Studies in process quality, risk and governance in offshore outsourcing of services

The use of Internet-Enabled Distributed Monitoring Systems have allowed firms to source services globally that were hitherto thought of as being too risky or complex to execute offshore. These systems allow buyers of such services (clients) to monitor the execution of processes in real time and exert a degree of managerial control over information workers of another firm located in distant region. This dissertation investigates how recent advances in Information Technology and Telecommunications have led to real-time monitoring of processes at the site of the provider by a buyer located across the globe. We furnish the results of a comprehensive, multi-year, multi-country survey of the efficacy of monitoring and other instruments of governance in offshore outsourcing projects. We provide a game-theoretic model of the dynamics of the buyer-supplier interaction and estimate the modeling primitives from the survey data. Our findings show that the problems of moral hazard and principal agency are greatly mitigated via the mechanism of monitoring across the boundaries of the firm, thus expanding the ambit of offshore outsourcing to include complex processes in widely varying wage regimes, thereby also amplifying the gains from wage arbitrage. Our survey also shows that such intenet-enabled monitoring mechanisms have allowed buyers and providers of services to focus on those processes that are best managed by each entity. Finally, our analysis also shows that offshore process execution centers can improve both operational efficiency and profitability by deploying real-time internet based systems for knowledge transfer that leads to better codification of processes. This dissertation also explores how an offshore outsourcing firm has successfully used such monitoring mechanisms to minimize risk and hence execute processes of high complexity with minimum disruption.