Globalisation of the IT Industry: the search for competitiveness drives the corporate offshore outsourcing in the IT industry
Purpose: When it comes to offshore outsourcing, for more than two decades, the corporate philosophy has been to "produce where it is cheapest and sell where it fetches the best price" (Bajpai et al. 2004, p.6). However, although the traditional determinants of the location decision for the corporate offshore outsourcing in the Information Technology (IT) industry have not disappeared over time, their influence has decreased. For example, nowadays the market size as one of the most important traditional determinant for investing abroad has lower significance, while others, new determinants became more important. The differences in costs in various locations, quality of the IT infrastructure, business conditions, high-skilled labour force, the quality of experience and knowledge of the IT companies when investing abroad, the search for continued quality etc., are gaining greater importance. Therefore, the competitiveness and the market growth are more in-line with the corporate philosophy of the modern IT companies, nowadays. This implies that investors’ motives continuously change and so markets too should seek new modes for attracting foreign investments. In this paper a conceptual framework has been developed using the theoretical underpinnings of Dunning’s Eclectic Paradigm so as to provide an additional understanding among scholars and practitioners about what are the main drivers the corporate offshore outsourcing in the IT industry. The conclusion provides discussion and suggests that the Dunning’s theory offers valuable insights for both academia and practice to develop more comprehensive approach about the offshore outsourcing location decision in the IT industry.
The position assumed for this study is interpretive utilizing qualitative methods of research.
Given the limited time and scope, a case study was not included in the research, and instead only a review in the FDI literature and the literature on IT offshore outsourcing has been made, which is a limitation of this study. Additionally, it is important to state that the secondary reporting could increase the objectivity of the paper, but the additional limitation of this study lies in the fact that not all the factors will be reported.
Originality/value of the paper
The originality (value) of this paper is that it utilizes the main tenets of Dunning’s eclectic paradigm so as to contribute to the pool of knowledge and to inject an additional understanding to the IS literature about the factors that determine the decision about the location of the offshore activities of the IT companies.
Keywords: IT offshore outsourcing, location determinants, IT industry