Kripalani, Balfour, Grow and Greene

Kripalani, Balfour, Grow and Greene 2003; Engardio
and Shameen 2006; Larson 2006; Ellram et al. 2008).
Outsourcing of business services, often called business
processes, to geographically distant countries is growing
in popularity as firms attempt to reduce labor
costs and retain marketplace advantage (Farrell 2004,
2005). The phenomenon of offshore outsourcing is
defined as the practice of hiring an external organization
outside the firm’s country of origin to perform
some or all business functions (CAPS Research 2006;
Overby 2003).
Factors such as high oil prices can make manufacturing
offshoring less appealing, but do not affect services
(Anonymous 2011). Wages are typically a higher
share of the costs of performing a service (Ritter and
Sternfels 2004) making offshoring to lower cost
regions an attractive alternative to domestic sourcing.
Other reasons for the trend toward services offshoring
include a general decline in communication and computing
costs, improvements in internet reliability and
functionality (Robinson and Kalakota 2005), a desire
to serve the local market and service quality comparable
or even superior to those of services provided
domestically (Sinderman 1995; Casale 1996; Goolsby
1999; Elmuti and Kathawala 2000; Anonymous
2011).
Offshore outsourcing of business processes increases
organizational complexity and risk (Aron and Singh
2005; Neo Advisory 2005), as firms are exposed to
different laws, cultures, customs and government
requirements, for example. To manage this additional
complexity and associated risk, organizations need to
establish appropriate governance structures for managing
the offshore service supplier. This may affect the
organization’s level of centralization and formalization
of processes, as new procedures for working with
people, new systems and alternative methods for control
are explored. This may also affect reporting structures,
roles and responsibilities. This research explores
the following question: How does the pursuit of the
strategy of offshore outsourcing of services affect the way
that supplier relationships are managed in terms of the
structural tenets of centralization, formalization and complexity?
Prior research generally supports that organizational
structure follows strategy (Chandler 1962;
Amburgey and Dacin 1994), noting that “unless structure
follows strategy, inefficiency results” (Chandler
1962, p. 314). However, this idea has been applied
only in a very limited way to supply management
organizations. The context of this research is the offshoring
of call center and back office work to India.
This research addresses a void in both the supply
chain and the strategy-structure literature, by analyzing
how companies adapt their supply management
and supplier management structures to facilitate service
offshore outsourcing strategy implementation.