Offshoring Research Network
Encyclopedia
The Offshoring Research Network is an international network of researchers and practitioners studying organizations in their transition to globalizing their business functions, processes and administrative services. The ORN conducts annual surveys tracking global sourcing
Global sourcing
Global sourcing is a term used to describe practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service...

 strategies, drivers, concrete implementations and plans across all business functions and processes.

The ORN is managed by Duke University
Duke University
Duke University is a private research university located in Durham, North Carolina, United States. Founded by Methodists and Quakers in the present day town of Trinity in 1838, the school moved to Durham in 1892. In 1924, tobacco industrialist James B...

, The Fuqua School of Business, Center for International Business Education and Research
Center for International Business Education and Research
The Centers for International Business Education and Research are resources for international business education in the United States funded by through the United States Department of Education...

 (CIBER). It involves partner universities in Europe, Asia and Australia. The ORN has over 3,000 corporate participants across all industries from all over the world. Based on annual surveys
Statistical survey
Survey methodology is the field that studies surveys, that is, the sample of individuals from a population with a view towards making statistical inferences about the population using the sample. Polls about public opinion, such as political beliefs, are reported in the news media in democracies....

, the ORN research team maintains a comprehensive database
Database
A database is an organized collection of data for one or more purposes, usually in digital form. The data are typically organized to model relevant aspects of reality , in a way that supports processes requiring this information...

 of firms and governmental organizations
Government agency
A government or state agency is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an intelligence agency. There is a notable variety of agency types...

 and their implemented and planned offshore sourcing projects over time. In addition, the ORN research team collects data on service providers offering offshore services.

Offshoring, according to the ORN, refers to the process of sourcing
Sourcing
In business, the term word sourcing refers to a number of procurement practices, aimed at finding, evaluating and engaging suppliers of goods and services:*Global sourcing, a procurement strategy aimed at exploiting global efficiencies in production...

 business functions or processes supporting home-based or global operations from a foreign country, either through wholly owned organizational units (captive offshoring/shared services
Shared services
Shared services refers to the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an...

) or external service providers (offshore outsourcing
Offshore outsourcing
Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the products or services are actually developed or manufactured. It can be contrasted with offshoring, in which the functions are performed in a foreign...

). The ORN project captures a wide range of business functions and processes, such as information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...

 (IT), finance & accounting, contact centers
Call centre
A call centre or call center is a centralised office used for the purpose of receiving and transmitting a large volume of requests by telephone. A call centre is operated by a company to administer incoming product support or information inquiries from consumers. Outgoing calls for telemarketing,...

, human resources, legal services (LPO
LPO
LPO may refer to:*LPO-50, a flamethrower built by the Soviet Union*Landing Page Optimization*Leading Petty Officer*Legal Process Outsourcing*Libertarian Party of Ohio*Libertarian Party of Ontario*Libertarian Party of Oregon...

), analytical and knowledge services (KPO
Knowledge process outsourcing
Knowledge process outsourcing is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost...

), software development
Software development
Software development is the development of a software product...

, procurement
Procurement
Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...

, marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...

 and sales, engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...

 and new product development
New product development
In business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...

. The ORN studies do not cover offshoring of manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 activities, nor do they capture outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

 or shared services
Shared services
Shared services refers to the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an...

 activities onshore/domestically.

Based on their research, ORN partners have published a number of academic and practitioner-oriented articles. In addition, the ORN has completed various research projects as well as case studies; organized academic and practitioner-oriented workshops and webcasts; delivered executive education programs and completed commissioned studies for corporate members of the ORN.

History and current objectives

The ORN project was launched in 2004 by the Center for International Business Education and Research (CIBER) at Duke University
Duke University
Duke University is a private research university located in Durham, North Carolina, United States. Founded by Methodists and Quakers in the present day town of Trinity in 1838, the school moved to Durham in 1892. In 1924, tobacco industrialist James B...

, The Fuqua School of Business. Dr. Arie Y. Lewin, Professor of Strategy and International Business and Director of Duke CIBER, was the initiator and has been the Lead Principal Investigator of the ORN project. The initial idea behind the project was to study the advancing trend of offshoring white-collar work
White-collar worker
The term white-collar worker refers to a person who performs professional, managerial, or administrative work, in contrast with a blue-collar worker, whose job requires manual labor...

, including administrative and technical tasks, as opposed to blue-collar work
Blue-collar worker
A blue-collar worker is a member of the working class who performs manual labor. Blue-collar work may involve skilled or unskilled, manufacturing, mining, construction, mechanical, maintenance, technical installation and many other types of physical work...

, which is mainly associated with manufacturing and which has been practiced for many years. In 2004, the CIBER research team launched the first annual on-line survey of U.S. companies engaged in or considering offshoring administrative and technical tasks. The survey was sponsored by Archstone Consulting. It was conceptualized as an annual survey to track offshoring drivers, risks and concrete implementations over time.

After the second annual survey in 2005, Duke CIBER launched collaborations with European research partners to expand the research initiative into a research network and to facilitate the recruiting of companies for the survey. The third survey in 2006 was sponsored by Booz Allen Hamilton
Booz Allen Hamilton
Booz Allen Hamilton Inc. , or more commonly Booz Allen, is an American public consulting firm headquartered in McLean, Fairfax County, Virginia, with 80 other offices throughout the United States. Ralph Shrader is its Chairman and Chief Executive Officer. The firm was founded by Edwin Booz in...

 and involved data collection from U.S. as well as European firms and public agencies, from Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...

, the UK, and Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...

. Since then, the project has been further extended and now includes research partners and organizations from Scandinavia
Scandinavia
Scandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...

, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...

, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

. In 2007, the Conference Board became a lead supporter of the ORN project, and the ORN team launched for the first time a complementary survey of service providers, mainly based in India, China and the United States. In 2009, the ORN survey is being converted to a web-based application with a new benchmarking feature adding value to participating organizations. The findings from the annual research surveys have shifted the focus of ORN research over time. After its initial orientation to offshoring white-collar work, the ORN project has put more emphasis on the global search for talent and offshoring of higher-skilled tasks, in particular product development. Most recently, the ORN project has positioned itself as a research project focusing on studying companies in their transition to globalizing their business functions, processes and administrative services. Offshoring is understood as an intermediary step towards evolving new global organizational capabilities rather than an end in itself.

Network partners and sponsors

The ORN currently involves nine research partner universities and more than 3,000 corporate participants from all over the world. Until 2008, the ORN project was partly funded by a federal grant through Duke CIBER, and partly by private organizations. Since 2008, the ORN project has been mainly funded by private companies and business associations. Currently, ORN has two main sponsoring organizations: The Conference Board
The Conference Board
The Conference Board, Inc. is a non-profit, non-partisan business membership and research group. It has approximately 12,000 executives in its network, from 1200 corporations in 60 countries. It holds conferences, convenes executives, conducts economic and business management research, and is seen...

 and PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....

. In addition, ORN has been supported by 14 private organizations and 10 affiliated CIBERs and universities. The partners and sponsors of ORN are listed in the table below:

Research partners

University/School Country Year Joined Researchers
Duke University
Duke University
Duke University is a private research university located in Durham, North Carolina, United States. Founded by Methodists and Quakers in the present day town of Trinity in 1838, the school moved to Durham in 1892. In 1924, tobacco industrialist James B...

, The Fuqua School of Business, Center for International Business Education and Research (CIBER)
 United States
2004 (Initiating School)
Prof. Arie Y. Lewin, Dr. Carine Peeters (2004–2006), Dr. Stephan Manning (2006–2009), Dr. Nidthida Perm-Ajchariyawong (Since 2008)
University of Manchester
University of Manchester
The University of Manchester is a public research university located in Manchester, United Kingdom. It is a "red brick" university and a member of the Russell Group of research-intensive British universities and the N8 Group...

, Manchester Business School
 United Kingdom
2005
Prof. Silvia Massini
Copenhagen Business School
Copenhagen Business School
Copenhagen Business School, also known as CBS, is situated in Copenhagen, Denmark. With more than 17,000 students and 1,300 staff members, CBS is also one of the largest business schools in Europe. CBS offers a wide range of business-oriented university programmes and a research environment...

, Center for Strategic Management and Globalization
 Denmark
2006
Prof. Torben Pedersen, Prof. Bent Petersen
Rotterdam School of Management, Erasmus University
Rotterdam School of Management
Rotterdam School of Management, Erasmus University is the international business school of the Erasmus University Rotterdam located in Rotterdam, Netherlands...

 Netherlands
2006
Prof. Henk Volberda
Solvay Brussels School (ULB)  Belgium
2006
Prof. Carine Peeters
University of Navarra
University of Navarra
The University of Navarra is a private pontifical university based at the southeast border of Pamplona, Spain. It was founded in 1952 by St. Josemaría Escrivá de Balaguer, the founder of Opus Dei as a corporate work of the apostolate of Opus Dei....

, IESE Business School
 Spain
2006
Prof. Joan E. Ricart
WHU – Otto Beisheim School of Management  Germany
2006
Prof. Thomas Hutzschenreuter
Macquarie University
Macquarie University
Macquarie University is an Australian public teaching and research university located in Sydney, with its main campus situated in Macquarie Park. Founded in 1964 by the New South Wales Government, it was the third university to be established in the metropolitan area of Sydney...

, Department of Business; University of Western Sydney
University of Western Sydney
The University of Western Sydney, also known as UWS, is a multi-campus university in the Greater Western region of Sydney, New South Wales, Australia...

, Centre for Industry and Innovation Studies
 Australia
2008
Prof. Stephen Chen; Prof. Oscar Hauptman
EMLYON Business School  Early Modern France
2010
Prof. Christiane Prange
Kyung Hee University  South Korea
2010
Prof. Geon-Cheol Shin
University of Tokyo
University of Tokyo
, abbreviated as , is a major research university located in Tokyo, Japan. The University has 10 faculties with a total of around 30,000 students, 2,100 of whom are foreign. Its five campuses are in Hongō, Komaba, Kashiwa, Shirokane and Nakano. It is considered to be the most prestigious university...

 Japan
2010
Prof. Takahiro Fujimoto, Prof. Youngwon Park

Sponsoring partners

Organization Sponsored Activities Years
Archstone Consulting LLP Corporate Client Survey
2004-5
Booz Allen Hamilton
Booz Allen Hamilton
Booz Allen Hamilton Inc. , or more commonly Booz Allen, is an American public consulting firm headquartered in McLean, Fairfax County, Virginia, with 80 other offices throughout the United States. Ralph Shrader is its Chairman and Chief Executive Officer. The firm was founded by Edwin Booz in...

/Booz & Co.
Corporate Client Survey (2006), Service Provider Survey (2007)
2006-7
The Conference Board
The Conference Board
The Conference Board, Inc. is a non-profit, non-partisan business membership and research group. It has approximately 12,000 executives in its network, from 1200 corporations in 60 countries. It holds conferences, convenes executives, conducts economic and business management research, and is seen...

U.S. Corporate Client Survey
Since 2007
PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....

Founding Member of the ORN Best Practices Institute and European Corporate Client Survey
Since 2007
International Association of Outsourcing Professionals (IAOP) Service Provider Survey, Academic Conference
Since 2007
Enterprise Software Roundtable Service Provider Survey
2007
Software Information and Industry Association Service Provider Survey
2007
NASSCOM
NASSCOM
The National Association of Software and Services Companies of IT software and services related activities for use of both the software developers as well as interested companies overseas....

, 6th Sense, Genpact
Genpact
Genpact Limited is a global business process and technology management company. It was formerly a GE owned company called GE Capital International Services or GECIS. It operates from India, China, Guatemala, Hungary, México, Morocco, the Philippines, Poland, the Netherlands, Romania, Spain, South...

, ITAA, Quickstart Global, Sonnenschein Nath & Rosenthal
Service Provider Survey
2007
University CIBERs 1 Academic conferences and associated activities
Since 2007
Great Idea Service Provider Survey
2008
Wipro
Wipro
Wipro Limited formally Western India Products Limited is a global IT services and consulting company headquartered in Bangalore, India. As of 2011, Wipro is the second largest IT services company by turnover in India and employs more than 120,000 people worldwide as of March 2011...

3rd Annual International Research Conference on Offshoring
2009


1 Florida International University
Florida International University
Florida International University is an American public research university in metropolitan Miami, Florida, in the United States, with its main campus in University Park...

, Indiana University
Indiana University
Indiana University is a multi-campus public university system in the state of Indiana, United States. Indiana University has a combined student body of more than 100,000 students, including approximately 42,000 students enrolled at the Indiana University Bloomington campus and approximately 37,000...

, Michigan State University
Michigan State University
Michigan State University is a public research university in East Lansing, Michigan, USA. Founded in 1855, it was the pioneer land-grant institution and served as a model for future land-grant colleges in the United States under the 1862 Morrill Act.MSU pioneered the studies of packaging,...

, Temple University
Temple University
Temple University is a comprehensive public research university in Philadelphia, Pennsylvania, United States. Originally founded in 1884 by Dr. Russell Conwell, Temple University is among the nation's largest providers of professional education and prepares the largest body of professional...

, University of Connecticut
University of Connecticut
The admission rate to the University of Connecticut is about 50% and has been steadily decreasing, with about 28,000 prospective students applying for admission to the freshman class in recent years. Approximately 40,000 prospective students tour the main campus in Storrs annually...

, University of Hawaii
University of Hawaii
The University of Hawaii System, formally the University of Hawaii and popularly known as UH, is a public, co-educational college and university system that confers associate, bachelor, master, and doctoral degrees through three university campuses, seven community college campuses, an employment...

 at Manoa, University of Kansas
University of Kansas
The University of Kansas is a public research university and the largest university in the state of Kansas. KU campuses are located in Lawrence, Wichita, Overland Park, and Kansas City, Kansas with the main campus being located in Lawrence on Mount Oread, the highest point in Lawrence. The...

, University of Maryland, College Park
University of Maryland, College Park
The University of Maryland, College Park is a top-ranked public research university located in the city of College Park in Prince George's County, Maryland, just outside Washington, D.C...

, University of Memphis
University of Memphis
The University of Memphis is an American public research university located in the Normal Station neighborhood of Memphis, Tennessee and is the flagship public research university of the Tennessee Board of Regents system....

, University of North Carolina
University of North Carolina
Chartered in 1789, the University of North Carolina was one of the first public universities in the United States and the only one to graduate students in the eighteenth century...

 at Chapel Hill

Surveys, case studies, and services

Primary activities of the ORN include the annual Corporate Client Survey and the annual Service Provider Survey. In addition, the ORN conducts flash surveys on current or emerging topics, case studies and custom research. Based on their research, ORN members publish papers in both academic and practitioner-oriented journals. In addition, ORN partners, in particular the Duke University team, provide a range of services: education programs, workshops, webcasts and advisory services.

At the core of ORN is the annual Corporate Client Survey. It tracks strategic drivers and risks of offshoring, location choices, delivery models, performance outcomes and future plans of U.S.-based, European and other companies. Particular features are:
    • Respondents include companies that currently engage in offshoring, that are considering offshoring and that have not yet considered offshoring
    • Data is collected at multiple levels: firm level (firm demographics, offshoring strategies and outcomes, business functions offshored, future plans); business process level (drivers and risks), implementation level (launch year and location choice of concrete offshore projects, task information, service delivery model, savings achieved)
    • Offshoring drivers and projects are captured across business processes, including IT
      Information technology
      Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...

      , Software Development
      Software development
      Software development is the development of a software product...

      , Finance & Accounting, Call Centers, Human Resources
      Human resources
      Human resources is a term used to describe the individuals who make up the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations...

      , Legal Services, Procurement
      Procurement
      Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...

      , Marketing & Sales, Engineering
      Engineering
      Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...

      , Product Design
      Product design
      -Introduction:Product design is the process of creating a new product to be sold by a business or enterprise to its customers. It is concerned with the efficient and effective generation and development of ideas through a process that leads to new products.Product designers conceptualize and...

      , Research & Development and Knowledge & Analytical Services (KPO
      Knowledge process outsourcing
      Knowledge process outsourcing is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost...

      )
    • The survey captures previous offshoring projects (with emphasis post-1990s), current implementations and future plans
    • Participating firms are from various industries, ranging from Financial services
      Financial services
      Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

      , Manufacturing
      Manufacturing
      Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

      , Software companies to Technical and Professional Services
      Professional services
      Professional services is an industry of infrequent, technical, or unique functions performed by independent contractors or by consultants whose occupation is the rendering of such services....

    • Participating firms include large (from the Forbes 2000), mid-size and small companies (<500 employees)
    • The survey is translated into the native business language of different participating countries
    • A new web-based survey application offers respondents continuous access and on-demand benchmarking features


In parallel, the ORN research team annually conducts the Service Provider Survey which collects data on the supply of offshore services. Particular Features are:
    • Participating firms include large, mid-size and small providers (<500 employees)
    • Participating service providers are from all main offshore destinations, e.g., India, China, Eastern Europe, as well as U.S.-based service
    • Data is collected at two levels: firm level (firm demographics, services provided, industries served, risks perceived, talent recruiting, future plans); and process level (location of provision of particular business processes, savings achieved, contract renewal rate)


More recently, the ORN research team at Duke University initiated Flash Surveys aiming to capture recent developments and trends in the offshoring arena. For example, in late 2008, the team launched a flash survey focusing on the impact of the current financial crisis on offshoring.

Additional case studies conducted by ORN partners serve to illuminate firm-level challenges with offshoring as well as the emergence of new organizational capabilities and best practices. A number of MBA teaching cases and academic publications have been and are being produced from these case studies.

Services provided by the ORN include workshops and webcasts on annual survey findings and offshoring research. The Duke University research team organized the 1st Annual Offshoring Research Conference, held at Duke University, in 2007, and it will host the 3rd Annual Conference, April 5–7, 2009. Other services include Executive MBA programs, PhD workshops, and special workshops at academic conferences (e.g., the European Group for Organizational Studies). The Duke University ORN team also holds an annual executive education program titled “Successful Offshoring and Outsourcing Strategies.” This program combines top managers sharing experiences in a panel format, with ORN research on the offshoring practice. To encourage interaction with speakers and encourage cross learning, participation is limited to 30 attendees.

Research themes

The ORN research team has published a range of academic and practitioner-oriented articles that mainly focus on certain themes: the global search for talent, the globalization of innovation, the emergence of geographic knowledge service clusters, and the emergence of new global organizational capabilities.

Global search for talent

A key ORN finding is the increasing importance of access to qualified personnel as a driver of offshoring decisions. Most scholars have argued that offshoring is primarily driven by opportunities to reduce labor costs and by labor arbitrage effects. While the ORN surveys confirm the importance of costs, they also reveal that companies use offshoring as a means to access talent pools outside their home countries, in particular for higher-skilled work. This trend has been explained by an increasing supply of science and engineering talent in emerging economies, e.g., India, and the increasing difficulty of finding talent in the U.S. and Western Europe. It is further reinforced by restrictive visa policies in the U.S. and incentives for foreign graduates to return to their home countries, a recent phenomenon referred to as brain circulation
Brain Circulation
Brain circulation is a concept that is posited as a counter-factual to the idea of brain drain. The concept of "brain drain" gained popularity as skilled labour from certain countries emigrated to other countries in search of better opportunities...

.

Whether offshoring is primarily driven by costs, by the global search for talent or a combination of both has been widely debated. Some scholars argue that science and engineering degrees in India and other emerging economies are, on average, not yet compatible with degrees in the U.S. and Western Europe. Therefore, the supply of qualified talent in emerging economies is more limited than often argued in the business press. However, foreign client firms sometimes respond to that challenge by setting up complex collaborations with local universities to secure access to qualified personnel. Also, recent studies suggest a trend towards modularization
Modularization
The notion of ontology modularization refers to a methodological principle in ontology engineering. The idea is that an ontology is built in a modular manner, i.e...

 and standardization
Standardization
Standardization is the process of developing and implementing technical standards.The goals of standardization can be to help with independence of single suppliers , compatibility, interoperability, safety, repeatability, or quality....

 of higher-skilled work allowing for the use of less qualified personnel for lower costs. According to ORN studies, the search for talent and cost considerations therefore depend on changes in technology, education policies, firm capabilities and economic conditions. In the short term, the financial crisis might result in labor cost savings becoming a more important offshoring driver.

Globalization of innovation

The ORN surveys reveal that more and more firms are offshoring knowledge work, including software development
Software development
Software development is the development of a software product...

, engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...

, product design
Product design
-Introduction:Product design is the process of creating a new product to be sold by a business or enterprise to its customers. It is concerned with the efficient and effective generation and development of ideas through a process that leads to new products.Product designers conceptualize and...

, research and development
Research and development
The phrase research and development , according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of...

. Previously, offshoring was mainly associated with Information Technology Outsourcing
Information Technology Outsourcing
Information technology outsourcing or ITO is a company's outsourcing of computer or Internet related work, such as programming, to other companies...

) and standard business processes. However, according to ORN findings, small companies in particular seek to offshore knowledge work, partly using specialized suppliers, to compensate for their limited capital and capacity for product development. Drivers of this trend include the potential to increase speed to market and better access to qualified personnel.

This trend is increasingly being discussed in the academic and practitioner-oriented literature. The economist Alan Blinder argues that technical processes, such as software testing
Software testing
Software testing is an investigation conducted to provide stakeholders with information about the quality of the product or service under test. Software testing can also provide an objective, independent view of the software to allow the business to appreciate and understand the risks of software...

 and engineering support
Engineering support
Configuration management is for most of time dealing with the system that is large, complexed, has a long life duration and involve more people. The key issues for engineering support are to coordinate the participants and to provide each engineer an environment, also called a workspace where they...

, are becoming easy to offshore because advanced information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...

 helps decompose and separate technical processes which can then be undertaken and coordinated remotely. Other researchers argue that knowledge-intensive tasks remain difficult to decompose because of the complex and often tacit knowledge
Tacit knowledge
Tacit knowledge is knowledge that is difficult to transfer to another person by means of writing it down or verbalising it. For example, stating to someone that London is in the United Kingdom is a piece of explicit knowledge that can be written down, transmitted, and understood by a recipient...

 involved in carrying out these tasks. ORN findings, however, suggest that this trend is likely to continue as more and more service providers offer product development services, as firms look for external sources of new ideas (e.g., open innovation
Open Innovation
Although the idea and discussion about some consequences date back at least to the 60s, open innovation is a term promoted by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at the University of California, Berkeley, in his book Open Innovation: The new...

), and as new business models and technologies (e.g. Internet marketplaces such as Innocentive.com
InnoCentive
InnoCentive is an "open innovation" company that takes research and development problems in a broad range of domains such as engineering, computer science, math, chemistry, life sciences, physical sciences and business and frames them as "challenge problems" for anyone to solve them...

) emerge.

Geographic knowledge services clusters

One major factor contributing to recent offshoring and outsourcing trends is the emergence of new geographic knowledge services clusters. In general, business cluster
Business cluster
A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used...

s can be defined as geographic concentrations of firms and institutions related to particular industries or fields. In the offshoring space, a new type of cluster is emerging, quite different from [Silicon Valley], which often serves as a prototype of an industry cluster. These new types of clusters are highly dependent on foreign investment and are characterized by the supply of specialized talent and expertise that is demanded across industries. One key example of such a cluster is Bangalore for IT-related services and software programmers who have developed specialized service capabilities, which are in demand worldwide in several different industries, including manufacturing, financial and professional services. Recent studies further indicate that these clusters increasingly show similar institutional features across the world, such as collaborative agreements between foreign firms and local universities, which are a result of local embedding and sourcing strategies of multinational enterprises across locations.

The ORN research team has started to conduct survey- and case study-based research to better understand the development of these clusters. A very recent project, for example, seeks to investigate the emergence of new IT and software development clusters in Latin America which attract foreign investors from Spain and the U.S. in particular. A longer term project involves the identification of knowledge service clusters around the world, using a longitudinal study
Longitudinal study
A longitudinal study is a correlational research study that involves repeated observations of the same variables over long periods of time — often many decades. It is a type of observational study. Longitudinal studies are often used in psychology to study developmental trends across the...

 of location choices and the delivery of offshore services from particular locations. Other scholars have also looked into the emergence of offshore destinations, in particular in India, and the factors contributing to the selection of locations by investors.

New global organizational capabilities

One key proposition raised by the ORN research team is that offshoring is an intermediary step to evolving new global organizational capabilities rather than an end in itself. In general, organizational capabilities denote the ability of organizations – in this case firms – to deploy and use resources in a way that help them survive in a changing, competitive environment. As companies face various challenges related to offshoring, for example the challenge of attracting and retaining talent, or of losing managerial control and process knowledge, they are forced to develop new capabilities that help them manage offshore operations and that fundamentally transform their internal processes. Examples of this sort of new capability include new procedures to manage interfaces between tasks, locations, business units and teams
TEAMS
Teams is the plural form of team.TEAMS may also refer to:*TEAMS , a competition sponsored by JETS*TEAMS , an Kenyan initiative to link the country to the rest of the world through a submarine fibre optic cable....

; new employment models using external talent agencies; new procedures for training and evaluating external suppliers etc.

The development of these capabilities is a continuous learning process and involves the search for solutions of unanticipated challenges. For example, a recent ORN study indicates that many companies go through a period of declining cost savings – the so-called ‘inefficiency trap’ – as they increase the scale and scope of offshore operations. This trap is largely caused by ‘hidden costs’ involved in coordinating offshore operations that only become apparent over time. To study how companies deal with these challenges, the ORN research team is conducting a number of case studies involving series of interviews and field visits at U.S. and European companies.

Relevance and impact

The ORN project and the annual surveys in particular have been recognized as an important source of knowledge in the offshoring debate by the academic community and practitioners.

Academic research

Research papers based on ORN data have been presented at major academic conferences in the field of management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...

 and international business
International Business
International business is a term used to collectively describe all commercial transactions that take place between two or more regions, countries and nations beyond their political boundary...

 research, in particular at annual meetings of the Academy of Management
Academy of Management
The Academy of Management is a professional association for scholars dedicated to creating and disseminating knowledge about management and organizations. The Academy of Management was established in 1936...

, the Academy of International Business
Academy of International Business
Academy of International Business is the leading association of international business scholars and specialists. Established in 1959, it has over 3000 members in about 72 countries. Membership is open to organizations as well as individuals...

, and the European Group for Organizational Studies. Further, ORN research papers have been or will be published in a number of major journals in this field, including Long Range Planning, Academy of Management Perspectives
Academy of Management
The Academy of Management is a professional association for scholars dedicated to creating and disseminating knowledge about management and organizations. The Academy of Management was established in 1936...

, Journal of International Business Studies
Journal of International Business Studies
The Journal of International Business Studies is a double blind peer-reviewed academic journal and the official publication of the Academy of International Business. It is published by Palgrave Macmillan and covers research on international business. The journal was established in 1970 and is...

, and Harvard Business Review
Harvard Business Review
Harvard Business Review is a general management magazine published since 1922 by Harvard Business School Publishing, owned by the Harvard Business School. A monthly research-based magazine written for business practitioners, it claims a high ranking business readership among academics, executives,...

. Through its publications, the ORN team seeks to advance knowledge about the antecedents, process and effect of offshoring, outsourcing and global sourcing, the transformation of global firm structures and the emergence of global organizational capabilities.

Managerial practice

A number of practitioner-oriented reports and business press articles have been released based on ORN research. Major publications include the 2006 ORN Report “The Globalization of Innovation” and the 2007 Service Provider Report “Offshoring 2.0: Contracting Knowledge and Innovation to Expand Global Capabilities”. Forthcoming is the 2008 Survey Report “Offshoring Reaches the C-Suite”. Through its advisory services and its collaboration with a number of private organizations, such as The Conference Board
The Conference Board
The Conference Board, Inc. is a non-profit, non-partisan business membership and research group. It has approximately 12,000 executives in its network, from 1200 corporations in 60 countries. It holds conferences, convenes executives, conducts economic and business management research, and is seen...

, IAOP and PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....

, the ORN team has been able to regularly present and discuss findings with corporate clients, outsourcing professionals and other interest groups.

Policy-making

The impact of ORN research on policy-making
Policy
A policy is typically described as a principle or rule to guide decisions and achieve rational outcome. The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol...

 and policy-oriented debates has been limited so far. Reasons may include the strong orientation of ORN to firm-level strategies and decisions. A notable exception is the analysis of H-1B visa
H-1B visa
The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101. It allows U.S. employers to temporarily employ foreign workers in specialty occupations...

 policies and their impact on offshoring decisions in a recent academic paper based on ORN data. Key propositions regarding the impact of national policies on offshoring are further discussed in a recent perspective paper.

Criticism and responses

The ORN project has been criticized in the past for being biased towards corporate interests. This criticism primarily relates to the funding structure of the project in its early years. In the first three years, the main ORN survey was sponsored by advisory firms. In 2007, the Conference Board was recruited as a lead supporter of ORN. According to the Duke ORN research team, this partnership promotes the neutrality of the project. In the 2007/8 Survey Report “Offshoring Reaches the C-Suite” the ORN author team makes the following statement:
    • "Duke Forges a New Partnership with The Conference Board [...] Since its foundation, the ORN project has learned that companies value its academic rigor and objectivity. To further reinforce its neutrality and to differentiate the ORN project from consulting companies, the Duke CIBER has formed a new partnership with The Conference Board—the leading, nonprofit, independent business research organization in the United States. This new collaboration provides an objective platform from which to conduct offshoring research free of any commercial or proprietary bias."

See also

  • Offshoring
    Offshoring
    Offshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring...

  • Outsourcing
    Outsourcing
    Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

  • Shared Services
    Shared services
    Shared services refers to the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an...

  • Offshore outsourcing
    Offshore outsourcing
    Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the products or services are actually developed or manufactured. It can be contrasted with offshoring, in which the functions are performed in a foreign...

  • Business Process Outsourcing (BPO)
    Business process outsourcing
    Business process outsourcing is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments...

  • Globalization
    Globalization
    Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

  • Farmshoring
    Farmshoring
    Farmshoring is a term used to describe the shifting of employment from abroad into rural communities across the United States. It is conceptually similar to onshoring which can be defined as "the act of transferring some of a company’s recurring interval activities and decision rights to outside...

  • Supply Chain Management
    Supply chain management
    Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...

  • Knowledge Process Outsourcing (KPO)
    Knowledge process outsourcing
    Knowledge process outsourcing is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost...

  • Legal Process Outsourcing (LPO)
  • Recruitment Process Outsourcing (RPO)
    Recruitment Process Outsourcing
    Recruitment Process Outsourcing is a form of business process outsourcing where an employer outsources or transfers all or part of its recruitment activities to an external service provider....

  • Global Sourcing
    Global sourcing
    Global sourcing is a term used to describe practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service...

  • Information Technology Outsourcing (ITO)
    Information Technology Outsourcing
    Information technology outsourcing or ITO is a company's outsourcing of computer or Internet related work, such as programming, to other companies...


Literature


External links

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