Measuring value progress in outsourcing organizations

The purpose of this paper is to develop and validate a scale for measuring value progress in outsourcing organizations. The scale is also intended to capture the differences in the nature of progress between different categories of outsourcing organizations. The procedure for developing measures suggested by Churchill was adopted. The balanced scorecard framework has been used to generate items. Data were collected from 693 employees in 49 outsourcing organizations in India (specifically, those categorized as knowledge process outsourcing (KPO) and business process outsourcing (BPO)) and the scale reliability and validity was tested using content validity, exploratory and confirmatory factor analysis, and co-efficient alpha scores. Confirmatory fit indices have been used to establish validity and unidimensionality of the measures. The study statistically establishes a tool to measure progress of outsourcing organizations. The findings reveal that some organizations progress horizontally through size expansion and some others adopt a vertical progress through customization and domain expertise. However, these progress directions (horizontal and vertical), contrary to industry view and this paper's hypothesis, are not commensurate with the KPO and BPO classifications. Apart from using this tool to measure the impact of intangible assets/interventions, future longitudinal research can examine the patterns in the direction of progress across industries/countries. Individual outsourcing organizations can use this tool to identify their current progress direction and the areas to focus for the desired progress direction. A scale to capture the direction of progress defined through logical and conceptual bases, done in this study, is the first of its kind in the outsourcing context. © 2011, Emerald Group Publishing Limited