Master Thesis

Title: Risk Identification in Offshore Outsourcing of Services in Small and Medium sized Enterprises Authors: Oleksandra Volianska & Christian Schulz Supervisor: Andrea Fried, PD Dr. Background: Development of technologies and worldwide reductions of trade barriers during the last decades increased competition and the need to offer high-quality products and services for a reasonable price. Particularly, the service sector increased in size and variety of outputs. The development of the information technology segment has determined the market environment. To be able to compete in this global market offshore outsourcing of IT functions can be a valuable tool if handled in the right way. Small and medium sized enterprises can profit from service offshore outsourcing although studies show that this type of organizations fail in their outsourcing initiatives in an above average rate as a result of deficits in risk management, precisely in risk identification. Aim: The aim of this Master Thesis is to analyse the specific characteristics of small and medium sized enterprises in order to find out how they impact the different stages of the service offshore outsourcing process. Theory and empirical data helps to spot strengths and weaknesses of these organizations in order to find a solution to a better risk identification process which then might lead to increased success in offshore outsourcing of services. Definitions: Service offshore outsourcing refers to the purchase of a service (which may have been produced in-house before) by a firm from a supplier located in a different country while the supplier and buyer keep their respective initial locations. Risk is the potential that a chosen action or activity leads to an undesirable outcome. Risk identification, the first part of risk management (followed by risk assessment and prioritization), is defined as an analysis of potential risk factors to the success of an endeavour. Completion and results: Specific characteristics of small and medium sized enterprises play a significant role in the risk identification process of service offshore outsourcing. By being aware of these risks and acting according to minimize them, harm can be prevented. Especially, a well-designed service offshore outsourcing contract, regular communication and personal relationships could be an advantage to overcome the drawbacks of small size, high dependency, need for flexibility and lack of resources. Search Terms: risk management, risk identification, risk, offshoring, outsourcing, service, small and medium sized enterprises. Christian Schulz Master Thesis Oleksandra Volianska Spring Term 2011