Satwik Seshasai

Offshoring: The Transition From Economic Drivers Toward Strategic Global Partnership and 24-Hour Knowledge Factory

The changing economic and labor conditions have motivated firms to outsource professional services activities to skilled personnel in less expensive labor markets. This offshoring phenomenon is studied from a political, economic, technological and strategic perspective. Next, an analytical model is developed for achieving strategic advantage from offshoring based on global partnerships. The model studies the impact of offshoring with respect to the complexity and strategic nature of the tasks and presents a decision strategy for obtaining value through offshoring of increasingly complex tasks. The result is an integrated “24-hour knowledge factory†that is based on a sustainable global model rather than a short term fiscal model. This 24-hour paradigm embodies the shift-style workforce that evolved for the manufacturing sector during the Industrial Revolution and relies on a set of critical success factors in the current environment. A case example is provided from IBM to illustrate these underlying critical success factors.

Toward the 24-Hour Knowledge Factory

The term 24-Hour Knowledge Factory connotes a globally distributed work environment in which members of the global team work on a project around the clock; each member of the team works the normal workday hours that pertain to his or her time zone. At the end of such a workday, a fellow team member located in a different time zone continues the same task. This creates the shift-style workforce that was originally conceived in the manufacturing sector. A globally distributed 24-hour call center is the simplest manifestation of this paradigm. The true example of the 24-hour factory paradigm discussed in this paper involves groups working together to accomplish a given set of deliverables, such as a software project, and transcending conventional spatial and temporal boundaries.

The Critical Role of Information Resource Management in Enabling the 24-Hour Knowledge Factory

The 24-hour Knowledge Factory is introduced as a global work environment where work is passed between individuals in other time zones on a daily basis. The evolution of this model is described, from foundations in manufacturing to current implementations in software development. The effective management of information resources is critical to the success of this environment. A pilot study, conducted at IBM, utilized a set of advanced tools for gathering social and technical data from repositories as diverse as source control systems and team meeting minutes. This pilot study provides good insights into how the 24-hour Knowledge Factory concept will operate in a commercial setting. The paper concludes with a set of recommendations for leveraging information resources to achieve the ideal 24-hour Knowledge Factory.

Harbinger of the 24-Hour Knowledge Factory

Recent academic and policy studies focus on offshoring as a cost-of-labor driven activity that has a direct impact on employment opportunities in the countries involved. This paper broadens this perspective by introducing and evaluating the 24-hour knowledge factory as a model of information systems offshoring that leverages other strategic factors beyond cost savings. A true 24-hour knowledge factory ensures that progress is being made on information systems related tasks at all times of day by utilizing talented information systems professionals around the globe. Many organizations currently implement other variants of offshoring that appear similar but are fundamentally distinct. The typical model is a service provider framework in which an offshore site provides service to the central site, often with two centers and a distinction between a primary center and secondary center. Entire tasks are often outsourced to the lower-cost overseas site and sent back when completed. In contrast, the 24-hour knowledge factory involves continuous and collaborative round-the-clock knowledge production achieved by sequentially and progressively distributing the knowledge creation task around the globe, completing one cycle every 24 hours. Thus, the 24-hour knowledge factory creates a virtual distributed team, in contrast to a team that is collocated in one site, either onshore or offshore. By organizing knowledge tasks in this way, the 24-hour knowledge factory has the potential to work faster, to provide cheaper solutions, and to achieve better overall performance. Previous studies have examined individual teams over time and explored various benefits of distributing work to distant teams, but have not directly compared the effect of collocation versus geographic distribution on the use of information systems and the overall performance over time of two real-world teams working on a similar task in controlled conditions. This paper highlights the concept of the 24-hour knowledge factory and tests the model in a controlled field experiment that directly compares the use of information systems and subsequent performance in collocated and globally distributed software development teams. The central finding is that while collocation versus geographic distribution changes the way teams use information systems and interact at key points during a project, each type of team has the potential to use information systems to leverage its inherent advantages, to overcome disadvantages, and ultimately, to perform equally well. In other words, one organizational structure is not inherently superior nor must structure pre-determine performance. Geographic distance introduces new challenges but these can be overcome and even leveraged for strategic advantage. In sum, our findings suggest that firms can apply the 24-hour knowledge factory model to transition from a service provider framework in which offshoring is a short-term and unilateral cost-saving tactic to a strategic partnership between centers in which offshoring becomes a core component of a global corporate strategy.

The Use of Information Systems by Collocated and Distributed Teams: Towards the 24-Hour Knowledge Factory

Recent academic and policy studies focus on off shoring as a cost-of-labor driven activity that has a direct impact on employment opportunities in the countries involved. This paper broadens this perspective by examining the 24-hour knowledge factory as a model of information systems off shoring that leverages other strategic factors beyond cost savings. A true 24-hour knowledge factory can ensure that progress is made on tasks at all times of day by utilizing three or more sets of information systems professionals, located at strategically selected locations around the globe. Some organizations today utilize a service provider framework in which an offshore site provides service to the central site. Entire tasks are often outsourced to the lower-cost overseas site and sent back when completed. In contrast, the 24-hour knowledge factory involves continuous and collaborative activities round-the-clock. By organizing tasks in this manner, the 24-hour knowledge factory offers the potential to reduce turnaround time to complete tasks, to reduce total costs, and to provide better overall performance. Previous studies have examined the performance of individual teams over time and have explored the benefits of distributing work to distant teams, but have not directly compared the effect of collocation versus geographic distribution in the context of the use of emerging information system technologies and methodologies. Since the concept of the 24-hour knowledge factory is still in the early stages of practice for semi-structured tasks, a controlled field experiment was conducted using two distributed centers in which the tasks were performed in a sequential manner. The use of information systems and the overall performance were studied using a collocated software development team and a distributed software development team. While the two teams used information systems in dissimilar ways at key points during a project, the overall performance of the two teams was largely similar at the macro level but differed at the micro level. In other words, one organizational structure is not inherently superior to the other, in terms of the ability to meet stated goals. While spatial and temporal separations introduce new challenges, these can be overcome with the deployment of appropriate collaboration technologies - and even leveraged for strategic advantage. In sum, our findings suggest that firms can apply the two-center and three-center work models to transition from a service provider framework in which off shoring is a short-term and unilateral cost-saving tactic to a strategic partnership between centers in which off shoring becomes a core component of the global corporate strategy.