current version October 19, 2011. Review of this manuscript was arranged by the Special Issue Editor L. Willcocks. N. Su is with the Richard Ivey School of Business, University of Western Ontario, London, ON N6A 3K7, Canada (e-mail:
[email protected]). N. Levina is with the Leonard N. Stern School of Business, New York University, New York, NY 10012 USA (e-mail:
[email protected]). Digital Object Identifier 10.1109/TEM.2010.2090733
benefits [7]; on the other hand, it may challenge organizations’ existing managerial capabilities and operational models [1], [8]. In the past, many large firms developed relationships with multiple IT service suppliers for a particular business function due to historic reasons, such as mergers and acquisitions, and decentralized decision making process in supplier selection. However, increasingly, managers have started considering using multiple suppliers as a strategic move. The existing literature on IT service outsourcing offers some examples of multisourcing contracts [9], [10], [11], but limited theoretical insights into the strategic rationale behind multisourcing [5]. However, in the manufacturing domain, a similar concept, “supply base management,” has been extensively studied, especially in the field of operations management (OM). Moreover, in manufacturing, there is a trend opposite to multisourcing, namely, supply base consolidation or reduction [12]. It is generally believed that decreasing the number of suppliers and building deep supplier relationships are among the best practices that differentiated Japanese automakers such as Toyota and Honda from their competitors [13], [14]. In this paper, we integrate related research on multisourcing in both information systems (IS) and OM literatures and develop a theoretical model regarding the tradeoffs associated with the use of multiple suppliers for IT service outsourcing. Specifically, we first characterize a firm’s multisourcing supply base along two dimensions, breadth and depth, and theorize about the impact of these two dimensions on different aspects of outsourcing outcomes including cost, risk, flexibility, innovation, service quality, and delivery speed. Building on this theoretical model, we develop a conceptual framework of four configurations of supply bases in global multisourcing strategy. Finally, we apply case studies of two global leading financial services firms to illustrate how these configurations were implemented and evolved in real business settings, and identify patterns of global multisourcing strategy in IT service. II. RELATED LITERATURE In this section, we review concepts related to using multiple suppliers in IT service and manufacturing and identify various aspects of outsourcing outcomes. A. Multi-supplier Sourcing 1) IT Service: In the IT service domain, the first detailed description of multi-supplier sourcing discusses an arrangement, where there is one outsourcing contract but multiple service
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suppliers [9], [10], [15]. Such a strategy is most suitable when the IT work to be outsourced has a large scale and when the firm seeks to reduce the risk associated with supplier dependence, while the managerial overhead created by multi-supplier relationships is the key limitation [10]. This limitation may diminish as firms realize the need to invest in internal sourcing competency and create organizational structures and processes to effectively manage suppliers and execute sourcing strategies. The idea that firms have to build sourcing capabilities that can be used to manage multiple suppliers was made popular, in particular, by Gartner’s consultants and researchers [1]. Their research advocates the use of multiple suppliers for certain types of services as part of a sourcing strategy termed “multisourcing,” i.e., “the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers” [1, p. 1]. Recent actual deal announcements in the offshore outsourcing space seem to corroborate the trend [7]. In particular, in a turbulent business environment where global IT service supply markets rapidly change, having a portfolio of suppliers and frequent updating of multisourcing strategy, are particularly beneficial to clients firms [5]. 2) Manufacturing: In the manufacturing domain, the concept of multiple sourcing or multi-supplier sourcing refers to a business model where a firm utilizes multiple suppliers as opposed to a sole supplier for a particular component [13], [16]. These models are in contrast to single sourcing, where the client develops tightly integrated relationship with a single supplier for a particular component [17]. “Parallel sourcing,” a practice often found among leading Japanese automakers, refers to using multiple suppliers with comparable capabilities who are simultaneously single-source suppliers for similar components [13], [18]. Unfortunately, the literature adds to the confusion among terms as parallel sourcing is actually also a type of multi-supplier strategy with a particular duration and nature of supplier relationship. Across the organization, a large manufacturing firm might end up with thousands of suppliers [12]. These suppliers form a complex, interconnected supply network [19]. Within this network, the sourcing client is called the “focal firm,” while the set of suppliers that are actively managed by the focal firm through contracts and purchases is termed the “supply base” [20].
B. Outsourcing Outcome From the IS literature, we identify five key benefits of IT service outsourcing [15], [21]–[23], which are, cost reduction, flexibility enhancement, supplier innovation, service quality improvement, and delivery speed increase. The last four— flexibility, innovation, service quality, and delivery speed—are also termed “intangibles” (e.g., [24]). The literature also highlights two types of risks: strategic risk and operational risk (e.g., [25]). These outsourcing outcomes are largely consistent with those in manufacturing supply base management (e.g., [20]). This section reviews each of these benefits and risks in both IT service and manufacturing to enable further discussion of how multisourcing strategy impacts these outcomes.
1) Cost: The most important driver of outsourcing for many firms is cost reduction. Firms tend to outsource because they believe that suppliers possess certain production cost advantages [26]. Production cost refers to the cost of transforming inputs into outputs [27], or in the context of services, cost of performing a function at a given service level specified in a contract. Service levels are typically characterized by a certain degree of flexibility, innovation, quality, and speed. In the delivering of IT service, production cost typically involves hardware, software, and personnel [26]. There are also many other costs incurred in an outsourcing transaction, including searching and contracting costs, coordination costs, and costs associated with suppliers’ opportunistic behavior, which often turns into the suppliers’ increased profits. While some scholars have termed these costs collectively as transaction costs, there is much debate in the literature regarding whether the actual costs incurred in outsourcing, such as searching, contracting, and coordination costs, should be mixed together with potential costs associated with the risk of suppliers’ opportunistic behavior, which may or may not materialize [23]. For example, Williamson’s original definition in transaction cost economics treats these costs separately [27], whereas later literatures combine them together [23]. To avoid confusion surrounding “transaction costs,” we choose not to use this term and view the total cost of outsourcing as consisting of three major types: contracting, production, and coordination costs. We consider the potential costs associated with suppliers’ opportunistic behavior as transaction risk, more specifically, as “strategic risk” of outsourcing [28]. 2) Risk: Sourcing-related risk generally refers to the potential occurrence of an incident where suppliers do not meet client demand [20]. Risk in sourcing can be broadly categorized into strategic risk and operational risk [25]. Strategic risk is caused by suppliers’ deliberate, opportunistic profit-seeking behavior that reduces the client’s financial benefits; operational risk is caused by unintentional breakdown in the execution of tasks [25]. Risk can also be seen as a type of cost—“opportunism cost” [25], [28]. However, in this paper, we only include the actual cost incurred to the client in the contracting process in the definition of cost, and view the potential cost associated with suppliers’ opportunistic behavior as a type of risk. Strategic risk generally refers to the risk caused by the misalignment between incentives of the client and the supplier [25]. In IT service outsourcing, strategic risk may take several forms. The first form arises when suppliers underinvest in the relationship with the clients by reducing employee training, management attention, etc. The second form is suppliers’ potential significant escalation in pricing during contract renewal; this is often due to suppliers’ rising negotiation power as a result of clients’ transferring of process and knowledge to suppliers. The third form of strategic risk involves suppliers’ acquisition of clients’ proprietary processes and technologies and eventually becoming the clients’ competitors (e.g., [20] and [25]). Finally, strategic risk may emerge due to the collusive activities among multiple interrelated suppliers (e.g., [20]). Operational risk is associated with the occurrence of unplanned events that negatively impact the flow of goods or services in a supply chain [29]. Operational risk generally
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encompasses, among others, disruption and delay of delivery, IS breakdown, inaccurate forecast, expensive and inflexible supply capacity, low service quality, and high error rates [25], [29]. This risk is independent of strategic risk that stems from suppliers’ opportunistic behavior [25]. In IT service outsourcing, the limited codifiability of the outsourced work and therefore the requirement for tacit knowledge, and the lack of specific metrics to measure service quality are two important causes of operational risk [25]. 3) Intangible: Besides cost reduction, other major benefits of outsourcing include enhancing flexibility, generating innovation, improving service quality, and increasing delivery speed (e.g., [23]). While some aspects of these benefits can be specified in a formal contract, many other aspects are difficult to quantify and value financially. We refer to those aspects of flexibility, innovation, quality, and speed that are valuable but are not specified in the sourcing contract as “intangibles” (e.g., [24]). Flexibility in sourcing can be conceptualized as a set of options that provide a firm with preferential access to future opportunities for transforming the firm’s supply chain [30]. It manifests itself in the firm’s ability to successfully evolve its systems as markets, technologies, and supplier capabilities change [31]. Flexibility in IT service outsourcing encompasses four dimensions: robustness, modifiability, new capability, and ease of exit [32]. In supply base management, flexibility is also reflected in a firm’s ability to respond to time-sensitive requests [20]. A firm’s sourcing flexibility is a part of the firm’s overall “operating flexibility,” i.e., the ability to arbitrage in the real and financial markets by shifting production factors and resources among different units of the firm [33]. Innovation takes many forms and encompasses both new product development and business processes improvement [34]. Innovation is a major consideration for outsourcing in both manufacturing (e.g., [14]) and knowledge-based services (e.g., [35]). Innovation may emerge as a result of the supplier’s valuable resources and capabilities, such as specialized technologies, management techniques, and industry expertise (e.g., [34]). Innovation can also be “cocreated” [36] through boundary-spanning activities between two organizations [37], or the combination of resources from multiple organizations [38]. Service quality delivered by suppliers is an important factor of outsourcing success [23], [39], [40]. Broadly speaking, intangible service quality refers to the difference between the service customer’s expectations and perceptions [41]. Service quality can be generally conceptualized along five dimensions: reliability, responsiveness, assurance, empathy, and visual appearance [41]. Specifically, reliability refers to dependable and accurate delivery of the promised service; responsiveness means the willingness to help customers and provide prompt service; assurance includes supplier employees’ knowledge, courtesy, and the ability to build trust and confidence; empathy implies caring, individualized attention provided to customers; and visual appearance encompasses the presentation of physical facilities, equipment, and service personnel [41]. Delivery speed is an important variable in measuring business performance and constitutes a source of competitive advantage for some firms [34], [42]. In certain industries, reducing the time
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to market is even more critical than other economic factors such as cost (e.g., [43]). In IT outsourcing, the speed by which the supplier completes the outsourced task is a key consideration [44], [45]. If well managed, outsourcing can accelerate the client firm’s new product introduction, service improvement, and endto-end operations [44]. III. THEORETICAL FRAMEWORK In this section, we synthesize multisourcing-related concepts in both IT service and manufacturing and identify the impact of two characteristics of multisourcing supply base on different aspects of outsourcing outcome. A. Characterizing Multisourcing Supply Base We adopt the term “supply base” from the OM literature and apply it to IT service to refer to the set of contractual supplier relationships directly managed by the sourcing firm. This definition is somewhat similar to the term “outsourcing portfolio” [46] in the IS literature, which describes the set of outsourcing contracts in force at a given time. 1) Supply Base Breadth: Integrating various streams of the OM literature, we identify two key characteristics of a firm’s supply base as most critical to the competitiveness of the firm. The first is the number of suppliers the focal firm uses for a given product or service (e.g., [47]). Drawing upon the OM literature, we define the breadth of a firm’s multisourcing supply base as the number of suppliers the firm uses within a given business function. 2) Supply Base Depth: The second characteristic of the supply base is the depth of relationship between the client and the suppliers [14]. A close client–supplier relationship is often seen as a key success factor in manufacturing sourcing [13], [14]. We emphasize that this is a separate dimension from breadth as the focal firm can build significant commitment with suppliers without agreeing on single-sourcing relationships. McMillan [13] points out that Japanese automakers often develop deep relationships with multiple similar suppliers. Sometimes, a focal firm can obtain significant commitment from suppliers even in “extreme” multisourcing scenarios, where many suppliers are willing to invest in the client relationship in order to acquire valuable skills or knowledge in a competitive situation [5], [48], [49]. In this paper, we define the depth of a firm’s relationship with a supplier as the focal firm’s level of investment in a particular supply relationship for a given function. Such investment may take the form of contractually committed time and resources for helping the supplier develop routines, acquire knowledge, and improve capabilities (e.g., [5] and [14]). Fig. 1 illustrates these two concepts. Focal firm A has a highbreadth supply base, but each supply relationship has low depth. Firm B is the opposite. In reality, most supply bases are a combination of the two archetypes, such as that of Firm C. B. Supply Base’s Impact on Outsourcing Outcomes We review and analyze the impact of the breadth and depth of multisourcing supply base on the focal firms’ outsourcing
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Fig. 1.
Supply base characteristics.
Fig. 2.
Supply base’s impact on outsourcing outcomes.
outcomes. The result of analysis is a conceptual model (see Fig. 2). In the process of synthesizing IS and OM literatures, we have discovered that rarely do the two parameters of supply base have a direct impact on outsourcing outcomes. Instead, we have identified four mediating variables that have direct impact on outsourcing outcomes and that are influenced by supply base depth and breadth: 1) access to suppliers’ generic capabilities and capacities such as the suppliers’ overall technical expertise, managerial skills, and reusable technologies; 2) suppliers’ ability to utilize economies of scale within an engagement reflected by suppliers’ decreasing unit production costs as a result of increasing transaction volumes; 3) client’s switching costs such as the costs of terminating a contract, transferring physical assets,
data, and know-how; 4) each supplier’s client-specific capabilities, including the supplier employees’ knowledge of the client’s systems and processes and the ability to customize services to fit client needs. In the following, we elaborate each relationship in this model. 1) Impact of Supply Base Breadth: A major argument for the focal firm to increase the number of IT service suppliers for a given function is the potential to select and utilize suppliers with best-of-breed capabilities and adequate production capacities [5], [10]. Such capabilities are “generic” in the sense that they are accumulated across the suppliers’ past projects with a variety and multitude of clients, rather than specific to a particular client. IT service suppliers’ generic capabilities consist of a set of
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complementary capabilities, including technical skill, process competency, and client management ability, that were built over time through the suppliers’ exposure to multiple clients [50], [51]. Strong supplier capabilities can lead to suppliers’ cost advantages that may eventually translate into the client’s cost savings through proper contracting [50]. On the other hand, increasing the breadth of supply base has its downside from a production cost perspective. First, as the supply base broadens, the average amount of work sourced to each supplier is reduced. The consequence of the reduced size of each client–supplier relationship is limited economies of scale within the engagement (e.g., [52]). Specifically, the supplier’s upfront investment in the client, especially in training human resources and acquiring client-specific knowledge, is now spread across a smaller scale of ongoing work. Therefore, for a given unit of service delivered by the supplier, the average production cost is increased. Second, increasing the number of suppliers raises administrative cost such as invoicing, order processing, etc. [52]. The cost of coordinating activities of multiple suppliers is also increased [53]. Third, having a broad supply base involves a higher total cost of searching for, and negotiating and contracting with the suppliers. Due to the opposite effects of supply base breadth on production and coordination costs as a result of increased access to suppliers’ generic capabilities but reduced economies of scale within the outsourcing engagements, supply base breadth has no definitive impact on the overall outsourcing cost, except increasing the contracting cost. Proposition 1.1: The breadth of supply base is positively related to contracting cost.
Increasing the breadth of supply base can reduce the client’s dependence on each individual supplier and therefore lowers the possibility of being taken “economic hostage” [27] by the supplier. For example, in case a supplier underinvests in the relationship or opportunistically increases price, the client has the option to transfer the service to other suppliers in the supply base. Therefore, a broad supply base lowers strategic risk. This benefit, however, is premised on the assumption that the client can switch from one supplier to another [25]. Low switching cost includes two aspects. First, contractually, the client has the flexibility to terminate a relationship. Second, operationally, the client is able to transfer outsourced service from one supplier to another at a reasonable cost. In fact, if the suppliers are significantly different in their capabilities or the relationships are structured so as to prevent switching, the breadth of supply base may not lower strategic risk. Similarly, operational risk can be mitigated by the presence of multiple suppliers. In the event that one supplier fails to perform, the focal firm has the option to transfer the business to other suppliers [25]. The lower the switching cost, the less time and effort it takes to make the transfer and recover the supply chain. In summary, the cost of switching between suppliers mediates the negative relationships between supply base breadth and strategic and operational risks. Additionally, access to best-of-breed suppliers, as a result of using a broad supply base, may also reduce operational risk because of individual suppliers’ strong service delivery capabilities. In fact, superior supplier capabilities, such as the ability to
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switch locations and engage backup systems, may be a more reliable way of reducing operational risk than switching between suppliers (e.g., [54]). Proposition 1.2: The breadth of supply base is negatively related to the focal firm’s strategic and operational risks, and the relationship is mediated by the client’s switching costs and access to suppliers’ generic capabilities and capacities.
Increasing the breadth of supply base may also bring intangible benefits to the client in the form of flexibility, innovation, service quality, and delivery speed. Specifically, a broad supply base gives the focal firm access to best-of-breed capabilities and sufficient capacities, which potentially enable the suppliers to more flexibly accommodate the client’s requirement changes or bring new competency. Increasing the number of suppliers also gives the focal firm a broad set of “probes” [55] into potential pools of best-of-breed skills and talent; the broadened access to such high-quality resources can improve the firm’s innovation performance (e.g., [56]). Access to best-of-breed suppliers can also improve the quality of service due to suppliers’ specialized capabilities. Finally, such specialized expertise and the potential increase in production capacities as a result of simultaneously engaging multiple suppliers can raise the speed of delivery. Empirical studies of multi-supplier sourcing in both manufacturing and service suggest that increasing the number of suppliers indeed brings the opportunity to utilize diverse, specialized expertise from the global supplier markets and reap such intangible benefits in a rapidly changing business environment (e.g., [5] and [48]). On the other hand, as discussed previously, increasing the breadth of supply base means that it is more feasible for the client to terminate its relationship with an individual supplier. Due to the reduced switching cost on the client’s side, the supplier has less potential to take the client economic hostage and pursue opportunistic activities, such as underinvesting in its relationship with the client. This effect, in turn, further strengthens the intangible benefits of outsourcing. Proposition 1.3: The breadth of supply base is positively related to the focal firm’s intangible benefits including flexibility, innovation, service quality, and delivery speed, and the relationship is mediated by the access to suppliers’ generic capabilities and capacities, as well as the client’s switching costs.
2) Impact of Supply Base Depth: Increasing the depth of supply base means that suppliers and the client have a long-term outlook on their relationship and are less interested in getting short-term gains at the expense of the other party. Prior literature [13] has discussed this type of relationship as a way to avoid typical incentive misalignment. Both parties are more willing to make long-term investments in the relationship. Such investments may enable the suppliers to develop capabilities that are specific to the client, or client-specific capabilities [51]. Such capabilities may be tangible in nature, such as dedicated technical equipment, or intangible, such as knowledge of the client’s business processes. Client-specific capabilities oftentimes result from the supplier’s deep understanding of the client’s practices, routines, and culture. Suppliers’ client-specific capabilities and continuous learning enable themselves to improve production
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and ultimately help the client reduce production cost [14]. Also, deep knowledge of the client facilitates the communication and collaboration with the client and therefore reduces the coordination cost between the client and the suppliers (e.g., [51]). Proposition 2.1: The depth of supply base is negatively related to production costs and coordination costs, and the relationship is mediated by the suppliers’ client-specific capabilities.
Increasing the depth of supply base also implies that the suppliers accumulate client-specific capabilities that cannot be easily replicated by other suppliers. As mentioned, such clientspecific capabilities may include deep knowledge about the client and customized solutions. In the event that the client switches to a different supplier, such capabilities get lost and the replication of these capabilities takes significant time and effort. Also, the incumbent supplier would be reluctant to share and transfer such capabilities. Therefore, switching cost is increased. High switching cost, on the one hand, creates a dependent relationship that gives the suppliers the opportunity to lock the client in; on the other hand, it impedes transfer of business when supply chain disruptions occur. Therefore, both strategic and operational risks increase. This is consistent with the finding that a high level of customization lowers the client’s ability to switch suppliers or take their operations back in-house [32], [54]. Client-specific capabilities as a result of increased depth of supply base, meanwhile, have a negative impact on operational risk. This is because the suppliers’ increased client-specific capabilities improve their ability to respond to the client’s changing business requirements [14], [51]. Due to the opposite effects of supply base depth on operational risk as a result of increased switching costs but improved supplier client-specific capabilities, supply base depth has no definitive impact on operational risk. Proposition 2.2: The depth of supply base is positively related to the focal firm’s strategic risk, and the relationship is mediated by the client’s switching costs.
Increasing the depth of supply base may also bring intangible benefits to the client in the form of flexibility, innovation, service quality, and delivery speed. Specifically, establishing deep supply relationships increases the suppliers’ understanding of the client’s unique business practices, which potentially improves suppliers’ ability to flexibly respond to changes in client needs (e.g., [57]). Such deep relationships can also create a competitive advantage for the client firms by enabling them to innovate across organizational boundaries through utilizing valuable resources brought by their suppliers (e.g., [58]). A trusting, committed, and mutually understanding dynamic is also more likely to emerge as the relationship between the client and its suppliers deepens, which increases the perceived service quality (e.g. [47]). Finally, deep supply relationships allow the suppliers to perform the outsourced tasks in a more efficient manner, which increases delivery speed. Empirical studies of multi-supplier sourcing in both manufacturing and service have confirmed that increasing the depth of supplier relationships can indeed allow the suppliers to develop capabilities that are spe-
cific to the client, which in turn, bring intangible benefits to the client (e.g., [13] and [40]). However, on the other hand, increasing the depth of supply base raises the costs of switching between suppliers. The increased switching costs may give suppliers the opportunity to lower their investment in, and commitment to, the client, which in turn, leads to reduced intangible benefits (e.g., [59]). This is consistent with the finding regarding the “dark side” of such close client–supplier relationship in many industries [60]. Due to the opposite effects of supply base depth on intangible outcomes as a result of improved supplier client-specific capabilities but increased switching costs, supply base depth has no definitive impact on intangible benefits. Fig. 2 summarizes the aforementioned theoretical analysis. In the figure, the oval-shaped components represent the mechanisms or mediating factors, by which supply base characteristics impact outsourcing outcomes. The objective of this model is to help managers identify the pros and cons of different types of multisourcing supply bases, as elaborated in the following. IV. CONFIGURING MULTISOURCING SUPPLY BASE Based on the aforementioned framework, we classify multisourcing supply bases into four “configurations”: high breadth, high depth; high breadth, low depth; low breadth, high depth; and low breadth, low depth. We respectively term these four archetypes as diversified partnerships, diversified transactions, concentrated partnerships, and concentrated transactions. We then discuss each configuration’s strengths and weaknesses and the type of outsourced work that is most suitable for each configuration. A. Diversified Partnerships “Diversified partnerships” involves using a significant number of suppliers while making significant investment in the suppliers to form a portfolio of partner-like relationships. The main strength of this configuration is access to a broad set of both generic and client-specific capabilities. The weakness is limited economies of scale within the outsourced engagements and therefore potential lack of cost advantages. Risks can be mitigated if the switching costs are properly managed. This configuration is especially suitable for outsourcing functions for which economies of scale within the outsourced tasks is not critical, but access to both best-of-breed and client-specific capabilities is the key. One example of such tasks is project-based, customized, knowledge-intensive service such as specialized software design and development (e.g., [5]). B. Diversified Transactions “Diversified transactions” involves using a significant number of suppliers without making significant investment in each supplier to form a portfolio of relationships that resemble market transactions. The main strength of this configuration is low strategic and operational risks, as well as acquisition of best-ofbreed generic capabilities and sufficient capacities. The weakness is also limited economies of scale within the outsourced
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Fig. 3.
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Four archetypes of multisourcing supply bases.
tasks and potential lack of cost advantages. This configuration is especially suitable for outsourcing functions for which economies of scale within the outsourced tasks are not critical, but access to best-of-breed generic capabilities is the key. One example is copying and printing service where firms often combine a multitude of best-of-breed solutions. C. Concentrated Partnerships “Concentrated partnerships” involves using a small number of suppliers while making significant investment in each supplier to form a few partner-like relationships. The main strength of this configuration is economies of scale within the outsourced task and therefore potential cost advantages as well as suppliers’ client-specific capabilities. The weakness is high strategic risk. One example of tasks that are suitable for this configuration is complex, large-scale enterprise information systems outsourcing, which requires both economies of scale and significant customized innovation from suppliers; these types of tasks are often executed through strategic alliances such as Campbell Soup’s strategic partnership with IBM [61]. D. Concentrated Transactions “Concentrated transactions” involves using a small number of suppliers without making significant investment in each supplier to form a few market-transaction-like relationships. The main strength of this configuration is its low contracting and coordination costs and low strategic risk due to the lack of relationship-specific investment from either party. This configuration is especially suitable for outsourcing functions for which operational risk can be properly mitigated and the supply market has multiple suppliers with comparable capabilities that match the focal firm’s needs. One example of such tasks is acquiring bundles of information commodity such as generic online reports (e.g., [62]).
Fig. 3 outlines the strengths, weaknesses, and examples of appropriate application of the four configurations. It is worth noting that the four configurations are “extreme” archetypes of supply bases in multisourcing. In reality, the multisourcing strategy is a continuum that encompasses many different, “hybrid” configurations that combine these extreme archetypes. For a given business function, the focal firm may also need to change the configuration of its supply base over time to achieve optimal outsourcing outcomes. V. CASE STUDY The conceptual framework developed in previous sections can be applied to both IT service and manufacturing. In the following, we use the framework to illustrate in real business settings how companies strategically configure their IT service supply bases over time and analyze the rationale behind their decisions. We also use these cases to further refine and enrich the theoretical framework and identify patterns of global IT service multisourcing strategy. A. Methodology This paper seeks to explore the impact of different supply base configurations in IT service multisourcing and understand how firms strategically configure their supply bases over time. Given that the research is exploratory and the phenomenon is deeply embedded in organizational practices, the case study methodology [63] was adopted. The case method has unique advantages “when the investigator has little control over events and wants to focus on contemporary phenomena within some real-life contexts” [63]. The study was conducted at two global leading financial services firms. We have refrained from disclosing their names for confidentiality reasons. The cases serve mostly an illustrative purpose. We provide a brief overview of the methodology. A more detailed description of the methodology can be found in a related paper [5].
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From 2005 to 2008, 74 in-depth, semistructured interviews with 69 people were conducted at the first bank, Global Bank A, including managers across different levels from the bank as well as from its suppliers. The interviews broadly explored the bank’s outsourcing strategies, practices, and outcomes. Here, we use a subset of the overall data that pertain to multisourcing strategy. In 2008, three in-depth, semistructured interviews, with a director who oversaw the offshoring and outsourcing activities at the second bank, Global Bank B, were conducted. These interviews were specifically focused on multisourcing strategy and were intended to provide a comparison with Global Bank A. Each interview lasted between 40 minutes and 2 hours, with an average length of about 1.5 hours. Archival data, such as presentation slides and public information, were collected to supplement the interview data. B. Company Background In the following, we first overview the business backgrounds of these two companies and then summarize their outsourcing journeys. 1) Global Bank A: Global Bank A was a leader in the financial services industry and a Fortune Global 100 company, with revenue of over 50 billion USD and thousands of employees across the globe (2008). The bank was a pioneer in global IT service sourcing and had a long history of outsourcing and offshoring that can be summarized into three phases. Phase I started in the 1980s, when the bank already established outsourcing relationship with several suppliers in onshore locations. Then in 1989, the bank contracted with a few Indian suppliers to provide technical support to the bank’s operations in Asian countries such as India and Singapore. Global Bank A’s outsourcing entered Phase II in 2001, when the CEO mandated aggressive cost-cutting during the slowdown of the financial services industry after the dotcom crash. In response, the bank adopted an aggressive outsourcing and offshoring strategy that led to the creation of a large supply base across the globe, including North America, Western Europe, Eastern Europe, Russia, and India. A diverse portfolio of supply relationships, including both long-term, stable relationships and short-term, experimental relationships, were formed in this stage. For some divisions of the firm, there were over 50 suppliers on their preferred supplier list. In 2003, the bank entered Phase III, when it decided to consolidate its IT service supply base by creating a program management office to orchestrate its global supply base. As a result, the bank successfully reduced its preferred supplier base and established deep relationship with about a dozen suppliers. 2) Global Bank B: Global Bank B was also a leader of the financial services industry and a Fortune Global 100 company, with revenue of over 50 billion USD and thousands of employees across the globe (2008). Global Bank B’s approach toward IT service was very different from that of Global Bank A. Global Bank B has been highly cautious about transferring IT service to external organizations and offshore locations. Its outsourcing journey can also be summarized into three phases. Before 2003, the bank had some outsourcing activities with some onshore suppliers. The bank’s offshore outsourcing journey did not
start systematically until 2003, when it began to work with two major Indian IT service suppliers and another smaller Indian supplier that was later replaced by a global supplier. We define this stage as Phase I. In 2007, Global Bank B entered Phase II, during which the bank deepened its supply relationships, giving more core processes to the suppliers and strengthening its mutual commitment with suppliers. Since 2008, the bank decided to significantly broaden its supply base and implement multisourcing strategy by increasing its preferred supplier base from 4 to about 25. At the time of the interview, the bank was undergoing this expansion, and was expecting to enter Phase III, what the bank officially termed “multisourcing” model, by the end of 2009. C. Case Analysis By applying the previously developed conceptual framework to analyze the sourcing strategies of the two banks, we identify several patterns that further refine and enrich the framework. Specifically, we use the two dimensions, breadth and depth, to analyze the evolution of the two banks’ supply bases in one function, namely, customized IS development and maintenance. Then, we identify the patterns of the evolution of their supply bases and elaborate the underlying rationale. We also use the two banks to illustrate some of the propositions derived in previous sections. 1) Multisourcing Pendulum: The two banks adopted very different outsourcing paths within customized IS development and maintenance function. Interestingly, they had been changing their supply bases in opposite directions. However, one commonality can be observed from these two cases, i.e., their multisourcing strategies were constantly evolving and seemed to have been switching between using more and fewer suppliers over time. We term this continuous, dynamic evolution of supply base configurations as the “multisourcing pendulum.” In the case of Global Bank A, Phase I was characterized by the creation of relationships with a number of suppliers. At the time, the trend of outsourcing in the financial services industry was just starting, and many offshore suppliers were still in their infancy. Therefore, many of these relationships were experimental in nature. Taking advantage of the significant cost arbitrage was the primary purpose. Investing in building the capabilities of suppliers was not the bank’s top priority. The types of outsourced tasks at the moment were mostly low-end IT service that were run independently across bank’s divisions and exhibited limited economies of scale even when sourced internally. The supply base can be categorized as “diversified transactions.” What pushed Global Bank A into Phase II, aggressive outsourcing, was the increasing need to utilize the growing capabilities of offshore suppliers under the strong pressure to reduce costs. In this phase, the breadth of the supply base kept expanding as the bank sought to tap into the emerging bestof-breed capabilities in diverse offshore locations. At the same time, the bank’s relationships with many key suppliers were strengthened. The depth of these relationships increased as the bank’s various divisions invested significantly in developing the
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Fig. 4.
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Multisourcing pendulum: exploring optimal supply base breadth.
capabilities of their suppliers, who were then able to undertake higher end, more complex projects and deliver significant value to the client. A subset of the supply base, i.e., the list of “preferred suppliers” moved toward “diversified partnerships.” As the supply base kept expanding, the bank felt the elevated management overhead caused by the fragmented and distributed outsourcing decision making. Therefore, the bank entered Phase III, starting to consolidate its supply base. As a result, the relationships with a select set of strategic suppliers were furthered deepened, while many other relationships were terminated. In 2008, the number of suppliers on the strategic supplier list was about a dozen. The “preferred suppliers” component of the supply base moved toward “concentrated partnerships.” In the case of Global Bank B, due to its unique corporate culture and business practices, the outsourcing journey started much later than that of Global Bank A. Before Global Bank B started systematically outsourcing IT development and management, it had outsourced certain small-scale, low-end tasks to some local suppliers. As the bank felt the increasing need to leverage the already mature capabilities of offshore suppliers to reduce cost, it entered Phase I, and created a low-breadth “core” supply base consisting of three major suppliers while maintaining relationship with the local suppliers it had already worked with. The outsourcing was based on what the bank termed as “co-management model.” Specifically, the bank managed the project itself, but utilized the suppliers’ staff as resources for a set of noncore, relatively generic tasks. Cost reduction by utilizing existing supplier capabilities, rather than by helping suppliers develop capabilities, was the primary goal of this phase. The core supply base in this phase can be categorized as “concentrated transactions.” In Phase II, the bank deepened its relationship with the three key suppliers and started moving toward what the bank called “full-outsourcing model.” For example, in 2007, the bank outsourced a major IT function to a leading supplier. There was a high level of mutual commitment and investment between the bank and its suppliers. In this phase, the goal of outsourcing shifted toward further utilizing the capabilities of suppliers, rather than only leveraging cost arbitrage. In particular, the bank started giving the suppliers more core processes and more customized tasks that required the suppliers to make client-specific investments. The core supply base moved toward “concentrated partnerships.” In the meantime, the bank also started planning Phase III. In this phase, on the one hand, the bank will further deepen its relationship with existing core supply base and outsource more value-adding tasks; on the other hand, the bank will broaden
its supply base by including about 25 suppliers and implement the “multisourcing model.” The objective of this phase was to capitalize on a growing global talent pool and mitigate risk while maintaining cost advantages. Eventually, the core supply base will move toward “diversified partnerships.” In both of these cases, firms dynamically reconfigure their IT service supply bases, transforming their core supply bases between a more focused sourcing model and more diversified sourcing model. This is not due to a lack of strategy, but rather a dynamic and emergent learning process, as firms experiment with different configurations to explore the optimal supply base for a given function. This process is further influenced by firms’ changing internal business conditions and external market environments. Fig. 4 illustrates this ongoing “multisourcing pendulum,” as the firm swings between single sourcing, i.e., concentrated partnerships, and extreme multisourcing, i.e., diversified transactions. 2) Deepening Supplier Relationship: While we identified significant swings in the pendulum as firms explored their business needs over time, our analysis indicated that both firms had been consistently deepening their relationships with the set of key suppliers. In the case of Global Bank A, when moving from diversified transactions to diversified partnerships, the bank moved from only leveraging cost arbitrage toward reaping the benefits brought about by suppliers’ increasingly sophisticated capability. Such capability resulted from, first, maturation of offshore locations’ IT service industry as a whole, and second, the bank’s continuous investment in training and educating its suppliers. The investment helped the suppliers to build up capabilities in the form of knowledge, skills, and practices that were specific to the client. According to the interviews, such a deepened supply relationship paid back through increased innovation, improved service quality and speed, and further cost reduction. In the consolidation phase, the bank’s primary goal was to reduce the overhead associated with coordinating a large number of suppliers. By encouraging its program managers to outsource tasks to a dozen preferred suppliers, the bank in effect further deepened supply relationships by concentrating investment on the suppliers that were considered strategic to the bank. It is worth noting that, although achieving economies of scale was a key factor in the bank’s decisions in this phase, the bank still maintained a significant supply base and allowed its program managers to invest in other suppliers they chose to work with. The main reason was that in knowledge-intensive, customized software development, economies of scale are often limited due to the uniqueness of each outsourced task. The success of these
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tasks oftentimes depends on suppliers’ continuous investment in acquiring knowledge and skills that are specific to the client. This continued deepening of the bank’s supply relationships is reflected in the description of a relationship manager from one of the bank’s offshore suppliers. “(At Global Bank A), there is willingness to experiment with new types of partnerships. . . They have also shown us a significant commitment. They have shown us tremendous willingness to educate us about how a bank works. . . We have shown a lot of commitment to [Global Bank A] in terms of making investment in people and time.”
Similarly, in the case of Global Bank B, thus far the bank had been focusing on moving from concentrated transactions to concentrated partnerships. Specifically, the bank had been transitioning from directly utilizing and managing suppliers’ staff as low-cost resources toward systematically guiding the suppliers to build up capabilities based on the specific needs of the bank. In this process, the bank started transferring more value-adding tasks and core processes to the suppliers. A more open, trusting relationship began to emerge. As for the future transformation, i.e., toward diversified partnerships, the bank intended to better align its outsourcing requirements with the growth strategies of a broader set of suppliers so that the bank can create deep, mutually committed relationships with different suppliers and obtain high-quality service. Therefore, besides broadening supply base, deepening supply relationships was also a key objective of the bank. The evolution of Global Bank B’s supply relationships was described by the bank’s global offshoring and outsourcing director as follows. “Over the years we have built up a trusted relationship with our partners, so that we are now willing to give more of our core processes, more of our core competencies, and even some intellectual property to our partners.”
As can be seen from the outsourcing journeys of both banks, even though different objectives were pursued at different stages, deepening relationships with key suppliers had been a consistent pattern in their global outsourcing strategies for customized IS development and maintenance. 3) Leveraging Supply Base Breadth: While the depths of the banks’ relationships with their key suppliers had been continuously increased, the breadths of the supply bases were leveraged as a strategic tool by the banks to achieve different goals at different stages of their outsourcing journeys. In the case of Global Bank A, when it increased the supply base breadth in the expansion phase of its offshore outsourcing journey, the main purpose was taking advantage of the emerging capabilities from various offshore locations. At the beginning of this phase, offshore suppliers often lacked sufficient business knowledge, process maturity, and technical skills. Therefore, while investing in selected suppliers, the bank’s program managers acted entrepreneurially and tapped into more suppliers with unique capabilities from different regions to create more options. One such example was using a supplier from Russia, a location, where there were many skilled engineers, but the overall offshore IT service industry was still in its infancy at the moment. This experiment turned out to be highly successful
and resulted in a long-term supplier relationship. The strategy of broadening the supply base was explained by the head of the bank’s project management office. “We let people make relationships with whomever they wanted; do small projects offshore so that people see that it works and then encourage them to do bigger projects.”
The expansion resulted in a broad supply base. Some program managers had to deal with three or more suppliers, some of which were inherited from other managers due to internal reorganization, rather than selected by the managers themselves. In the consolidation phase, the main purpose was to reduce the cost of coordinating a broad supply base and increase economies of scale, while the relationships with key strategic suppliers were further deepened, as explained by a member from the bank’s project management office. “Today [mid 2006] still, more than 50% of projects are one off. Yet, I believe that 80% of the work (in terms of volume) goes to the seven strategic vendors.”
In the case of Global Bank B, when the bank started moving toward what it termed “co-management” outsourcing model, the offshore suppliers were already relatively mature. In this phase, focusing its management resources on utilizing supplier staff’s skills in low-end tasks and achieving economies of scale to reduce the bank’s cost were the top priority. Therefore, a lowbreadth supply base was adopted, as explained by the bank’s global offshoring and outsourcing director. “We had very established relations, very established process. . . . We could deploy roles very quickly; we could leverage the salary arbitrage. . . (There was) a very reduced number of vendors. . . In terms of making it easy, making it quick, making it with the right partner for certain time, it was the right thing to do.”
When the bank transitioned from the “co-management model” to the “full-outsourcing model,” it built up deep relationships with several strategic suppliers. However, as the supply relationship stabilized, strategic risk began to emerge. In particular, the bank’s management felt that one major supplier was reducing its commitment to the bank and started to underinvest in the relationship. In the interviewee’s words, the relationship was “going lower and not as enthusiastic as it was at the beginning.” By broadening its supply base and building deep relationships with a larger number of suppliers, the bank tried to reduce switching costs and create competitive pressure for suppliers, as discussed by the global offshoring and outsourcing director. “Going to the next step, I think we should really broaden this, really create competition again. This is something we have announced to our vendors. They all know that. They will still be in the game. . . (But) all these other vendors are coming new to our market.”
In summary, the breadth of the supply base directly impacts the focal firm’s access to best-of-breed supplier capabilities, economies of scale, and switching costs. In practice, firms strategically and dynamically configure the breadths of their supply bases to adapt to changing internal business priorities and turbulent external market conditions.
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VI. CONCLUSION AND DISCUSSION Multisourcing has emerged as an important IT outsourcing strategy that is especially relevant in today’s turbulent business environment post-global financial crisis. In this paper, we make several contributions to the understanding of this emergent phenomenon. First, as suggested by Whetten [64], we borrow theories from another field, namely, OM, and synthesize existing research findings in both IT service and manufacturing to develop new insights into the impact of supply base on outsourcing outcomes. Second, based on the existing literatures, we propose conceptualizing firms’ supply bases along the dimensions of breadth and depth, which allows us to analyze the tradeoffs of multisourcing strategy in a more nuanced manner. Third, we identify different configurations of multisourcing, their benefits and risks, and suitable services. Finally, we develop a theoretical model that elaborates how the configuration of supply base impacts outsourcing outcomes through the mediation of several mechanisms, namely, access to suppliers’ generic capabilities and capacities, economies of scale within the outsourced function, client’s switching costs, and suppliers’ client-specific capabilities. More specifically, this paper contributes to a growing area of research that explores multisourcing strategy [5], [32]. For example, this paper builds on Sia et al.’s [32] definition of flexibility and theoretical model, which suggests using multiple suppliers should positively influence flexibility. However, we also show that multisourcing strategy may have both positive and negative impact on flexibility, depending on the depth of various relationships. This may help explain some of the unsupported hypotheses in Sia et al.’s research [32]. Beyond the theoretical contributions, we have also used qualitative case studies of two global financial services firms’ outsourcing of customized information system development and maintenance to illustrate the conceptual framework. Specially, the cases demonstrate how firms’ sourcing strategy resembles a “pendulum” as firms move between expanding and consolidating their supply bases while exploring their business needs and responding to changes in their environments. While we expect the pendulum to somewhat stabilize over time as firms learn more about their needs and as the global sourcing market matures, we would not expect a long-term static strategy to emerge as firms’ internal needs and external market environments will continuously evolve, especially in today’s turbulent global economy. The case study also suggests that for services with limited economies of scale within an engagement, but with significant benefits from suppliers’ development of client-specific assets, supply bases that have both high depth and high breadth can be advantageous. One such example is customized information system development. Deepening relationships with multiple suppliers is particularly important in this context, which is similar to Japanese automakers’ best practices in supply base management [14]. At the same time, in IT service, the breadth of supply base for a given business function may vary broadly, and there is no dominant trend of supply base reduction, as in manufacturing (e.g., [12]). The main reason is that unlike manufacturing,
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in highly customized, knowledge-intensive types of services, economies of scale are often limited. Instead, firms may often need to expand their supply bases in order to keep exploring new supplier capabilities. This may not be the case for other types of IT services, especially services that rely more on economies of scale, such as the outsourcing of infrastructural systems. This research has managerial implications for practitioners. By characterizing IT service supply base along the dimensions of breadth and depth, this paper provides practitioners with a framework for conceptualizing the configuration and evolution of their firms’ supply bases. Oftentimes, the debate regarding single versus multisourcing tended to focus on breadth as the key characteristic of supply bases. In this paper, we highlight that in multisourcing, breadth and depth are not necessarily negatively correlated; rather, they are two separate dimensions that allow for a multitude of possible configurations. This paper further suggests that practitioners should examine the nature of the service that is being outsourced, such as the economies of scale it exhibits and the degree of customization it requires, and understand their firms’ strategic priorities in outsourcing, such as cost versus intangible outcomes. Externally, managers should closely monitor the evolution of global supply markets, especially in terms of maturity of suppliers, speed of change in supplier competencies, and substitutability among suppliers. Based on the conceptual framework in this paper, firms can design their multisourcing strategy from top down in order to maximize the predictable outcomes. We would like to caution managers, however, against the idea of designing multisourcing strategies in a static manner. The theoretical model highlights that due to the organizational complexity associated with multisourcing, the exact nature and magnitude of tradeoffs involved in different configurations are difficult or impossible to predict outside a specific context. Therefore, the valuable learning opportunities that come from experimenting with the firm’s strategy should be integrated into the strategy design process. The multisourcing pendulum observed in the cases is not to be avoided, but rather is to be guided and reflected upon. Granted, these kinds of strategic explorations may incur significant costs, and we would only advise practitioners to undertake such explorations if their firms have mature sourcing capabilities that enable the firms to reduce contracting and coordination costs while experimenting with and learning from different configurations. This paper opens up many possibilities for future academic research. First, the theoretical propositions developed in this paper have only been illustrated in the case analysis. Future research should empirically test these propositions. Second, the theoretical framework in this paper is quite general; the actual optimal breadth and depth of a supply base may depend on other parameters of the outsourced task, supply market, and the focal firm. These factors should be considered in further developing and testing the theory and in understanding which configurations can lead to better outsourcing outcomes. Third, the paper is centered on economic and operational outcomes of outsourcing, omitting other drivers [23]. Firms often outsource to focus on core competencies, access financial resources or international markets, or respond to political and institutional
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pressures [23]. These factors should be further investigated in studying global multisourcing strategy. Finally, details of how to develop robust outsourcing capabilities to enable complex multisourcing configurations deserve further exploration. ACKNOWLEDGMENT The authors would like to thank Special Issue Editors L. Willcocks, J. Rottman, J. Kotlarsky, and I. Oshri, the three anonymous reviewers, as well as participants of the 3rd Global Sourcing Workshop at Keystone, CO, for their comments on their research. REFERENCES [1] L. Cohen and A. Young, Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility. Boston, MA: Harvard Business School Press, 2006. [2] D. Jones. (2010). Should organisations put a size limit on their IT outsourcing contracts? TPI. Point of View. [Online] Available: http://www. tpi.net/pdf/pointofview/Size-of-Government-Contracts.pdf. [3] D. Skinner, C. Ford, and N. Stamp. (2009). Global sourcing trends in 2010. Morrison & Foerster LLP. [Online]. Available: http://www.mofo.com/ docs/pdf/Global_Sourcing_Trends_in_2010.pdf. [4] B. Huber. (2008). “Agile multi-sourcing—A critical business trend: Concepts and background,” TPI. [Online]. Available: http://www.tpi.net/pdf/ papers/AgileMulti-Sourcing.pdf. [5] N. Levina and N. Su, “Global multisourcing strategy: The emergence of a supplier portfolio in services offshoring,” Decis. Sci., vol. 39, no. 3, pp. 541–570, 2008. [6] P. Thibodeau, J. Ribeiro, and C. Stedman. (2006). GM splits IT services work, pulls together rival vendors. Computerworld [Online]. http://www.computerworld.com/s/article/108378/GM_Splits_IT_ Services_Work_Pulls_Together_Rival_Vendors. [7] FinancialWire. (2008). Multi-sourcing of IT, the way ahead? InsuranceNewsNet.com, Inc. [Online]. Available: http://insurancenewsnet.com/ article.aspx?n=1&neID=20080226375.4_28a401354750142c.. [8] Accenture. (2006). Power of many: Maximizing the multi-source IT operating model for high performance. The Point [Online]. 6(5). Available: http://www.accenture.com/NR/rdonlyres/A6DD4361–9FC5–4D87BD76-AEF32E0024B7/0/point44LV.pdf. [9] W. Currie, “Using multiple suppliers to mitigate the risks of IT outsourcing in two UK companies: ICI and Wessex Water,” J. Inf. Technol., vol. 13, no. 3, pp. 169–180, 1998. [10] W. L. Currie and L. P. Willcocks, “Analysing four types of IT sourcing decisions in the context of scale, client/supplier interdependency, and risk mitigation,” Inf. Syst. J., vol. 8, no. 2, pp. 119–143, 1998. [11] I. Oshri, J. Kotlarsky, and L. Willcocks, “Managing dispersed expertise in IT offshore outsourcing: Lessons from Tata Consulting Services,” MIS Q Executive, vol. 6, no. 2, pp. 53–65, 2007. [12] J. A. Ogden, “Supply base reduction: An empirical study of critical success factors,” J. Supply Chain Manage., vol. 42, no. 4, pp. 29–39, 2006. [13] J. McMillan, “Managing suppliers: Incentive systems in Japanese and U.S. industry,” California Manage. Rev., vol. 32, no. 4, pp. 38–55, 1990. [14] J. K. Liker and T. Y. Choi, “Building deep supplier relationships,” Harvard Bus. Rev., vol. 82, no. 12, pp. 104–113, 2004. [15] M. C. Lacity and L. P. Willcocks, “An empirical investigation of information technology sourcing practices: Lessons from experience,” MIS Quart., vol. 22, no. 3, pp. 363–408, 1998. [16] N. Agrawal, S. A. Smith, and A. A. Tsay, “Multi-vendor sourcing in a retail supply chain,” Prod. Oper. Manage., vol. 11, no. 2, pp. 157–182, 2002. [17] W. E. Deming, Out of the Crisis. Cambridge, MA: MIT Press, 1986. [18] J. Richardson, “Parallel sourcing and supplier performance in the Japanese automobile industry,” Strategic Manage. J., vol. 14, no. 5, pp. 339–350, 1993. [19] T. Y. Choi, K. J. Dooley, and M. Rungtusanatham, “Supply networks and complex adaptive systems: Control versus emergence,” J. Oper. Manage., vol. 19, no. 3, pp. 351–366, 2001. [20] T. Y. Choi and D. R. Krause, “The supply base, and its complexity: Implications for transaction costs, risks, responsiveness, and innovation,” J. Oper. Manage., vol. 24, no. 5, pp. 637–652, 2006.
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Ning Su received the Bachelor’s degree from Fudan University, Shanghai, China, the Master’s degree from University of Toronto, Toronto, ON, Canada, both in computer science, and the Ph.D. degree from the Leonard N. Stern School of Business, New York University, New York. He is currently an Assistant Professor at the Richard Ivey School of Business, University of Western Ontario, London, ON, Canada. His research focuses on global sourcing strategy, technological and service innovation, and entrepreneurial firms from emerging markets. His research has been published in journals such as Decision Sciences and presented at conferences such as the International Conference on Information Systems and the Academy of Management Annual Meeting.
Natalia Levina received the Bachelor’s degree in computer science and mathematics and the Master’s degree in mathematics, both from Boston University, Boston, MA, and the Ph.D. degree from the Sloan School of Management, Massachusetts Institute of Technology, Cambridge. She is currently an Associate Professor at the Leonard N. Stern School of Business, New York University, New York. Her research interests focus on understanding how people produce and span organizational, professional, cultural, and other boundaries in the process of developing and using technology. Her research has been published in Information Systems Research, Management Information Systems (MIS) Quarterly, Academy of Management Journal, Journal of MIS, Decision Sciences, and Organization Science, among others. Dr. Levina has been on the editorial boards of Information Systems Research and Organization Science, and on the board of the Academy of Management’s Organizational Communication and Information Systems division and a Vice-Chair of Association for Information Systems Special Interest Group on Grounded Theory Method. She was awarded fellowships from Alfred P. Sloan Industry Studies Foundation and IBM for studying global sourcing.
