PRACTICAL IMPLICATIONS

For outsourcing firms to survive, they will be forced to tackle the problem of scalable growth. In doing so, they must balance the tension between developing standardized services, capable of replication across thousands of customers; and its correlative or opposite: efficiently customizing such services to meet the unique needs of individual customers. Many service providers continue to pursue scalable growth

earnings and growth. This research contributes to practice in three ways: it adopts a vendor perspective on service delivery, it investigates the issues and challenges related to the evolution of enterprise architectural maturity, and it provides insight into sustaining long-term partnerships.

6.2.1 Vendor Perspective on Service Delivery

A key driver of this research was the fact that many outsourcing relationships fail, because service providers are often unable to meet the high expectations of customers, and are even less likely to do so profitably. The consequences of outsourcing failures are considerable for provider and customer alike, given the typical expenditure of both parties on both initiatives. By adopting a provider centric perspective, we were able to shed light on some of the inherent challenges service providers‘ face, such as how to meet the dual objectives of standardization and customization. By going inside the provider firm and exploring patterns of collective action within and between

organizations, we saw how detrimental local action at the expense of global coordination could be. We also noticed the importance of social interaction for aligning incentives and expectations, and for collaborating to achieving seamless integration between business units, service modules, and applications. Furthermore, we discovered that the most difficult challenges faced by service providers were the results of their very own actions. Perhaps most importantly, we saw how attempts to resolve the paradox between

standardization and customization through structural and temporal separation proved ineffective within the provider organization. Instead, a holistic approach to the design of an enterprise architecture where organizational structure, process design, and technology

work together give service providers the greatest chance of balancing the tension between standardization and customization and achieving scalable growth.

6.2.2 Evolution of Architectural Maturity

To address the tension between standardization and customization, service

providers must design sophisticated enterprise architectures that allow the organization to pursue these opposing objectives. As related in our findings, MoveQuick first pursued structural and temporal separation as a means for addressing the tension they faced. However, after these initiatives proved unsuccessful, they embarked on a new strategy, wherein they pursued the development of a modularized enterprise architecture. This was a distinct paradigm shift, and offers lessons for other service organizations seeking to achieve scalable growth. Instead of reducing equivocality by developing prepackaged solutions, service providers might want to follow MoveQuick’s lead. Doing so would focus their attention and resources on improving their ability to respond to customer requirement heterogeneity, rather than reduce it through external control. However, developing modular enterprise architecture requires its own paradigm shift, where attention shifts from a focus on grandiose enterprise applications to specialized service components with standardized interfaces transferable into an enterprise-wide solution. However, recent research suggests that firms in pursuit of modularized enterprise architecture may need to pass through multiple stages to get there (Ross, Weill and, Robertson, 2006).

governance mechanisms to assist the service provider in addressing the tension they face, while encouraging long-term sustainability of partnerships. By designing partnership structures intelligently, service providers can positively shape collective behavior— enabling a dual pursuit of both standardization and customization. As a result, both firms can move past the early gains that come from obtaining the low hanging fruit, and develop sustainable relationships to create real strategic value for the customer firm, while enabling the provider to provision services profitably. It is essential for companies that are already involved in outsourcing relationships, or those considering such an endeavor, to understand how they can develop structures capable of balancing opposing pursuits and promoting long-term sustainability. As we saw in the TechKnow

relationship, SLAs proved to be a crucial part of their overall governance mechanism. Our findings suggested that many of their SLAs focused too much on short-term objectives. That does not have to be the case. If intelligently designed, SLAs can represent the DNA of outsourcing relationships, shaping collective behavior and influencing the evolutionary tendencies of a relationship.

To develop SLAs that shape both types of behavior, they must contain diverse types of informational cues, while also establishing appropriate rewards to serve as behavioral reinforcements. For instance, to promote continuous improvement in the short-term, such cues might clearly aim towards improving the speed of an existing process; the reinforcing relates to the monetary rewards earned if outcomes meet or exceed these objectives. Thus, achieving 95% on-time delivery goals, and improving on these outcomes overtime, represents continuous incremental improvement. In contrast,

other SLAs may contain additional types of informational cues that promote innovation of existing processes. For instance, SLAs that focus on overall service quality, which include metrics related to inventory holding costs and product availability, may encourage individuals to consider innovations to existing practices to improve overall service quality.