Cognitive mapping the topic of organizational outsourcing

Cognitive mapping the topic of organizational outsourcing

Joseph Kim-keung Ho

Independent Trainer

Hong Kong, China

Abstract: The topic of organizational outsourcing in the subject of Business Management is complex. By making use of the cognitive mapping technique to conduct a brief literature review on the organizational outsourcing topic, the writer renders a systemic image on the topic of organizational outsourcing. The result of the study, in the form of a cognitive map on organizational outsourcing, should be useful to those who are interested in the topics of cognitive mapping, literature review and organizational outsourcing.

Key words: Organizational outsourcing, cognitive mapping, literature review

Introduction

As a topic in Business Management, organizational outsourcing is complex. It is thus useful to employ some learning tool to conduct its study, notably for literature review purpose. For a teacher in research methods, systems thinking and management, the writer is specifically interested in finding out how the cognitive mapping technique can be employed to go through a literature review on  organizational outsourcing. This literature review exercise is taken up and reported in this article.

On the cognitive mapping exercise for literature review

Literature review is an important intellectual learning exercise, and not just for doing final year dissertation projects for tertiary education students. On these two topics of intellectual learning and literature review, the writer has compiled some e-learning resources. They are the Managerial intellectual learning Facebook page and the Literature on literature review Facebook page. Conducting literature review with the cognitive mapping technique is not novel in the cognitive mapping literature, see Eden and Simpson (1989), Eden, Jones and Sims (1983), Open University (n.d) and the Literature on cognitive mapping Facebook page. In this article, the specific steps involved in the cognitive mapping exercise are as follows:

Step 1: gather some main points from a number of academic journal articles on Organizational outsourcing. This result in the production of a table (Table 1) with the main points and associated references.

Step 2: consolidate  the main points from Table 1 to come up with a table listing the cognitive map variables (re: Table 2).

Step 3: link up the cognitive  map variables in a plausible way to produce a cognitive map (re: Figure 1) on the topic under review.

The next section applies these three steps to produce a cognitive map on organizational outsourcing.

Descriptions of cognitive map variables on the organizational outsourcing topic

From the reading of some academic articles on Organizational outsourcing, a number of main points (e.g., viewpoints, concepts and empirical findings) were gathered by the  writer. They are shown in Table 1 with explicit referencing on the points.

Table 1: Main points from the organizational outsourcing literature and referencing

Main points from the organizational outsourcing literature	Referencing
Point 1: "Business Process Outsourcing (BPO) is a relatively recent phenomenon in India, emergent in the early 1990s, but today it is one of India’s fastest-growing industries, attracting many international and local companies and entrepreneurs. It is no exaggeration to say that the BPO industry has made significant contributions toward alleviating Indian unemployment. However, the industry has also witnessed significant problems during its rapid growth. Paramount among these is the issue of psychological contract and its impact on employees’ motivation".	Dzever, S. and B. Gupta. 2012. "Business process outsourcing industry in India: Additional benefits of a CSR approach" Asia Business & Management 11(3), Macmillan  Publishers Ltd.: 237-289.
Point 2: "In essence, BPO [Business Process Outsourcing] is the act of giving a third party the responsibility of running what would otherwise be an internal system or service within the organization, thereby allowing the company to concentrate on its core business activity".	Dzever, S. and B. Gupta. 2012. "Business process outsourcing industry in India: Additional benefits of a CSR approach" Asia Business & Management 11(3), Macmillan  Publishers Ltd.: 237-289.
Point 3: "BPO [Business Process Outsourcing] activities are often divided into two categories, namely back office outsourcing (this includes internal business functions such as billing or purchasing) and front office outsourcing (which includes customer-related services such as marketing or technical support). The significant opportunities provided by information technology (IT) stimulate cross-border BPO activities. A BPO contracted outside a company’s own country is sometimes referred to as offshore outsourcing; one contracted to a company’s neighboring country is sometimes called near-shore outsourcing (NASSCOM, 2008)".	Dzever, S. and B. Gupta. 2012. "Business process outsourcing industry in India: Additional benefits of a CSR approach" Asia Business & Management 11(3), Macmillan  Publishers Ltd.: 237-289.
Point 4: "Overseas outsourcing of jobs has quickly become a controversial national issue. Some see outsourcing as a way of maintaining or increasing a company’s competitiveness. Many others view outsourcing in a far more negative light, focusing on jobs lost".	Weidenbaum, M. 2005. "Outsourcing: Pros and cons" Business Horizons 48, Elsevier: 311-315.
Point 5: "Companies who outsource just because everybody is doing it may be surprised by unexpected costs and complications. About one half of the outsourcing arrangements entered into end up being terminated, for a variety of reasons. Some new overseas vendors encounter financial difficulties, or are acquired by other firms with different procedures and priorities".	Weidenbaum, M. 2005. "Outsourcing: Pros and cons" Business Horizons 48, Elsevier: 311-315.
Point 6: "Some American companies are paying much more in real estate fees for their offshoring activities than they would in the United States. This negative differential occurs for two reasons: one is the cost of upgrading poor infrastructure overseas; the second is the fact that inexpensive overseas labor pools are usually found in very large cities, while facilities such as call centers back home are located in lower-cost suburban and rural areas".	Weidenbaum, M. 2005. "Outsourcing: Pros and cons" Business Horizons 48, Elsevier: 311-315.
Point 7: "The survey results clearly demonstrate that more organizations are using outsourcing as part of their service provision strategy. While very few responding organizations have outsourced substantial proportions of their research services, approximately a quarter used outsourcing firms to deal with capacity overload and with research in specialist areas. Offshoring is established to only a very small degree, and whether to offshore is a decision directed mainly by the global structure and offshoring strategy of their parent organizations".	Ward, S. 2004. "Outsourcing research: What's your position?" Business Information Review 21(4), Sage: 227-239.
Point 8: "Outsourcing is ..... shifting from the execution of standardized processes to work on knowledge processes – the outsourcing of activities that require domain expertise, subject expertise, and higher-end professional talent".	Ward, S. 2004. "Outsourcing research: What's your position?" Business Information Review 21(4), Sage: 227-239.
Point 9: "The market opportunities for outsourcing research services are expanding. Just looking at the service offerings of a few research and consultancy services firms produces an impressive list of research products: ● rapid response services delivering factual information on markets, countries, people, legislation, products ● alerting and monitoring services, regular trend reports, and topical briefs ● market profiles, financial reviews and competitor analyses ● due diligence on potential clients ● sector and industry reviews....".	Ward, S. 2004. "Outsourcing research: What's your position?" Business Information Review 21(4), Sage: 227-239.
Point 10: "Williamson (1975) uses the term 'asset specificity', meaning to what extent resources are specific to a particular product or context. It becomes increasingly difficult to change supplier the higher the degree of asset specificity a product has, and, thus, the greater the likelihood of problems arising in the relationship with the supplier. Williamson concludes that, in principle, a situation characterized by a high degree of uncertainty and asset specificity is best dealt with within the company, within a hierarchical structure".	Brandes, H., J. Lilliecreutz and S. Brege. 1997. "Outsourcing - success or failure? Findings from five case studies" European Journal of Purchasing & Supply Management 3(2), Elsevier: 63-75.
Point 11: "Jauch and Wilson (1979) maintain that make/buy or outsourcing is mainly a strategic decision that should be taken on the basis of factors other than just cost calculations and technical judgments".	Brandes, H., J. Lilliecreutz and S. Brege. 1997. "Outsourcing - success or failure? Findings from five case studies" European Journal of Purchasing & Supply Management 3(2), Elsevier: 63-75.
Point 12: ".... one result of outsourcing is that the formerly internal supplier in these instances now acts like an external supplier and needs to adapt to the market and increase its customer base. As a consequence, the outsourced unit needs to develop its own strategy. Brandes (1994) argues that outsourcing often leads not only to increasing demands on the supplier but also on the purchasing company and the supplier relationship".	Brandes, H., J. Lilliecreutz and S. Brege. 1997. "Outsourcing - success or failure? Findings from five case studies" European Journal of Purchasing & Supply Management 3(2), Elsevier: 63-75.
Point 13: "The option to use outsourcing strategy globally is a choice which all companies, be it large or small, increasingly have to consider. The motivation for outsourcing is often cost, market access, or to gain access to specific resources (Ferdows, 1997). When the decision to outsource has been taken, the buyer company needs to decide which relationship to create with the vendor organization (e.g. the level of collaboration and trust between the companies).".	Hansen, Z.N.L. and L.B. Rasmussen. 2013. "Outsourcing relationship: Changes in power and dependency" European Management Journal 31, Elsevier: 655-667.
Point 14: "Outsourcing decisions are strategic decisions where a company has decided to implement a service from a third party instead of producing it in-house (Gilley & Rasheed, 2000). Outsourcing decisions can be explained using four different theoretical perspectives (Grant, 1991; Javalgi, Dixit, & Scherer, 2009; Tsang, 2000); (1) Transaction cost economics, (2) Relational exchange theory, (3) Resource-based view and (4) Resource dependency theory".	Hansen, Z.N.L. and L.B. Rasmussen. 2013. "Outsourcing relationship: Changes in power and dependency" European Management Journal 31, Elsevier: 655-667.
Point 15: "The importance of investigating the impact of buyer–supplier relationships on corporate efficiency is seen from the fact that a typical industrial company spends 50–85 per cent of its turnover on purchased goods such as raw materials, components and semi-manufactures (Cammish and Keough, 1991; Dyer et al., 1998). This partly explains why business process outsourcing has proved to be a relevant strategic option for companies narrowing their operations to focus on core competencies".	Momme, J. and H.H. Hvolby. 2002. "An outsourcing framework: action research in the heavy industry sector" European Journal  of Purchasing & Supply Management 8, Pergamon: 185-196.
Point 16: "Lonsdale and Cox (1998) document that outsourcing decisions are rarely taken within a thoroughly strategic perspective. Hence, many companies adopt a short-term perspective, being motivated primarily by the search for direct cost reductions. Typically, managers either seem to believe that no strategic planning is required, or instead attempt to ‘‘reinvent the wheel’’, which leads them to learn from mistakes that could have been avoided".	Momme, J. and H.H. Hvolby. 2002. "An outsourcing framework: action research in the heavy industry sector" European Journal  of Purchasing & Supply Management 8, Pergamon: 185-196.
Point 17: "Outsourcing of IS development is defined as the subcontracting of some or all of the development and processing activities of an organization to an outside vendor (Richmond et al, 1992). The inter-organizational partnership in which consultants from a service provider with relevant expertise guide the internal development team to implement a system is considered to be a prevalent form of IS outsourcing".	Kim, H.J., B. Shin and H. Lee. 2013. "The mediating role of psychological contract breach IS outsourcing: inter-firm governance perspective" European Journal of Information Systems 22, Operational  Research Society Ltd.: 529-547.
Point 18: "Given its three underlying principles (i.e., mutuality, psychological obligations, and individual level of analysis), the psychological contract can be defined, in the context of inter-organizational outsourcing, as the contractual parties’ mental beliefs and expectations about their mutual obligations, which are perceived at the individual level".	Kim, H.J., B. Shin and H. Lee. 2013. "The mediating role of psychological contract breach IS outsourcing: inter-firm governance perspective" European Journal of Information Systems 22, Operational  Research Society Ltd.: 529-547.
Point 19: "The information technology (IT) outsourcing industry provides services related to information system planning, implementation, operations to companies and public organisations. As information systems become larger and more complicate, demands for the IT outsourcing companies have also grown correspondingly during the last few decades. There is a big market for business process outsourcing market".	Cha, K.J. and Y.S. Kim. 2016. "Critical success factors for mutual collaboration with suppliers in IT outsourcing industry: a case study  of a top IT outsourcing company in Korea" Enterprise Information Systems, Taylor and Francis [DOI: 10.1080/17517575.2016.1196734].

With a set of main points collected, the writer produces a set of cognitive map variables. These variables are informed by the set of main points from Table 1. These variables are presented in Table 2.

Table 2: Cognitive map variables based on Table 1

Cognitive map variables	Literature review points
Variable 1: Drivers of interest in organizational outsourcing	Point 1: "Business Process Outsourcing (BPO) is a relatively recent phenomenon in India, emergent in the early 1990s, but today it is one of India’s fastest-growing industries, attracting many international and local companies and entrepreneurs. It is no exaggeration to say that the BPO industry has made significant contributions toward alleviating Indian unemployment. However, the industry has also witnessed significant problems during its rapid growth. Paramount among these is the issue of psychological contract and its impact on employees’ motivation". Point 9: "The market opportunities for outsourcing research services are expanding. Just looking at the service offerings of a few research and consultancy services firms produces an impressive list of research products: ● rapid response services delivering factual information on markets, countries, people, legislation, products ● alerting and monitoring services, regular trend reports, and topical briefs ● market profiles, financial reviews and competitor analyses ● due diligence on potential clients ● sector and industry reviews....". Point 13: "The option to use outsourcing strategy globally is a choice which all companies, be it large or small, increasingly have to consider. The motivation for outsourcing is often cost, market access, or to gain access to specific resources (Ferdows, 1997). When the decision to outsource has been taken, the buyer company needs to decide which relationship to create with the vendor organization (e.g. the level of collaboration and trust between the companies).". Point 19: "The information technology (IT) outsourcing industry provides services related to information system planning, implementation, operations to companies and public organisations. As information systems become larger and more complicate, demands for the IT outsourcing companies have also grown correspondingly during the last few decades. There is a big market for business process outsourcing market".
Variable 2: Improve intellectual understanding of organizational outsourcing	Point 2: "In essence, BPO [Business Process Outsourcing] is the act of giving a third party the responsibility of running what would otherwise be an internal system or service within the organization, thereby allowing the company to concentrate on its core business activity". Point 3: "BPO [Business Process Outsourcing] activities are often divided into two categories, namely back office outsourcing (this includes internal business functions such as billing or purchasing) and front office outsourcing (which includes customer-related services such as marketing or technical support). The significant opportunities provided by information technology (IT) stimulate cross-border BPO activities. A BPO contracted outside a company’s own country is sometimes referred to as offshore outsourcing; one contracted to a company’s neighboring country is sometimes called near-shore outsourcing (NASSCOM, 2008)". Point 10: "Williamson (1975) uses the term 'asset specificity', meaning to what extent resources are specific to a particular product or context. It becomes increasingly difficult to change supplier the higher the degree of asset specificity a product has, and, thus, the greater the likelihood of problems arising in the relationship with the supplier. Williamson concludes that, in principle, a situation characterized by a high degree of uncertainty and asset specificity is best dealt with within the company, within a hierarchical structure". Point 14: "Outsourcing decisions are strategic decisions where a company has decided to implement a service from a third party instead of producing it in-house (Gilley & Rasheed, 2000). Outsourcing decisions can be explained using four different theoretical perspectives (Grant, 1991; Javalgi, Dixit, & Scherer, 2009; Tsang, 2000); (1) Transaction cost economics, (2) Relational exchange theory, (3) Resource-based view and (4) Resource dependency theory". Point 17: "Outsourcing of IS development is defined as the subcontracting of some or all of the development and processing activities of an organization to an outside vendor (Richmond et al, 1992). The inter-organizational partnership in which consultants from a service provider with relevant expertise guide the internal development team to implement a system is considered to be a prevalent form of IS outsourcing". Point 18: "Given its three underlying principles (i.e., mutuality, psychological obligations, and individual level of analysis), the psychological contract can be defined, in the context of inter-organizational outsourcing, as the contractual parties’ mental beliefs and expectations about their mutual obligations, which are perceived at the individual level".
Variable 3: Effective organizational outsourcing practices	Point 5: "Companies who outsource just because everybody is doing it may be surprised by unexpected costs and complications. About one half of the outsourcing arrangements entered into end up being terminated, for a variety of reasons. Some new overseas vendors encounter financial difficulties, or are acquired by other firms with different procedures and priorities". Point 6: "Some American companies are paying much more in real estate fees for their offshoring activities than they would in the United States. This negative differential occurs for two reasons: one is the cost of upgrading poor infrastructure overseas; the second is the fact that inexpensive overseas labor pools are usually found in very large cities, while facilities such as call centers back home are located in lower-cost suburban and rural areas". Point 8: "Outsourcing is ..... shifting from the execution of standardized processes to work on knowledge processes – the outsourcing of activities that require domain expertise, subject expertise, and higher-end professional talent". Point 11: "Jauch and Wilson (1979) maintain that make/buy or outsourcing is mainly a strategic decision that should be taken on the basis of factors other than just cost calculations and technical judgments". Point 12: ".... one result of outsourcing is that the formerly internal supplier in these instances now acts like an external supplier and needs to adapt to the market and increase its customer base. As a consequence, the outsourced unit needs to develop its own strategy. Brandes (1994) argues that outsourcing often leads not only to increasing demands on the supplier but also on the purchasing company and the supplier relationship". Point 15: "The importance of investigating the impact of buyer–supplier relationships on corporate efficiency is seen from the fact that a typical industrial company spends 50–85 per cent of its turnover on purchased goods such as raw materials, components and semi-manufactures (Cammish and Keough, 1991; Dyer et al., 1998). This partly explains why business process outsourcing has proved to be a relevant strategic option for companies narrowing their operations to focus on core competencies". Point 16: "Lonsdale and Cox (1998) document that outsourcing decisions are rarely taken within a thoroughly strategic perspective. Hence, many companies adopt a short-term perspective, being motivated primarily by the search for direct cost reductions. Typically, managers either seem to believe that no strategic planning is required, or instead attempt to ‘‘reinvent the wheel’’, which leads them to learn from mistakes that could have been avoided".
Variable 4: Learn from organizational outsourcing practices	Point 4: "Overseas outsourcing of jobs has quickly become a controversial national issue. Some see outsourcing as a way of maintaining or increasing a company’s competitiveness. Many others view outsourcing in a far more negative light, focusing on jobs lost". Point 7: "The survey results clearly demonstrate that more organizations are using outsourcing as part of their service provision strategy. While very few responding organizations have outsourced substantial proportions of their research services, approximately a quarter used outsourcing firms to deal with capacity overload and with research in specialist areas. Offshoring is established to only a very small degree, and whether to offshore is a decision directed mainly by the global structure and offshoring strategy of their parent organizations".

The next step is to relate the cognitive map variables to make up a cognitive map on organizational outsourcing. The cognitive map and its explanation are presented in the next section.

A cognitive map on organizational outsourcing and its interpretation

By relating the four variables identified in Table 2, the writer comes up with a cognitive map on organizational outsourcing, as shown in Figure 1.

These cognitive  map variables, four of them altogether, are related to constitute a systemic image of organizational outsourcing. The links in the cognitive map (re: Figure 1) indicate direction of influences between variables. The + sign shows that an increase in one variable leads to an increase in another variable while a -ve sign tells us that in increase in one variable leads to a decrease in another variable.  If there no signs shown on the arrows, that means the influences can be positive or negative.  For further information on organizational outsourcing, readers are referred to the Literature on outsourcing Facebook page.

Concluding remarks

The cognitive mapping exercise captures in one diagram some of the main variables involved in organizational outsourcing. The resultant cognitive map promotes an exploratory way to study organizational outsourcing in a holistic tone. The experience of the cognitive mapping exercise is that it can be a quick, efficient and entertaining way to explore a complex topic such as organizational outsourcing in Business Management. Finally, readers who are interested in cognitive mapping should also find the article informative on this mapping topic.

Bibliography

1.      Brandes, H., J. Lilliecreutz and S. Brege. 1997. "Outsourcing - success or failure? Findings from five case studies" European Journal of Purchasing & Supply Management 3(2), Elsevier: 63-75.

2.      Cha, K.J. and Y.S. Kim. 2016. "Critical success factors for mutual collaboration with suppliers in IT outsourcing industry: a case study  of a top IT outsourcing company in Korea" Enterprise Information Systems, Taylor and Francis [DOI: 10.1080/17517575.2016.1196734].

3.      Dzever, S. and B. Gupta. 2012. "Business process outsourcing industry in India: Additional benefits of a CSR approach" Asia Business & Management 11(3), Macmillan  Publishers Ltd.: 237-289.

4.      Eden, C. and P. Simpson. 1989. "SODA and cognitive mapping in practice", pp. 43-70, in Rosenhead, J. (editor) Rational Analysis for a Problematic World, Wiley, Chichester.

5.      Eden, C., C. Jones and D. Sims. 1983. Messing about in Problems: An informal structured approach to their identification and management, Pergamon Press, Oxford.

6.      Hansen, Z.N.L. and L.B. Rasmussen. 2013. "Outsourcing relationship: Changes in power and dependency" European Management Journal 31, Elsevier: 655-667.

7.      Kim, H.J., B. Shin and H. Lee. 2013. "The mediating role of psychological contract breach IS outsourcing: inter-firm governance perspective" European Journal of Information Systems 22, Operational  Research Society Ltd.: 529-547.

8.      Literature on cognitive mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-cognitive-mapping-800894476751355/).

9.      Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).

10. Literature on outsourcing Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-outsourcing-126297877960267/).

11. Managerial intellectual learning Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/managerial.intellectual.learning/).

12. Momme, J. and H.H. Hvolby. 2002. "An outsourcing framework: action research in the heavy industry sector" European Journal  of Purchasing & Supply Management 8, Pergamon: 185-196.

13. Open University. n.d. "Sign graph" Systems Thinking and Practice (T552): Diagramming, Open University, U.K. (url address: http://systems.open.ac.uk/materials/T552/) [visited at April 10, 2017].

14. Ward, S. 2004. "Outsourcing research: What's your position?" Business Information Review 21(4), Sage: 227-239.

15. Weidenbaum, M. 2005. "Outsourcing: Pros and cons" Business Horizons 48, Elsevier: 311-315.