IT AND BUSINESS PROCESS OUTSOURCING by Wilo Rodolfo Carpio

IS SOURCING

IT AND BUSINESS PROCESS OUTSOURCING: THE KNOWLEDGE POTENTIAL Leslie Willcocks, John Hindle, David Feeny, and Mary Lacity Despite the widespread trends in IT and business process outsourcing, there has been too little focus on what happens to knowledge when an organization outsources. We present a framework for evaluating the knowledge potential within five different types of insourcing and outsourcing arrangements. A detailed example of an enterprise partnership relationship is described as a benchmark for how companies can leverage the knowledge potential from IT and BPO outsourcing.

VEN IN SEMI-RECESSIONARY TIMES IN the developed economies, IT outsourcing and business process outsourcing (BPO) have been some of the biggest business trends and highest IT growth sectors. IT outsourcing global revenues are predicted to grow from $154 billion to over $200 billion between 2002 and 2005. Business process outsourcing (BPO) grew more than 25 percent per annum during 2002–2003 in the United Kingdom; and in Europe, BPO revenues may well increase from $43 to $72 billion Euros between 2002 and 2005. The United States has also experienced noteworthy BPO growth. But despite outsourcing’s rise to become a perennial, if not yet routine, way of managing IT and business processes, the knowledge management implications have received too little attention. Typically, organizations simply lack the means and experiential research to assign value to the knowledge they are transferring and receiving. That is, they have no real understanding of how new knowledge can be created in outsourcing situations, let alone exploited. Nor are managers inclined to assign that much

LESLIE WILLCOCKS is a professor of Information Management, Warwick University Business School. He can be contacted at willcockslp@aol.com. JOHN HINDLE is a partner at Knowledge Capital Partners. DAVID FEENY is director of the Oxford Institute of Information Management, Templeton College, Oxford University. MARY LACITY is a professor of MIS at the University of Missouri, St. Louis.

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importance to knowledge about what is often predefined as a “non-core” set of outsourced activities. But whatever the cause, a lack of focus on what happens to knowledge when an organization outsources constitutes a serious gap in practice, and one that deserves serious study and analysis. We proceed by describing intellectual capital, and how, by harnessing social capital, it can be developed and leveraged. We then apply these ideas to five major types of sourcing arrangements — from in-house to true partnering — to show how intellectual capital can be lost, missed, or evolved and leveraged. Our final example is a detailed case study of an enterprise partnering relationship that establishes a benchmark for how to use outsourcing to create and exploit knowledge. INTELLECTUAL CAPITAL AND SOCIAL CAPITAL

Most academics and practitioners in knowledge management are familiar with the formulation adopted by Stewart (2001) and others to

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describe the essential elements or assets that contribute to the development of intellectual capital:

he process of what Stewart calls “interplay” is recursive: social capital facilitates the development of new intellectual capital, which in turn strengthens social capital.

❚ Structural capital, representing “the codified bodies of semi-permanent knowledge that can be transferred” and “the tools that augment the body of knowledge by bringing relevant data or expertise to people” ❚ Human capital, or “the capabilities of the individuals required to provide solutions to customers” ❚ Customer capital, or “the value of an organization’s relationships with the people with whom it does business — shared knowledge” While there are specific investments and activities that can strengthen each of these elements, Stewart (2001) argues that creating intellectual capital is more complicated than simply hiring bright people or buying knowledge management software: “…intellectual capital is not created from discrete wads of human, structural, and customer capital, but from the interplay among them.” How, then, can organizations create the conditions, structures, and policies that encourage “interplay”? What specific actions can they take to maximize knowledge exchange and combination? We suggest there are intentional ways of creating a fourth kind of capital — social capital — that facilitates the development of trusted knowledge paths. From a sociologist’s perspective, social capital is the value of the social network individuals belong to and their inclination to do things for each other because of that network. Put somewhat more simply, it is the value suggested by the motto from the U.S. television program Cheers, “where everybody knows your name.” It is the value represented by trust, loyalty, and reciprocity within a community. Management researchers Nahapiet and Goshal (1998) have examined the catalyst role of social capital in developing intellectual capital. They identify three specific dimensions of social capital that facilitate the “interplay” that Stewart speaks of: 1. The structural dimension involves the network ties and configuration and “appropriable” organization that facilitate access to people and resources, thus promoting the

combining and exchange of intellectual capital. 2. The cognitive dimension involves the shared “cultural” context of the organization — the language, codes, and narratives that provide ways of knowing and create meaning. 3. The relational dimension involves trust and group identity (norms, obligations, identification), creating a sense of common motivation, purpose, and benefit. These management researchers then map the requirements for productive “interplay” — the ingredients for successful knowledge combination and exchange — against these three dimensions. Because these conditions are difficult, if not impossible, to achieve in pure market transactions, Nahapiet and Goshal argue that organizations have a special advantage over markets in creating new intellectual capital. Moreover, they argue, the process of what Stewart calls “interplay” is recursive: social capital facilitates the development of new intellectual capital, which in turn strengthens social capital. Given today’s trends in outsourcing, we therefore face an apparent conundrum: if membership in the organization conveys such a powerful advantage in creating intellectual capital, how can outsourcing, which involves the externalization of huge swathes of people, systems, and institutional knowledge, possibly create greater advantage? IT SOURCING FOR BACK-OFFICE IMPROVEMENTS

Below we examine the knowledge implications in back-office IT initiatives that we have documented in our research base of over 350 case studies (Cullen and Willcocks, 2003; Feeny, Willcocks, and Lacity, 2003; Lacity and Willcocks, 2001; Willcocks and Currie, 1997; Willcocks and Griffiths, 1997; Willcocks, Petherbridge, and Olson, 2002). As shown in Table 1, the five different sourcing options that we have studied in practice have different implications for what happens to knowledge. However, as we will describe below, these assumptions about what will happen to knowledge are often belied by what happens in practice. In Table 1 we therefore list the potential benefits and risks for knowledge gains and losses that we have identified during our research, using the intellectual capital and social capital lenses that we described above. Although our main focus is on outsourcing, let us

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TABLE 1 Back-Of ce Impro vement: Five Options for Back-Of ce P erformance Improvement

Back-Office Performance Improvement DIY

Management Consultancy

Outsourcing IT Operations

Fee-for-Service BPO

Enterprise Partnering

Examples

Ef ciency dr ives Internal reengineering Technology solutions

Analysis work ERP BPR Major change initiatives

Selective/total Data center/ Networks Desktops Development

Accounting Human Resources Call centres

HR transactions Insurance Settlement/Claims Procurement

Potential Benefits

Gains accrued internally Under in-house control/ ownership Easier to sustain gains made

Infusion of external energy, skills By-passing political resistance Scale to handle work

Hand over legacy Reform in-house systems development Improve management practices Cost savings

Hand over non-core processes Cost and ef ciency gains Access to skills and scale Leverage off-shore advantages

Cost and quality gains Technology investment Continuous improvement through Generic competencies Risk–reward

Risks

Inertia of legacy Systems Processes Culture Political issues (e.g., over service standardization) Lack of skills, focus, investment

Skills not transferred Change does not “stick” Cost escalation Little ownership of outcomes

Lack of innovation Technology investment not sustained Cost-service trade-offs Cost of add-on services Loss of know-how

Motivation to invest/innovate? One-off gains Cost–service tradeoffs Add-on services? Loss of know-how

Securing new customers Retaining/developing superior management and knowledge

first look briefly at the more traditional “Do-ItYourself” and “Management Consultancy” options. Do-It-Yourself Sourcing

The case studies of Willcocks and Currie (1997) and Willcocks and Griffiths (1997) show that, in principle, Do-It-Yourself (DIY) should be a strong option from a knowledge perspective. Using the terms of the management theorists, social capital should be strong while structural, human, and customer capital may be more variable, depending on past knowledge management practices and the size of organization. If set up well, a DIY initiative offers lots of opportunities for knowledge assimilation and creation, with a view to subsequent exploitation. In practice, however, especially with backoffice IT initiatives, we found that legacy systems, processes and culture, and political issues often create barriers, or at least lowerlevel objectives for improvements and knowledge creation. Moreover, DIY back-office improvements often did not play a priority role in skill development or a sustained focus on the necessary technical and financial investments. In other words, there were lost opportunities for knowledge assimilation and creation. I N F O R M A T I O N

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Management Consultancy Sourcing

Companies that choose a Management Consultancy sourcing option are looking for an infusion of human capital in the form of new skills, energy, and knowledge, as well as structural capital in the form of knowledge bases and best practices, due to the scale and specialist expertise consultancy firms can offer. While in many cases we found that this approach paid off, the risks that all too often materialized were that skills and knowledge — structural and human capital — were not transferred to the client firm. That is, the changes did not “stick” and there was little internal learning or ownership of outcomes. Client companies often complained of paying for the consultant’s learning, while learning little themselves. Such initiatives lacked the “glue” or knowledge transfer vehicle of social capital. New knowledge was too rarely created for and internalized by the client, who in turn rarely was able to subsequently leverage the intellectual capital inherent in the initiative. IT Outsourcing: The Knowledge Potential

Moving to the third option in Table 1, the outsourcing promise is to leverage the supplier’s superior technical know-how (human capital),

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he loss of information and knowledge can be traumatic for both outsourcing parties unless specific and purposeful steps are undertaken to develop and sustain new information pathways and mechanisms.

superior management practices (structural capital), economies of scale, and, increasingly, access to strategic and business advice enabling the client to refocus on strategic, core capability and knowledge areas. But our own research into IT outsourcing has shown consistently over the past decade that the prospects have been disappointing for meaningful knowledge management, and value creation therefrom (Cullen and Willcocks, 2003; Feeny, Willcocks, and Lacity, 2003; Lacity and Willcocks, 2001): ❚ Most clients report their frustration with endless cost–service debates, and sometimes significant loss of control over their IT destiny and knowledge base. ❚ Most vendors find it difficult to deliver on their promises of innovation and value added, because of their lack of knowledge about the client’s long-term business strategy. Typically, even on the very big, long-term deals considered to be strategic vendor relationships, the supplier offers technical knowhow for routine solutions, with high performers in short supply. There is little influx of new technical/managerial talent, and disappointing access to the supplier’s global capability and knowledge bases. Meanwhile, the client does not thoroughly think through the issues of core capability and retained knowledge. As a result, the client spends much time fire-fighting and experiences little value-added or technical/business innovation. Over time, the client loses control over its IT destiny or business process destiny, as knowledge asymmetries develop in favor of the vendor (Cullen and Willcocks, 2003). The loss of information and knowledge can be traumatic for both outsourcing parties unless specific and purposeful steps are undertaken to develop and sustain new information pathways and mechanisms. One route we have advocated is the retention of nine core capabilities (Feeny and Willcocks, 1998).These ensure the elicitation and delivery of business requirements, the development of technical/business architecture, the managing of external supply, and the coordination and governance of these tasks. In practice, we have found all too many client organizations inadequately making these critical, initial knowledge investments (Feeny and Willcocks, 2004). For example, in two studies of major IT outsourcing deals (Kern and Willcocks, 2001; Lacity and Willcocks, 2001), we found the more

frequent pattern to be focusing on contract monitoring and management, and understaffing business-facing and technology-facing activities. The belief was that “technical architecture” and “making technology work” were prime targets for outsourcing. But, for example, after several years, outsourcing clients (such as both Dupont and Commonwealth Bank) discovered they needed to rebuild their technical architecture capability and to retain more control over their IT destiny. Client organizations also routinely underestimated the degree of high-performing technical “doing” capability they needed to retain inhouse in order to deal with idiosyncratic business systems, nonroutine problems, and the historically derived complexities of the technical infrastructure — all areas where suppliers do not play from a position of knowledge strength. Typically, client organizations initially underinvest in the knowledge areas of informed buying of external supplier services and vendor development. Once a contract begins, they also inadequately secure ways in which to build shared knowledge from relationships and interchanges back into the business (Feeny and Willcocks, 2004). In failing to make these knowledge investments, client organizations invariably run into a range of problems, which, together with a rising awareness of over-dependence on the supplier, can lead to belated re-insourcing of these capabilities. One of the most obvious candidates for re-insourcing that we have seen is the technical “doing” capability associated with applications development. The outsourcing alternative here can lead to increasing problems, as the client organization loses knowledge, control over its IT destiny, and the ability to leverage IT for business value. Business Process Outsourcing: The Knowledge Potential

The IT outsourcing approach restricts creation and leveraging of knowledge concerns only to one specialist area — IT operations. However, much bigger knowledge gains can theoretically arise if whole functions or processes that include IT are outsourced. This is the premise of the dramatic growth in business process outsourcing (BPO) since 2001. As shown in Table 2, BPO suppliers come in many forms. Most of these services are offered on a fee-for-service basis. The knowledge contract is to outsource non-core (although often critical), largely back-office commodities to

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TABLE 2 Different Forms of BPO Suppliers Pure plays Specialist providers

IT outsourcers — extenders Consultants — extenders Vertical specialists Business service providers Software providers Offshore providers

Xchanging, Exult Ryder, UPS (logistics) Convergys (customer care) Core 3 ( nance and accounting) EDS, CSC Accenture, PricewaterhouseCoopers McKesson (healthcare) Employease (human resources) Genesys Wipro, Infosys

suppliers that have superior structural and human capital in the areas of business process and specific expertise. Some deals also recognize the need for closer partnering to get closer to the customer: to create and leverage customer capital to both parties’ advantage, and also to create and leverage social capital across client and service provider. In practice, while BPO is often handled much like classic fee-for-service IT outsourcing, such deals lie much closer to the business. This means that the knowledge implications are even greater, although in our experience, just as neglected. The potential dangers we notice here are loss of internal business process know-how. There is a need to create the requisite capability to manage the supplier, to motivate the supplier to invest knowledge and innovate in a sustained way. Otherwise, there will be only one-off gains, additional service charges, and interminable cost–service wrangles, basically over the price of knowledge and capability supplied. That said, these knowledge implications may well be disguised for a time by real cost and service improvements, simply because so many back-office business processes inherited by suppliers are so inefficient. However, it is likely that our research on this newer type of outsourcing will reveal that the emergent BPO market players and their clients will repeat many of the knowledge and capability mistakes made one decade earlier during the IT outsourcing boom years. Enterprise Partnership as a Knowledge Benchmark: The London Insurance Markets

A fifth option we have researched is that of establishing a risk–reward partnership between the client and supplier (Feeny, Willcocks, and Lacity, 2003). This type of arranagement places a stronger emphasis on continuous improveI N F O R M A T I O N

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ment through the application of generic, rather than specialist, competencies on the part of the supplier. Even more significant (and distinctive) is the risk–reward and joint ownership arrangement that lies at the center of such a deal, and the implications these features have for how knowledge is applied, created, and exploited. Although thus far we have seen few such outsourcing arrangements in operation, the ones we have researched suggest the promise of significant cost and quality gains, as well as potential external revenues from technology investment. This type of arrangement can be applied to both IT and BPO improvement initiatives. Let us look at one such deal in the London insurance markets. In May 2001, Lloyds of London/Insurance Underwriters’ Association (IUA) outsourced the back-office policy and claims settlement systems for the London insurance markets to the supplier Xchanging. Leveraging the learning from outsourcing in the past, the Xchanging approach introduces three key innovations: 1. An Enterprise Partnership business model 2. An Xcellence Competency model for knowledge-based capabilities 3. A four-phase Implementation model First, an Enterprise Partnership business model, Xchanging Insurance Services (XIS), was set up to serve as the back-office for Lloyds/IUA (see Figure 1). This new serviceproviding organization is jointly owned by the client and the vendor, both of which share in its cost savings and profits. By assuming full responsibility for all employees transferred from Lloyds/IUA, Xchanging not only preserves transferred knowledge, customer service, and customer relationships, but also establishes a new organization capable of delivering service seamlessly on an “as-is” basis. The Enterprise Partnership model entails multiple joint governance bodies: a Board of Directors, a Service Review Board, and a Technology Review Board.These governance mechanisms formally engage both client and vendor in a continuous process of joint planning and decision making, ensuring that business strategies are understood and decisions taken with full knowledge, in the best interests of the enterprise partnership rather than for the sole or lopsided benefit of one or the other party. A side benefit of this knowledge-sharing governance system is the creation of trust and mutual obligation, which reinforces the institutional relationship.

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FIGURE 1 Xchanging Insurance Services (XIS): An Enterprise Partnership Business Model

Lloyds of London

IUA London Markets

LPSO and LPC Staff

25% Share XIS (May 2001)

25% Share

- 5-year deal, 12 months termination thereafter - Joint non-exec. Chair - 5 Board members (Xchanging) - 2 non-exec. Board members (Lloyds/IUA) - Ownership of IP created by the enterprise - "As-is" cost/service for 6 months - Service Review panel: (Lloyds: 4 members) (IUA: 3 members) = Approval for all price + service charges - Termination for "chronic and consistent under-performance"

In intellectual capital terms (Stewart, 2001), one can see clearly elements of customer capital being created here. But in the deeper context of Nahapiet and Goshal’s social capital research, the Enterprise Partnership business model creates a robust structural dimension, with a formal governance network and a jointly held organization that can be “appropriated” to develop new intellectual capital and value. It also creates the necessary anticipation of value that can arise from joining Xchanging’s transformational expertise with the domain-specific knowledge being transferred. The second innovation, the Xcellence Competency model, defines seven knowledgebased capabilities used to transform the legacy back-office into a profitable enterprise partnership: service, people, process, technology, environment, sourcing, and implementation. Each competency is headed up by a highly experienced Practice Director (an example of Stewart’s human capital) who is responsible for establishing and maintaining the competency’s explicit knowledge capital in the form of a detailed competency manual, representing, in Stewart’s terms, structural capital. Further, the Practice Director is responsible for establishing the competency in each enterprise partnership using mainly transferred staff. This requirement ultimately builds a community of practice at the Xchanging level across all the enterprise partnerships, thus promoting development and sharing of tacit knowledge and its

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- Xcellence toolset/software use under license - Management expertise seconded at cost - Guaranteed investment and cost of first-year implementation (up to 15 million pounds) - CEO + executive management team

conversion to explicit knowledge. These practice communities meet regularly, communicate online, and network with other practitioners inside and outside their organizations. In the context of Nahapiet and Goshal’s social capital model, the Xcellence competencies also establish a shared cognitive dimension. They employ distinctive languages and “codes” that facilitate business transformation and knowledge exchange — the practice communities are rich environments for shared narratives. Further, the Xcellence platform facilitates access among practitioners, reinforces their expectation that they create value by sharing knowledge, and offers the ability to combine accumulated knowledge from across all the enterprises. The third innovation, a four-phased Implementation model, is a final key element of the Xchanging approach that creates significant social capital through its four phases: preparation, realignment, streamlining, and continuous improvement. The purpose of the Implementation model is to synchronize the significant changes that take place within the former employee population and the now-client community, and to establish and manage expectations between the partners. This innovation contributes significantly to creating the relational dimension of social capital. Recognizing that staff may initially feel powerless and resentful in an outsourcing situation, and that it takes considerable time for them to reorient themselves to new circumstances,

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Xchanging

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nternal success does not guarantee competitiveness in the open market, nor additional external customers: conflicts can arise between maximizing the enterprise partnership’s profits and minimizing the client’s costs.

Xchanging’s Implementation approach carefully stages business transformation activity to their readiness to accept and support it. As mentioned, all employees are transferred to the enterprise partnership on day one, and go through an intensive change program that lasts up to two years. Led by the People Competency, the process focuses on the Tuckman developmental cycle of mourning, forming, storming, norming, and performing. The net result is the deliberate creation of a new culture — that of a dynamic, profitable business — to supplant the previously neglected cost-center mindset. The process is not without cost, both direct cost in creating time for employees to make the transition and indirect cost in deferring gains until staff are fully prepared. But this effort to build group identity and trust, establish norms of behavior and performance, and instill a sense of mutual obligation yields enormous benefits in the exchange and combination of knowledge. At the beginning of 2004, the Lloyds of London/IUA/XIS deal was well into its third year and was adjudged very successful by all participants. XIS was achieving substantial performance improvements and cost reductions for the back-office of the London insurance markets. This was partly because it had so many major generic competencies to apply to the cause of continuous improvement. The parties were making good profits, mainly because XIS was regularly securing additional clients. In 2003, Xchanging also won a London insurance market innovator-of-the-year award for its work at Lloyds of London and for the IUA. At the same time, some potential business, and knowledge, risks should be noted. Internal success does not guarantee competitiveness in the open market, nor additional external customers: conflicts can arise between maximizing the enterprise partnership’s profits and minimizing the clients’ costs. The governance structure also depends on both sides investing the necessary effort and resources in long-term joint customer and supplier participation and decision making. LEVERAGING THE KNOWLEDGE POTENTIAL

Our judgment is that both clients and suppliers need to become much more aware of the role of knowledge assimilation, creation, and application in achieving back-office improvements. There is an increasing need to understand in a more fine-grained way what knowledge a client I N F O R M A T I O N

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needs to retain, and how to guarantee a supplier will possess, create, and leverage the structural, human, and customer capital needed to deliver on ambitious outsourcing objectives. A knowledge-based perspective reveals that if undertaking fee-for-service outsourcing, there are limits to what can be achieved. Our prescriptions for fee-for-service outsourcing deals were arrived at through exhaustive research, and the advice remains the same: ❚ Write complete, detailed contracts. ❚ Carry out due diligence prior to signing the contract. ❚ Retain core in-house capabilities. ❚ Ensure that you and the supplier have a cultural fit. ❚ Be sure the supplier has sector and domain knowledge and experience. ❚ Do not outsource a “mess.” ❚ Write short-term (3 to 5 year) contracts because the circumstances and technologies will change fast. Knowledge can be created and leveraged under a fee-for-service contract by following this advice. But, we contend, this can only occur to a limited extent because both sides still bring to the party an unnecessarily constrained focus on knowledge. In contrast, our enterprise partnership case study is an example of just one, if distinctive, way of contracting for knowledge in outsourcing. In our view, it serves as a key benchmark as to what is possible and what needs to be in place to make knowledge creation and use happen. Changing the business, governance, and implementation models allows a knowledge strategy to have a more central, leveraging role in outsourcing. Xchanging’s innovations are interesting because they support development of intellectual and social capital essential to the sharing, creation, and exploitation of new knowledge. Instead of false signals and misdirected energy, the model actively incents and supports the creation and exploitation of new intellectual property. At the same time, adopting something like an Xchanging enterprise partnership framework does require a new, different set of prescriptions: ❚ Sign short, incomplete contracts for five years or more. ❚ Carry out diligence after contract signing. ❚ Let the supplier clean up your back-office mess.

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❚ Create a clash of cultures if you want to see real back-office improvement. ❚ Hire a supplier with generic rather than domain-specific competencies.

any may well see adopting an approach that involves establishing a new jointventure type of enterpriselevel partnering approach as too big a cultural step and too risky.

Given what we have learned about outsourcing in the past, these new modes of operating may well feel too counter-intuitive. Many may well see adopting an approach that involves establishing a new joint-venture type of enterprise-level partnering approach as too big a cultural step and too risky. Instead, an organization may enter into other types of partnership arrangements to motivate and provide a structure for both the client and supplier to leverage the knowledge potential of the outsourcing arrangement. Two case examples of other types of equity arrangements between the client and supplier, which have the potential for achieving some of the same knowledge advantages as the enterprise partnership model, are provided below. 1. In 1997 Commonwealth Bank Australia (CBA) signed a ten-year preferred supplier, solesource contract with EDS for IT improvement. CBA took a 33 percent minority share interest in EDS Australia, and for the first several years CBA achieved its IT cost reduction objectives, with IT services being maintained largely to agreed service levels. However, during the 2000–2001 time period, CBA felt that knowledge and capability asymmetries had developed in favor of the vendor, and that the bank was losing control of its IT destiny. Over the next 18 months, under its CIO Bob McKinnon, the IT function built up its internal capabilities, especially in the areas of technical architecture, service delivery, IT planning, contract monitoring, informed buying, and governance. By 2004, the IT group had greatly strengthened its own knowledge base, moving from 32 to 116 headcount in mainly the technical architecture, service delivery, and demand management areas. This enabled them to better leverage the relationship and knowledge issues with the supplier. 2. In late 2000, Bank of America (BoA) entered into a 10-year BPO outsourcing contract with Exult for human resource processes and services. Exult’s job is to manage the HR back-office to Six Sigma standards and to improve the “shared HR services” organization’s performance for BoA and thirdparty clients, with the bank standing to gain

a share of these third-party revenues. One of the knowledge risks here is that BoA has become very reliant on Exult’s willingness to provide to the BoA account, over a long time period, its best managers, knowledge bases, and practices. CONCLUSION

Our own conclusion is that changes in management practices, on the part of both the client and the supplier, may well be the only real way to release the knowledge potential inherent in the practice of IT and business process outsourcing. The enterprise partnership model serves as a key benchmark as to what is possible, and what needs to be in place, to make knowledge creation and use happen in outsourcing arrangements. It provides an example of how to create social capital, which is the “glue” for converting intellectual capital into transferred and applied knowledge for business improvement for the client company. In an increasingly commoditized outsourcing market, with evermore demanding client companies, it may well be that competing on knowledge becomes the new game in town. ▲ References Cullen, S. and Willcocks, L. (2003). Intelligent IT Outsourcing: Eight Building Blocks to Success. Butterworth, Oxford. Feeny, D. and Willcocks, L. (2004). Implementing Core IS Capabilities. MISQ Executive (forthcoming, September). Feeny, D., Willcocks, L., and Lacity, M. (2003). Business Process Outsourcing: The Promise of Enterprise Partnership. Templeton Executive Briefing. Templeton College, Oxford University, Oxford. Kern, T. and Willcocks, L. (2001). The Relationship Advantage: Information Technology, Sourcing and Management. Oxford University Press, Oxford. Lacity, M. and Willcocks, L. (2001). Global Information Technology Outsourcing: Search for Business Advantage. Wiley, Chichester. Nahapiet, J. and Goshal, S. (1998). Social Capital, Intellectual Capital and the Organizational Advantage. Academy of Management Review, 23(2), 242–266. Stewart, T. (2001). The Wealth of Knowledge: Intellectual Capital and the Twenty-First Century Organization. Nicholas Brealey, London. Willcocks, L. and Currie, W. (1997). Does Radical Reengineering Really Work? In Willcocks, L., Feeny, D., and Islei, G. (Eds.) (1997). Managing

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IT as a Strategic Resource. McGraw-Hill, Maidenhead. Willcocks, L., Feeny, D., and Lacity, M. (2003). Transforming the Back Office through Enterprise Partnering: A Study of Xchanging in the London Market. Templeton Discussion Paper, Templeton College, Oxford University, Oxford.

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Willcocks, L. and Griffiths, C. (1997). Management and Risk in Major IT Projects. In Willcocks, L., Feeny, D., and Islei, G. (Eds.) Managing IT as a Strategic Resource. McGraw-Hill, Maidenhead. Willcocks, L., Petherbridge, P., and Olson, N. (2002). Making IT Count: Strategy, Delivery, Infrastructure. Butterworth, Oxford.

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