Offshore outsourcing: a managerial framework

Purpose – This paper aims to present a managerial framework that facilitates successful supplier selection and ongoing management for purchasing services from offshore suppliers. Design/methodology/approach – This research is grounded in transaction cost theory and developed using data from case studies of six Fortune 500 firms that have a minimum of three years experience purchasing services from suppliers located in India. Findings – Viewing the selection and management of suppliers for the purchase of offshore outsourced services as strategic in nature helps organizations ensure quality and low cost in the service delivery and also reduces complexity and associated risk to the organization. Research limitations/implications – The overarching limitation is the number and size of the companies being researched. Practical implications – This research presents a framework to guide managers in reducing risk and improving performance in these complex service purchases. Formalizing the selection and management of offshore outsourced services and investing in supplier improvements/measurement was found to improve operating relationships and enhance the business‐to‐business relationship. Originality/value – This research provides a supply management perspective on a relatively new phenomenon. There has been little academic research on business process offshoring and few theoretical insights to guide managers in the purchase of services from suppliers located in different geographies with different cultures and operating structures. This paper looks at this phenomenon from a US‐based perspective and provides guidelines for managers.