Feb. 6, 2006
Professor Konana's Research Deconstructs Outsourcing Options
By Asher Garonzik
When someone orders a computer from Dell.com, the PC’s parts are
pre-assembled, contained within one or two boxes and shipped right
to the customer’s doorstep—a simple and effective process. But
Prabhudev Konana, associate professor of information, risk, and
operations management, urged his audience to consider the
painstaking and complex process that led to that computer’s swift
delivery in his talk for the Faculty Research Presentation Series
Jan. 31.
Konana’s recent research on business process outsourcing provides
key information to help companies determine how to decide which work
to send out and where to send it. “All processes are interconnected
in a company,” Konana said. “If you can pull them apart, you can
outsource. The question is, how do you pick the best strategy?”
Konana differentiated between four business process mechanisms:
• domestic insourcing, keeping work within the company
• domestic outsourcing, sending work to another company inside the
country
• offshore insourcing, sending work to a subsidiary within the
company but in a different country
• offshore outsourcing, sending work to an outside company in
another country
By analyzing the sourcing decisions of several medium and large U.S.
firms with respect to these specific systems, Konana and his
colleagues found some surprising results. For example, though it
seems illogical, when a company’s processes are easy to pull apart,
Konana said, the likelihood of outsourcing overseas is very low. For
those companies that do choose to outsource, 75 percent of those
projects did not yield the desired results.
Konana also described some alarming finds. When large corporations
find the cost of paying skilled workers too high, the probability
that they will outsource the work to countries with cheaper labor
increases. “In general, when there’s too much hassle to deal with,
companies send it out,” Konana said. “This is scary,” he said, and
it’s happening frequently.
Konana earned his MBA and Ph.D. in management information systems
from the University of Arizona. He has an undergraduate degree in
chemical engineering from Karnataka Regional Engineering College.
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