Teaching case
Building innovation into the outsourcing
relationship: a case study
Correspondence:
R Babin, Ted Rogers School of Management, Ryerson University, Toronto, Canada M5B 2K3.
Tel: þ 416 979 5000×2448;
Fax: þ 416 979 5249;
E-mail: rbabin@ryerson.ca
Abstra ct
This teaching case has been developed for a global consumer products company.
Interviews from several outsourcing managers and executives within the company have
contributed to the case. This case focuses on how a company can build innovation into an
outsourcing relationship when it has not been explicitly stated in the outsourcing agreement.
The two fictitious companies in this case are Bentley & Brooks (B&B) (the client) and
AlphaCorp (the provider). Both companies are based on, but are not accurate portrayals of,
actual companies that are anonymous. The case is a composite of several actual
outsourcing cases between the two companies. B&B has outsourced much of their human
resource operations and IT support. They have been frustrated that their global outsource
provider, AlphaCorp, has not been able to bring innovation to the relationship. In the
outsourcing contract, innovation was not expressly identified, but was certainly discussed
during the outsourcing proposal and negotiations. In addition, the ability of AlphaCorp to
deliver consistent quality of service on a global basis has been uneven, particularly in Latin
America. You will be asked to take on the role of a B&B employee who is part of a team
looking into the innovation problem. The team has been asked to provide answers to three
key questions and to present their recommendations to a panel of senior executives of B&B.
Journal of Info rmat io n Technology Teaching Cases (2012) 2, 98 – 103.
doi:10.1057/jittc.2012.10; published online 23 October 2012
Keyw ords: outsourcing; innovation; continuous improvement; contract; relationship management
Comp any profile: Bentley & Bro oks (B&B)
B
& B produces and suppl ies hundreds of cons umer
goods in food and househol d produ ct catego ries. For
most of their history , they hav e operated primarily in
the Americas and Europe. In the past 10 years, they have
broadened the ir reach to include Asia, Africa, Aus tralia and
New Zealand.
The compan y sells its produ cts throug h its sales force,
indep endent bro kers, agents, and distribu tors to chain,
wholes ale, co-oper ati ve and indep enden t gr ocery acco unts,
and food service distribu tors and inst itutions . It also
distrib utes its pr oducts throug h a ne twork of distribu tion
centres , sate llite w arehouses, compan y-operated and pub lic
storage facilities , and depots.
B& B w as esta blished in Boston, Massachu setts in 1873
and has grown to beco me one of the world’s 10 larges t
multi nationa l consum er goods compa nies. The compa ny is
listed on most maj or stock exchanges.
The challenge
The challenge faci ng B& B is that while the y are generall y
satisfied with the ir outso urcing arran gements from opera -tional and servi ce delivery perspecti ves, they are less happy
about the lev el of inno vation and conti nuous impr ovement
(CI) tha t they are recei ving from the more importa nt
arrang ements .
The cha llenge w as twofold :
(1) How to get an existing service pr ovider to deliver
inno vation and CI in an arrang ement where there is no
pred efined w ay in which to measu re or manage the
provider ag ainst it and wher e there are poc kets of poor
servi ce lev els.
(2) Determ ining w hat meas ures sh ould be included in
contra cts for future outsou rcing arrangements to
ensure that inno vation and CI gets the focus and
impo rtance B& B wants.
Journal of Information Technology Teaching Cases (2012) 2, 98 – 103
& 2012 JITTC Palgrave Macmillan All rights reserved 2043-8869/12
palgrave-journals.com/jittc/
JIT044
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
Outsou rcing arrange ments at B&B
B& B was no strang er to outsou rcing arrangements . B& B’s
outso urcing strategy had been initia ted by the ir CEO, Max
Skinne r, in 200 4. He believ ed that outsou rcing would not
only reduce opera ting cos ts, but also help chan ge the
cultu re of the organiza tion to one that would be more
perform ance-d riven. He also believed that regio nal and
global outsou rcing arran gements w ould help bring greater
coherenc e to the organiza tion throug h common proces ses
and system s.
Over the past 7 years , B& B had implemented sev eral
major out sourcing arrang ements:
A Europe-w ide IT infrastruct ure outsou rcing w ith IBM
A Europe -wide comm unicatio ns outsourci ng w ith Fra nce
Telecom
A Europe- wide finance and acco unting outso urcing with
EDS
An Am ericas out sourcing financ e and acco unting out-sourcing with Accentu re
An Ameri cas non- core procurem ent and logi stics out-sourcing w ith T& B, a specialty procu rement and logistics
service provider
An Americas system devel opment and main tenance
outsou rcing with Tata Cons ultancy Services
A g lobal human re sourc e (HR) outsourcing with A lphaCorp,
in itially implemented in Europe and the A m ericas
Thes e outsou rcing contrac ts were 5–10 years in durati on,
and some of them have been exten ded for a seco nd term,
gene rally without competiti on, but w ith benchm ark ing to
achie ve fair pr icing of the renew al contract.
Over the last 7 years, B& B had seen gr eat progress in
their ability to negoti ate bette r deals with outso urcing
provider s and cut costs. Yet, B& B is now starting to
ques tion w hether their overall outso urcing stra tegy is
optim al, specifica lly cons idering ques tions such as: Shou ld
there be more or fewer outso urcing servi ce provider s?
Shou ld deals be more reg ional or global? Sho uld deals be
re-ten dered at end of term as a matt er of cours e to ensure
competi tive tension? Shou ld the scope of outsou rcing
relatio nships conti nue to be focused round busine ss
functions , or should they be mor e pr ocess focu sed?
AlphaCo rp outsour cing arrange ment
Some of B& B’s outsou rcing arrang ements had produ ced
tangible and substanti al benefi ts in a very short time fram e.
Others , such as that with AlphaCor p, had been challengin g
and difficult . B& B ex ecutives were mos t frustra ted with the
difficult y in bring ing innovatio n from the outsou rce pro-viders into the B& B enviro nment.
AlphaCorp was one of B& B’s most complex and important
outsourcing relationships, due to its wide scope of services
and geographies.
The scope of the Alpha Corp outsourci ng rela tionship
covered HR admi nistration. The 10-year deal was signed in
June 2006 and was impl emented in West ern Europe and the
Ameri cas by Decem ber 2007.
The services c overed by the deal includ e:
All HR data mai ntenance, includ ing all emplo yee infor -mation and informa tion on benefi t service provider s,
learning and educatio n service provider s, and other
service provider s
Compens ation and benefi ts admi nistration
Learnin g and educa tion admin istration
Recruiting of all administra tive employee s
Managem ent of the recrui ting process for all other
emplo yees
Managem ent of talent and compete ncies data
Travel and ex pense ad ministration
Procur ement of all HR servi ces
Mainte nance of the HR infor mation system
Managem ent of emp loyee assistance progra mmes
Payroll and benefit payment processi ng
Managem ent of all HR regulatory issues in each c ountry
in scope
The objectiv es for the outso urcing were to:
Achieve cons istency in H R busines s pr ocesses
Achieve cons istency in H R data
Increase the quality of recruiting, raisi ng the level of
skills acquired
Give gr eater visibility into the skills and compete nc ies in
the organiza tion
Implemen t emplo yee self-se rvice
Empower emp loyees to upgra de their skills
Achieve more effec tive relatio nships with HR servi ce
provider s
Reduce costs
Many of these o bjectives h ad been realized by the e nd of
year 2012. H owever, achieving consistency in processes and
data, a nd gaining greater access to talent and skill data was
still far from being achieved. This was seen as largely due to
la ck of understanding by Alpha Corp of how to work in
partnershipwiththe B&Borganization andofthecultural
differences in the areas where B& B operates around the world.
In particular , a lack of understand ing of the Latin
Ameri can busines s culture had led to major prob lems in
service provision acro ss the region, and the rela tionship
betwee n B& B and Al phaCorp in Latin America had become
quite strained.
AlphaCorp services are delivered from service centres in
Porto, Portugal; Nashville, Tennessee; and Santiago, Chile.
Governance is performed at three levels: national, regional
and global. So far , both pa rties had found that com munic a-tion between players within each of the parties’ own organi-zations at these three levels had been poor, particularly on the
B& B s ide, making re gional and global gove rnance difficult .
Sharing of ideas between countries and regions had been
partic ul arly poor. It had been hoped that the governance
proce ss would re sul t in sharing of go od ideas ac ro ss the
re gions and globall y, but this had not yet bee n acc omplished.
It ha d become apparent to B& B that Alpha Corp was not
achie ving their financ ia l objecti ves from the rela tionship
and that this was putti ng press ure on the ir ability to add -ress the mor e challengi ng objectiv es of the dea l requirin g
inno vative approa ches. B& B knew tha t Alpha Corp need ed
to mak e this deal work in light of its size and also because
it was a ‘mar quee’ t ransaction in the gl obal outso urcing
market tha t Alpha Corp needed to be succes sful for
marketi ng purpo ses.
Building innovation into the outsourcing relationshi p R Babin and C Schuster
99
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
The scenario /situation
Carlos Vio is the B& B Service Managem en t executive for
the Alpha Corp rela tionship in Latin America. He had
been hired speci fically for this role from HP in Chile,
having had si gnificant experienc e in HR BPO deals with
them. He has servi ce manag ers for the Alpha Corp
arrang ement in each Latin Ameri can cou ntry report ing to
him, and he reports two w ays: to the head of H R Latin
Ameri ca and to the Global B& B Serv ice Ma nagement leader
for the Al phaCorp deal, resid ent in London.
Figure 1 depicts the reporting structu re and the paral lels
betwee n AlphaCor p and B& B.
The AlphaCor p arrang ement w hile gene rally succes sful
from a day-to -day operatio nal level had been causin g
problems in two key areas:
1. The inno vation and CI that was ex pected from Alpha -Corp had not been real ized. Althou gh the outso urcing
contract did not ex plicitly defi ne inno vation and CI, B& B
had been swayed during the proposal and ne gotiations
by Alpha Corp’s claims of thought leader ship and intel-lectual capabi lities that would be focu sed on impr oving
B& B’s outso urced busines s pr ocesses .
2 . Service levels in Lat in America had bee n exc eptionally poor
lately. Evidence of poor performance consisted of service
outage s, falling serve r level agre ement (SLA) measures
and generally poor c ustomer satisfaction. For e xample, the
online personnel update function used to change home
address and other information had been unavailable for 2
weeks while a software malfunction was being resolved.
A 2 -week outage of a b asic service function was well beyond
the threshold of 3–5 days defined in the S ervice Level
Agreement (SLA).
Carl os realized that innovatio n was a difficult factor to
measu re in ou tsourcing arrang ements but was hoping that
he and Al phaCorp could find a way to mak e it happe n. The
troub lesome servi ce levels in Latin Am erica just made
Carlos ’ situati on more difficult , as he needed t o dec ide if
those had to be fixed before B& B could eve n start w orking
on gett ing innovatio n from that regio n.
Sen ior execu tives were not hap py about either situa tion
and ha d given Carlos 12 months to fix the La tin Am erican
situati on and to find ways to get real innova tion discussions
and processes underw ay. C arlos had assemb led a team to
work with him on this project.
Carl os and the team had spent some time talk ing to
senior ex ecutives about their expectati ons and frustra tions.
They had also met with som e of B& B’s region al Al phaCorp
account managers to find out what ideas they had that could
be leveraged across the entire AlphaCorp arrangement.
Carl os was hoping that the informa tion gath ered throug h
those discus sions comb ined with industry bes t practices
and resea rch would be enoug h to set B& B back on the right
cours e.
Extract of senio r executive comme nts
Senio r executives had e xpressed frustra tion that altho ugh
B& B w as able to apply inno vation and CI to the devel -op ment and improvement of prod ucts, they had not seen
that sp ark of creativity from any o f the major outsourcing
providers that they had engaged. A number of B& B
executives had agreed to be interviewed regarding inno-vation in outsourcing. T he B& B s enior executives int er-viewed came fr om both th e business side and IT. They
included:
Vice Presiden t of Workpla ce Se rvices
Director , Fi nance Se rvices NA & E urope
Director , H R Serv ices Supp lier P erformance
Director of Outsour cing Serv ices
Director of IT Use r Services
Director , Enterpri se Computi ng Proje ct Portfoli o &
Solutions
One executive had provided definitions o f C I and
in nov ation:
‘CI invol ves ong oing incre menta l chang es that are bene-ficial to the pr ovider and to B& B. Usually these are cost
reductio ns for the units del ivered. Most outsou rcers and
B& B are very good at CI. For example , the outso urcing
contract will identi fy year-over -yea r unit cos t impr ove-ments in perc entage terms that can be ver ified and are
rewarde d or pena lized as w ell as bench marked with
outside firms. Great compa nies such as the global service
provider s and B& B ha ve a cul ture of CI, cons tantly
encoura ging all of our people to think and act on
unprov en opp ortuni ties’.
‘Innova tion is a creative pr ocess that results in a step-function chang e in per formance and costs. Innova tion
can be disrupti ve becau se it makes previo us opera ting
model s for pr oducts and services ob solete. Inno vation is
unpredict able, and can be ris ky, but can deliver tremen-dous benefi ts when implemented succ essfully’.
Contrac t-relat ed comment s
‘When the deal is being negoti ated we see great inno -vation promise s from t he provider s. H owever, once the
deal is signed it ver y difficult to brin g that innova tion out
of the m’.
‘If cost red uction measureme nts hav e been defined in the
contract I am confident that the provider w ill meet those
targets, becau se there are rewar ds and penalti es attach ed
AlphaCorp
Senior Relationship
Executive
B&B SVP HR
Global Service
Management
Executive
Process
Delivery
Executive
Technology
Delivery
Executive
Local Service
Management
Manager
Management
Manager
Management
Manager
Regional HR
Service
Managers
Local Service
Management
Manager
Local Service
Management
Manager
Local Service
Management
Manager
Local Service
Management
Manager
Management
Manager
Management
Manager
Local Service
Management
Manager
Local Service
Management
Manager
Local Service
Management
Leader
Europe
Service Mgmt
Executive
Latin Am
Service Mgmt
Executive
North Am
Service Mgmt
Executive
Regional HR
Service
Managers
Regional HR
Service
Managers
AlphaCorpReporting Structure B&B Reporting Structure
Figure 1 Organization charts.
Building innovation into the outsourcing relationshi p R Babin and C Schuster
100
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
to meetin g t hose targets. Howev er, when we asked for
innovative ideas the y som etimes come back and ask us
for additiona l revenu e or chan ge req uests to pr ovide the
fundin g for t he innovat ion. We heard wond erful sales-speak prio r to the contra ct but we have been disap -pointe d with the lack of inno vation during the contra ct’.
CI comment s
‘The prov iders are very good at meeting the CI goals, but
we really do not see inno vation from the m’.
‘Our provider s hav e a tremendo us level of opera tions
understand ing. Their facilities manag ement and opera -tional capabi lities are superior. H owever, opera tional
efficiency may bring CI but rarely does it foste r inno -vation. P erhaps we expect too much from our outso urce
provider s’.
Innovation comme nts
‘Our glob al H R outsou rcing brought us to unders tand
that our firs t priorit y mu st be to have w ell understoo d
consis tent global practices that are execu ted efficien tly.
What may seem innova tive in Europe or North America
could be impo ssible to consider in other global loca tions.
So innovatio n must be seen as som ething that is appro-priate in the context of the local busi ness proces s in the
busines s unit’.
‘The only inno vation that has been seen from Al phaCorp
is the HRA
2
initiative in West ern Europe. That is an
excellent example of w hat ne eds to be do ne more often
and glob ally where po ssible. Perh aps if there was that
kind of thinki ng in Latin Ameri ca we w ould not have the
service problems w e hav e down the re’.
‘One ex ample of a shared problem tha t created inno -vation was B& B’s H P outso urcing rela tionship. B& B
shook-u p H P who came back with creative new ideas,
reduced revenu e from the ex isting outsou rcing arrang e-ment and creat ed an op portuni ty for new revenu e from
the innovatio n’.
‘The B& B Ar chitecture Review Board meets quarterly to
agree on opera tional and strategic proje cts. Our archi -tects seem to identif y more innovatio n than we see from
the vendor’.
‘When our provider s discus s innovatio n they also ask
about rev enue growth, and the y ask for exc lusivity so
that other competin g vendo rs would not be invol ved in
innovative new proje cts’.
‘Where we see innovation from our provider s is when
they unders tand our busines s very well and bring a
sophisti cated understand ing of our competiti on so that
it bring s a bette r competiti ve balance to B& B. This is
especiall y tru e with our real estate and facilities manag e-ment ou tsourcing provider s’.
‘We find that we often have to push our provider s to
bring inno vation to us. In some areas such as IT, there is
resistance to inno vation ’.
‘Here are some of the bette r practices w hen innova tion
does work in ou r outsou rcing arra ngements:
J
We agree on speci fic areas of interest for B& B and
c ompetenc e for the provider
J
The prov ider brin gs market knowl edge and intelli-genc e far beyo nd what B& B could deliver
J
We loo k for qui ck-wins that monet ize the valu e of the
inno vation in the ne ar term
J
We define a long er-term path to realize larger strategic
benefi ts
J
We share the benefi ts and the results of the inno vation
betwee n B& B and the provider ’.
‘Innova tion also come s from competi tion betwee n pro-viders wher e the best pragma tic and creat ive ideas win’.
Gene ral co mments on outsourcing at B&B
‘When we outso urced some of our busin ess pr ocesses we
learned that we did not fully unders tand det ails of our
own busi ness proces s. As we lifted-and- shifted bo th the
process and the data to the provider we discov ered gaps,
redunda ncies and incon sistencies that we both had to fix.
Innovatio n has been difficult as we have simply been
working hard to stabi lize and strea mline the fundamenta l
busines s proces ses’.
‘When w e have taken on major trans formati on projects
we have underesti mated the degre e of chang e, especiall y
when it occurs on a gl obal scale. Our outsou rce prov iders
are commit ted to manag ing the change , and they do
expect to run a profitab le busin ess. We are just now
starting to see an opera ting enviro nment that may allow
us to cons ider innovatio n, but the last 7 years hav e not
been easy and hav e certa inly been a learning experienc e
for us and our provider s’.
‘B& B is now heavily depend ent on its ou tsource pro-viders . Althoug h some inno vation respo nsibility will
come from t he B& B archi tecture group , much of the
thought leader ship and implemen tation should happe n
through the outso urce provider s’.
Clear ly, the B& B out sourcing execu tives had thought long
and hard about the need and challenges of work ing with
their outsourci ng provider s to creat e coll aborative inno va-tion. Carl os was thankfu l for their honest assessment of the
situati on.
Innovation initiat ive from Western Europe
Carlos had als o spoken with a number of the regional
account mana gers about the Alpha Corp arrangemen t and
was particu larly excited ab out what he had lear ned from
Maria Andersson , the Service Man agement leader for the
relatio nship in Western Europe.
Mari a had told him ab out the impl ementa tion of an
Alpha Corp servi ce prototype for her reg ion. Here, a gr oup
of young Al phaCorp engineers had developed a partners hip
arrang ement with a large mobi le pho ne compan y and two
major commu nication s carr iers. Workin g with B& B HR
users , the collective gr oup had devel oped pr ocesses , soft-ware and mobi le hardwar e, suppo rted by the comm unica-tions network, which w ould allo w B& B emplo yees to access
and synch their HR infor mation Anywh ere at Any time
(HRA
2
). HRA
2
was a ver y attracti ve servi ce capabi lity to
youn ger B& B e mployees who we re very comforta ble with
porta ble media such as tablets and sma rtphones. The
applic ation was able to opera te in 17 languages . Al phaCorp
Building innovation into the outsourcing relationshi p R Babin and C Schuster
101
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
had devel oped a pr ototype HRA
2
app for the iPho ne that
would be distr ibuted t o B& B employee s after it had been
thoro ughly tested. A simil ar app for the Bla ckberry was in
devel opment.
The initiative for HRA
2
had been a local competi tion
where university students emp loyed in Alpha Corp’s sum-mer progra mme were asked to come up with ideas and
sugges tions to improve the HR pr ocess. Mari a had
spons ored the competi tion, which gene rated seve ral ideas.
The HRA
2
idea was intend ed to address the problem of B& B
emplo yees who cons tantly travell ed and had limited office
suppo rt. The current app roach was to pr ovide a 24 7h
HR teleph one call cen tre servi ce. The ab ility to accura tely
captu re HR infor mation from emplo yees across many time
zones , langu ages and cultu res was problema tic for Alpha -Corp. The Alpha Corp HR call centre w as cons tantly trying
to impr ove its per formance, but often fell below industry
benchm arks for tim eliness and accura cy. In addition, with
ongoi ng turnover in the call centre, Alpha Corp’s opera ting
costs were mu ch higher than expected .
The HRA
2
inno vation had not been part of the out-sourc ing contract, and had been initiate d through colla-boration at the reg ional level. Maria had propos ed the
HRA
2
to B& B HR ex ecutives , w ith joint funding from
Alpha Corp and B& B (50:50 ). The HR executives agreed to
try the concept. It was a huge succes s. B& B emp loyees were
deligh ted w ith the impr oved service and Al phaCorp saw
redu ced opera ting costs and impr oved accu racy and
efficie ncy. The take-of f caught the attention of other B& B
execu tives who then asked AlphaCor p to stud y this model
and replicate it in other areas of the outsourci ng arrang e-ment. Thi s would not be easy, as the gov ernance relation -ship lack ed a form al mechanism for inno vation and
inno vation was not identified in the outso urcing agreem ent.
The H RA
2
inno vation concept also left many una nswered
ques tions, such as:
Who owned the concep t, the intellectual property?
Would HRA
2
be ex clusive to B& B or could Al phaCorp
offer it to other clie nts?
Where was the respon sibility for secu rity and liability ?
What were the mechanism s for conti nuing the initial
innovative concepts ?
Carl os cons idered the HRA
2
concept for La tin Am erica,
where HR outsou rcing had not been very succes sful.
Alpha Corp w as struggli ng to si mply provide the basic HR
servic es; accura cy and timeline ss were w ell below bench -marks . B& B had filed a recor d number of servi ce issue
compl aints to Alpha Corp, which ne eded to be resolved .
Alpha Corp had not been able to live up to the inno vation
and CI promise s made during the outsou rcing propos al. He
wond ered if the collab orative inno vation , w hich ha d
benefi ted AlphaCor p in Eur ope could be rep licated in Latin
Ameri ca. Indeed , becau se servic e levels hav e been so poor ,
trust betwee n the two sides w as ver y low and B& B had
sugges ted imposing pena lties if perform ance did not
impr ove.
In searc h of best practi ces in innovation and CI
The team had read a lot ab out inno vation and outso urcing
and had come across a num ber of articles discussin g
whet her innovatio n in outsou rcing w as a piped ream. Carl os
was very interested in tw o ou tsourcing model s from
academ ic experts in the field of outsou rcing. The model s
focused on outso urcing relatio nship as being a pre-requisi te for inno vation .
The first model is called the supplier c ompetenc y model ,
descri bed in Chap ter 4 of the Hand book of Global
Outsourc ing and Off shoring by Oshri et al. (2011 ). The
model suggests that outso urce sup pliers should hav e
strong c apabilities in techn ology expl oitation and process
impr ovement in order to help custom ers trans form the ir
busines ses (97–10 3).
The second model is from Kern and Willco cks (2000 ).
They identified trust betwee n the buyer and provider
as being an impo rtant capabi lity in the outsou rcing
relatio nship and a key to bui lding inno vation in out-sourc ing arrange ment. Figure 2 depi cts the role of trust in
outsou rcing.
Kern and Willcoc ks identi fy requirem ents for a smooth
outsou rcing working relat ionship to be ‘largely a task of
comm unicatio ns, coo peration and devel oping trust in the
counterp art’. They discuss the role of social and personal
bonds betwee n individ uals as being impo rtant to the
relatio nship, and note the importa nce of share d cultu ral
beliefs and values: ‘the devel opment of the rela tionship
depends on soc ial and perso nal bo nds, so much so that
alleviati on of c onflicts, achie ving satisfa ction and continu -ing to adapt all depend to a certa in extent on the closen ess
of the bo nds between indivi duals’ (331 ).
Other researche rs agree w ith Kern and Wil lcocks.
Lewick i and Bun ker (1996) defined a three- level trust
model , which consis ts of calculus -base d tru st, knowl edge-based trust and identi ficatio n-based trust.
Calcul us-ba sed trust ‘is based on assu ring cons istency of
beha viour; that is, individ uals w ill do wha t they say because
they fe ar the cons equences of not doing w hat the y say’.
Know ledge-based trust ‘is gr ounded in beha vioura l pr e-dicta bility – knowing the other sufficiently w ell so that the
other’s beha viour is anti cipatab le’. Knowledg e-based trust
occurs when one has enoug h infor mation ab out others to
unders tand them and accurately pr edict the ir likely beha -viour. Ident ification-b ased trust ‘is based on a compl ete
empathy with the other party’ s desir es and intentions ’
(119–1 20).
Outsourcing
Provider
Outsourcing
Buyer
Contractual Governance
Products, Services, Financial
Enforcement, Monitoring, etc.
Relationship Governance
Cultural Adaptation, Shared Vision,
Personal and Social Bonds, etc.
Behavioral Foundations
Commitment, Co-operation, Expectations, Dependency, Trust, etc.
Figure 2 The role of trust in outsourcing.
Source : Kern and WIllcocks (2000).
Building innovation into the outsourcing relationshi p R Babin and C Schuster
102
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
‘At this third lev el trust exists beca use each party
effect ively unders tands, agrees with, empathi zes with and
takes the other’s value s because of the emot ional conn ec-tion betwee n them and thus can act for each other’. It is this
third level of trust that buyers and provider s strive to
achie ve in the outsou rcing relationsh ip beca use of the value
it will creat e.
The case requi rements
You are the team work ing with Carl os. On the basis of the
informa tion fou nd in t his case and curren t arti cles blogs
1
and from yo ur own ex perience s, pr epare a respon se, to
be presented to senior execu tives, to the following three
ques tions:
1. What app roach w ould you recommend to get Al phaCorp
to brin g innovatio n to the table within this current
arrang ement in general? Consider som e of the follo wing
issues:
1.1. How should inno vation be built into the gov ern-ance proces s so tha t it gets proper attention
alo ngside moni toring of cos t and service level
per formance?
1.2. H ow should Al phaCorp and B& B distin guish
betwee n inno vation and CI?
1.3. Wh ere shou ld be focus of inno vation : Current
opera tions? New areas? Ex isting or new regio ns?
Wh y?
2. Would that approach be different for Latin Ameri ca in
the short term, while B& B is resolv ing servi ce level
issues? Explai n w hy it would or would not be diff erent.
Cons ider some of the follo wing is sues:
2.1. H ow could inno vation be used to impr ove perfor-mance and the outsou rcing relatio nship in Latin
Am erica?
2.2. Would innovatio n be an unwa nted compl ication to
the cur rent rela tionship? Why ?
3. What would you recom mend inco rporating into any
future outso urcing arra ngements w ith other servi ce
provider s to ensu re B& B w ould get inno vation and CI
where it is neede d?
3.1. Would a single model across all outso urcing arran -gem ents work ? Why or why not?
3.2. H ow should ownersh ip of intell ectual pr operty
(su ch as patents, meth odologies etc. ) be hand led
w hen multi ple organiza tions c ontribute to inno va-tio n?
3.3. Wh en should innovatio n and CI be discou raged,
or not expe cted as part of the outso urcing
arran gement?
3.4. Sho uld B& B adopt different model s for inno vation
in outsou rcing? Desc ribe tw o or three alternati ve
inno vation model s. Should penalti es or incenti ves
be impl emented in arrangemen ts to encoura ge
pr oviders to be mor e inno vative?
3.5. Wh at would be the role of B& B in en hancing
inno vation in outsourci ng? How would B& B work
mor e coo perativ ely with ou tsource provider s to
achie ve inno vation? What would be respecti ve roles
and respo nsibili ties?
Notes
1 This case study was prepared with support from the Centre for
Outsourcing Research and Education (CORE).
2 You may wish to read a blog on innovation and outsourcing
at http://blogs.computerworlduk.com/hart-of-outsourcing/2012/
05/innovation-and-transformation-do-it-for-the-right-reasons/
index.htm.
Refer ences
Kern, T. and Willcocks, L. (2000). Exploring Information Technology
Outsourcing Relation ships: Theory and practice, Journal of Strategic
Information Systems 9 (4): 321–350.
Lewicki, R.J . and Bunker , B.B. (1996). Developing and Maintaining Trus t in
Work Relationships (Ch apter 7), in R.M. Kramer and T.R. Tyler (eds.)
Trust in O rganizations, Frontiers of Theory and R esearch , T housand O aks, Sage.
Oshri, I., Kotlarsky, J. an d W illcocks , L. (2011). The Ha ndbook of Global
Outsourcing and Offshorin g, in J. K ott arsky and L.P. W illcocks (eds.)
Hampshre, UK: Palgrave Macmillan.
Abou t the author s
Cheryl Schu ster is a Consultant who bridg es the discip lines
of lear ning & devel opment and infor mation managemen t –
bringing infor mation to the people who need it, at the right
time and in the right way . For over 20 years , she has led
team s, implemented new strategies, conduc ted research and
devel oped lear ning progra mmes in a divers e group of sec-tors includi ng manag ement cons ulting, investm ent bank-ing, financ ial servi ces and health servi ces. She recei ved her
Master of Librar y Sc ience and B.A . in Englis h from McGill
Univer sity, Mon treal, Cana da and her Certifica te in Adult
Educa tion from St . Fran cis Xavi er Univer sity, Anitgoni sh,
Nova Scotia, Cana da. She is a Memb er of the Canadian
Societ y for Training and Develo pment (CSTD ).
Ron Bab in is an Assistant Pro fes so r a t the Ted Roger s School
of Manage ment a t Ryer so n U nive rsity in Tor ont o. As a
Former Partner at KPMG and then at Accenture, his industry
experience in outsourcing extends over 25 years. He is a
Member of the Centre for Outsourcing Research and
Educat io n ( COR E) a nd the Inter nat ional Assoc iation of
Outsourc ing Pr ofe ss ional (IAOP). H e is a Graduate of the
Manc heste r Business School at the Unive rs ity of Manc he ste r,
w he re h e rec ei ved a D o ctor ate in Business Administrat io n
(DBA). H is most re ce nt book, Sustainable Global Out-sourcing , w ith B rian Nic hol son, is publishe d by Palgrave
Macmil la n.
Building innovation into the outsourcing relationshi p R Babin and C Schuster
103
This document is authorized for use only by Mariam Ahmed (el7elwa000@hotmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.