Information technology and distance-induced effort to manage offshore activities

Abstract

Offshoring can reduce the production cost of an activity. Yet, at the same time, because of the distance between the parties involved in the activity, it can generate management costs. This study proposes a model of the main drivers of the effort required to manage offshore activities. The model was developed from both the literature and the analysis of interviews conducted in 12 offshore information technology (IT) service providers. The model posits that distance plays an important role in the determination of the effort level. However, in addition to cultural and geographic distances, a more complex notion, labeled “perceived distance,” is posited to play an important role. The model also proposes that IT affects the effort to manage an offshore activity by facilitating formalization of the information exchanged and moderating the impact of geographic distance on the effort required.