Measuring Service Quality in Egyptian Service Outsourcing Provider Companies.

• Author: ElKholy, Sayed

INTRODUCTION

Outsourcing is one of the fastest spreading forms of international trade in a globalization era. It is characterized by exponential growth in the rate of absorbing and mastering new technology and considered a catalyst to ignite worldwide economic welfare. Outsourcing is the process of subcontracting to a specialized supplier a non-core activity that used to be conducted in house and free resources for profit generating activities.

While the increasing pressure to cut cost is still among the primary drivers for this trend, today quality has become a major issue when it comes to choosing an outsourcing partner. As established outsourcing providers are besieged by new entrants from other low-cost countries, new sources of service differentiation become crucial to maintain the loyalty of existing customers and attract new ones. There has been a shift from the low-cost factor to a focus on continual improvement. The cost factor alone has been a risky strategy. Customers are no longer looking for lowest cost but rather a combination of cost, quality, and long-term relationship.

This shift has urged outsourcing providers to adopt an uncompromising approach towards quality to earn customer loyalty by providing services that are of the highest quality and greatest value. Today, quality is more than just complying with the requirement of established standards. Quality, particularly in a highly competitive environment, is more about cost-effectiveness, carefully reviewing failure modes at every state and, more importantly, planning to prevent such failures. Quality is a journey without a finish line. Performance and quality levels of most processes have the tendency to decrease over time unless forces are exerted to maintain them. To guarantee its sustained existence in the global market, outsourcing providers shift their focus from low cost factors to improved quality focus.

Importance of the Research

The importance of this study is basically derived from the importance of the outsourcing process itself as an innovative form of foreign investments. This necessitates studying outsourcing as a potential trend of international trade. Service quality became a vital prerequisite of successful outsourcing process, which is why measuring service quality is important as a driving force of attractiveness and competitiveness of Egyptian outsourcing service provider companies.

Research Aim

This study aims at giving insight into service quality measures of outsourcing provider companies in Egypt and to show how Egypt is to be considered a competitive outsourcing hub attracting more outsourcing contracts.

Research Objective

This study targets the gap between the expected level of quality perceived by the outsourcing client and the actual offered one from the service provider through five-quality dimensions SERVQUAL model.

Research Question

This study approaches the answer of a main question: Whether Egyptian outsourcing providers offer high quality services that satisfy their contracting clients?

This main question can be answered through discussing the following sub questions:

* What is outsourcing as a form of international trade?

* What is outsourcing market overview in Egypt?

* How is service quality an important determinant of attracting outsourcing?

* How to measure service quality in the outsourcing provider companies?

* How can an improved service quality enhance Egyptian outsourcing industry competitiveness?

LITERATURE REVIEW

The literature review of this study is based on a conceptual framework that is disaggregated into three groups. The first group gives a general overview of what is meant by outsourcing, its types, drivers, and main functions as illustrated by previous literature, such as Amiti and Wei (2004), Hummels et al. (2001) and Sykes (2004). The second group defines quality and the importance of service quality in raising outsourcing service provider companies' competitiveness. This point was tackled by previous researchers such as Chua and Deofeo (2007) and Hongyan et al. (2008). Finally, the third group introduces the SERVQUAL model with its primary dimensions, such as Parasuraman (1988).

As outsourcing receives enormous global attention, it provokes great debate about its precise definition as an emerging shape of international trade. Amiti and Wei (2004) said that the use of the term outsourcing hasn't been internationally standardized. Feenstra (1998) described outsourcing as a process of production disintegration, where it involves fragmentation and transfer of significant amount of management control and decision making to the outside vendors. Hummels et al. (2001) defined outsourcing as the process of transferring an existing business function including relevant physical and/or human assets to an external provider in order to strategically use outside resources to perform activities previously handled in house.

The two main outsourcing waves described by previous literature, such as Abraham and Taylor (1993) and Ying Fan (2000), are manufacturing outsourcing and services outsourcing. According to Sykes (2004), services outsourcing is divided into two types: Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO).

Previous literature, such as Abraham and Taylor (1993), Kakumanu and Portanova (2006), and Farell and Rosenfeld (2005), have discussed the benefits gained by the outsourcing companies, which include mainly lower labor costs and operating costs, giving the firms a chance to liberate its resources to be used in other productive purposes, in addition to reducing investment risks and acquire geographical diversification. While on the other hand the main benefits gained by the outsourcing service provider companies include mainly increased investments, employment spill overs, and in some cases transfer of new technology and know-how.

Cutting costs is no longer the main driver of outsourcing process; attaining high quality rises as important as cost saving force. Chua and Deofeo (2007) found that the outsourcing process is adopted not only to get cost advantage but also to reach improved quality of services that the outsourcing company cannot develop or maintain on its own and seeks this quality advantage from the service providers.

Furthermore, Hongyan et al. (2008) highlighted the importance of continuous quality improvements to affect the service providers' performance in various ways, such as increased revenues, reducing cost, and raised productivity. Quality has been regarded as one of the major drivers of competitiveness in every services industry especially outsourcing. The American National Standards Institute (ANSI) and American Society for Quality (ASQ) define quality as: "total features and characteristics of a product or service that impact the ability to satisfy given needs of customers." On their road to achieve high quality targets some outsourcing services providers adopted Total Quality Management (TQM) as a philosophy of a continual improvement. Rouget (2009) defined TQM as a systematic management approach centered on quality to meet the competitive challenge with focus on certain factors: customer satisfaction, client/service provider relationship, zero defects, process improvement, personnel training, and quality measurement.

Efforts to understand and identify service quality have been undertaken in the last three decades. Nroos (1982, 1990) noted that the quality of a service, as perceived by customers, has two dimensions: a functional and technical dimension. Functional quality focuses on "how" the process is conducted, and considers issues such as the behavior of customer contact staff and the speed of service. Whereas technical quality focuses on "what" is the process conducted and considers issues such as...