Companies are looking for new ways of decreasing costs and gaining innovation, as the competition is escalating. Striving to shorten product lifecycles and time to market, the product development has become increasingly important for companies on the global market (Van Echtelt et al, 2008; Primo, 2002), with respect to speed (Clark, 1989) performance and cost (Van Echtelt et al 2008). In addition to this, there is a need to manage geographically and functionally dispersed units, as well as suppliers all over the world, to remain competitive. A recent trend show that the capabilities and resources for managing product development increasingly reside outside company´s boundaries, e.g. relying on suppliers. The offshore outsourcing contracts have mainly been awarded to developing countries, to benefit from labour arbitrage. While the clients of outsourcing are concentrated in North America, Western Europe and Japan, India has been the leading destination (Mao et al. 2008).
Current research has identified several factors for successful outsourcing, including; Supplier competence in technology and quality control (Boutellier et al, 2008; Primo & Amundson, 2002), Interface management and communication (Boutellier et al, 2008; Primo & Amundson, 2002; Van Looy et al, 2005 ), Amount of direct interaction with supplier (Primo & Amundson, 2002), Legislation and contracts (Mao et al, 2008), Nature of supplier involvement (Primo & Amundson, 2002; Clark, 1989), Trust (Van Echtelt et al, 2008; Sherwood & Covin, 2008 ; Mao et al, 2008), Intercultural Understanding (Edoff et al, 2009) and the maturity of collaboration (Sherwood and Covin, 2008). While there is a buzz concerning strategies for outsourcing as well as incorporating Open Innovation (Chesbrough, 2003), there is a lack of understanding of the evolution and transformation of such collaborations. We will describe the complexity of governing outsourcing relationships, the actions and understanding needed to increase learning and innovation capabilities in a supplier-client relation.
In this paper we use an in depth case study to describe the relation between a high tech European company and an Indian consultancy firm, which started 2000. The companies were studied over a period of six months, in Sweden and at the Offshore Development Center in India, to provide a bilateral perspective on managing customer-supplier relationships. In total 40 respondents were interviewed, and the results were triangulated by observation (including participation in management day) as well as analyzing business review documentation. The collaboration has evolved from outsourcing maintenance, to product development of partial as well as whole products. But what does the shift from outsourcing in regard of cost, flexibility and value mean for outsourcing relation? The companies have performed a wide range of activities to strengthen the relation internally (common goal, intercultural understanding, order competence), within the relation (courses, workshops and exchanging employees) as well as external relations (university collaboration and Top talent program). The results of the case study show that the evolution of outsourcing relation is due to many different factors as stated in the literature, but also greatly affected by the intercultural differences. The intercultural factors influence not only communication, but the organizational culture and structure, motivation and the innovative capability of the companies. While the Indian service provider can take advantage of their collective culture to be efficient with processes and knowledge transfer, the Swedes can benefit from the low power distance to make quick decisions and try out radical ideas. If companies learn about the differences they can organize and adjust processes in a way that the relation gives them the best of both worlds.
2009.