Volume 19, Number 3 Article by Srinivas Gunta September, 2007
Co-location of Unrelated Divisions in the ITES-BPO Industry: Dynamics of Value Creation and Destruction :
Outsourcing in services has become imperative, with cost considerations increasingly giving way to strategic considerations. The focus has shifted to organising for superior service delivery – leading to decisions with respect to mode (off-shoring vs on-shoring), method (captive provider vs third-party provider) and means (specialised provider vs full-line provider).
An outsourcing outfit usually has different activities organised into various divisions such as software development, call centres and transaction processing centres. Also, the divisions may be organised based on the nature, periodicity and complexity of the work – implying that the qualifications, skill sets and the outlook of employees would differ. Outsourcing providers typically have physically co-located divisions, especially initially. Two reasons explain this phenomenon – managerially, it enables overall supervision and economically, it leads to better utilisation of common infrastructure. This is true of captive as well as third party providers on the one hand and specialised (in terms of focus) as well as full-line providers on the other. Considering that the advent of IT has enabled ‘division of work’ to obviate co-location, it can be assumed that co-location of disparate divisions lacks a compelling reason. Co-location in such a scenario where divisions are disparate and inter-divisional employees lack skills to evaluate other divisions or their employees poses an interesting problem for organisation theorists.
The comparative evaluations that the divisions attempt of one another can take several forms – inter-divisional learning that takes off from an internal competition perspective; informal knowledge transfer; and in extreme situations, destruction of value at the organisational level despite benefits at the divisional level. Srinivas Gunta reviews literature in the areas of co-location and product development extensively to delineate the dynamics of value creation and destruction. He offers some observations on the suitability of co-locating vis-à-vis the modes, methods and means of outsourcing.
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