A framework for offshore vendor capability development

Abstract

Offshore outsourcing is a common practice conducted by companies, especially in developed countries, by relocating one or more their business processes to other companies abroad, especially in developing countries. This practice grows rapidly owing to the ease of accessing qualified vendors with a lower cost. Vendors in developing countries compete more intensely to acquire offshore projects. Indonesia is still below India, China, Malaysia as main global offshore destinations. Vendor capability is among other factors that contribute to the inability of Indonesian vendor in competing with other companies in the global market. Therefore, it is essential to study how to increase the vendor's capability in Indonesia, in the context of global offshore outsourcing. Previous studies on the vendor's capability mainly focus on capabilities without considering the dynamic of capabilities due to the environmental changes. In order to be able to compete with competitors and maintain the competitive advantage, it is necessary for vendors to develop their capabilities continuously. The purpose of this study is to develop a framework that describes offshore vendor capability development along the client-vendor relationship stages. The framework consists of three main components, i.e. the stages of client-vendor relationship, the success of each stage, and the capabilities of vendor at each stage.