Offshoring activities impact a company's business model: The case of BBVA and banco santander

Abstract

There is an agreement in the literature that an effective business model is a competitive weapon for multinationals. We extend this strategic framework to the offshoring arena by analyzing a change in the business model as a means for coping with the inefficiency trap and reducing complexity management. Most companies start by offshoring simpler tasks and achieve great savings. But, as they become more involved in offshoring, complexity increases and savings decrease. We analyze this by studying two Spanish banks, BBVA and Banco Santander. Findings suggest that the reason and the limit to complexity can be found in the need to change the business model. Results may stimulate future research in other industries and companies from other countries.