Qualitative article ---Offshore outsourcing of customer relationship management: conceptual model and propositions

This article explains the reasons and results of Customer relationship management (CRM) offshore outsourcing intensity, which is measured by the ratio of a business’ expenditures accounted for by CRM offshore outsourcing to its total CRM-related expenditures.  The purposes of the article are to provide a conclusive and consistent view on the impact of CRM offshore outsourcing. To understand the performance consequences of offshore outsourcing of CRM well, both supply-side and demand-side effects have to be considered. With the development of globalization and the increasing competition, multinational companies are forced to outsource their products and services in order to reduce cost, such as labor cost and product cost. This article is important because it propose a model describe the causes and outcomes of customer relationship management systematically and conclusively. At the same time, this article illustrates CRM offshore outsourcing impacts financial performance and operating performance not only positively but also negatively, not like other articles (e.g, Agrawel et al. 2006)

According to the concept model presented in the article, it shows that Reasons of CRM offshore outsourcing intensity are reflected in 5 aspects that are macro business environment, industry, firm, product and task. To explain the reasons well, the author specifies the 5 aspects into 11 characteristics that are exhibited in Figure 1.

Most of the characteristics will induce offshore outsourcing positively, others negatively. The impact of CRM offshore outsourcing intensity is negative to customer relationship performance, however, the impact is positive to financial performance. Under this circumstance, the relationship can be mediated by each other. The conclusions above are supported by utilize agency theory, institutional theory, resource dependence theory and the structure-conduct-performance paradigm.

For practicing manager, low labor cost, developed information systems environment are not the only considerations for a firm to decide either offshore outsourcing or other ways.  Other factors should be considered for good performance such as current degree of internationalization of the firm. 

References:

Agrawal, M., Kishore, R., & Rao, H. R. (2006). Market reactions to e- business outsourcing announcements: an event study. Informa- tion Management, 43(October), 861–873.

Link: http://libproxy.uhcl.edu:6047/article/10.1007/s11747-011-0291-0/fulltext.html