Building capabilities for global service delivery: a study in the Indian software service sector

Abstract

Firm Capabilities have attracted research attention for several years. Capabilities have been seen from resource-based (Barney, 1991) and process-based (Helfat et al,2007) views. We take the latter and define capabilities as a collection of routines through which resources are utilized to engage in a set of purposeful activities. Based on a review of conceptual and empirical Work in the field of capabilities, we find that the developmental nature of capabilities forms the core of current research in the area. Further, we find that in past the studies in the area have looked at the mechanisms through which capabilities are built, factors that enable firms to build capabilities and the process of capability development. After surveying extant literature, we identify a need to explain the process of capability building from a holistic perspective by explaining all three aspects as well as the role of environment in capability building. In addition to this, we find that development of capabilities has been studied at the industry and in level, but there are hardly any studies that look at a specific activity for which capabilities are developed. In response to this, we identify global service delivery (GSD) as the purposeful activity for which capability building study can be undertaken. Global service delivery has been defined as a service which is delivered from across national borders. Looking at the above gaps, we take an evolutionary perspective (Helfat and Peteraf, 2003) and formulate the research objective as exploring the process through which firms build capabilities for global service delivery with internal and external factors acting upon it. A multiple case-study research methodology has been suggested to be a useful tool by Yin (2003) and Eisenhardt (1989) for addressing such questions aimed at phenomenon exploration. We selected three Indian software firms servicing clients using global delivery model (GDM) to undertake the study. These firms were selected based on their long history of having demonstrated GDM capability. The indicators for GDM capability was based on their geographical spread of operations and revenues from exports. The environment of software service industry over the last four decades was also studied in detail. The case-histories of firms and their environment were first subjected to within-case analysis, and cross-case analysis (Miles and Hubennan, 1994). Based on the analysis of the environment, we outline the evolution of the industry over the last four decades and look at capabilities developed during each phase. From the analysis of the data on the three firms, we identify a pattern and propose a staged model of capability building. The model outlines the process through which firms build capabilities for GSD, with the help of internal and external factors. This staged model is proposed to be having four stages: Initiation, Establishment, Replication, and Value- addition. We also identify the mechanisms, internal factors, and external enablers that lead to the development of capabilities for GSD. Finally, we derive a capability building framework in form of propositions based on the significant drivers affecting capability building for GSD. The key contribution of this research to literature is holistically explaining capability building for global service firms — in terms of mechanisms, factors and process of capability development. The staged model of capability building acts as a prescriptive tool for practice by informing about the resource requirement at each stage of capability building. For policy makers, this model provides insights into designing appropriate interventions and providing adequate support to firms seeking support at every stage. The propositions provide future directions for research in capability building literature.