Research Highlights

You have outsourced a service process to a third-party vendor who now directly interacts with your customers. The vendor has operations in a remote location. How do you know they have staffed enough to provide your customers with the responsiveness you require? How do you know that the productivity of their staff is reaching the level that it could? You don’t know the labor pool available to the vendor or the effectiveness of the training methods they used. They are a black box with which all your customers regularly interact.

In their new research paper, “Call Center Outsourcing Contracts Under Information Asymmetry” (http://ssrn.com/abstract=985558), Sameer Hasija (SUNY Binghamton), Edieal J. Pinker (Simon School, University of Rochester) and Robert A. Shumsky (Tuck School of Business, Dartmouth College) use the example of call centers to show how this can be done. The authors note that by offering a menu of contracts with the right combination of features, an outsourcer can significantly increase its profits even when it does not know exactly how productive a vendor can be.

The key is to offer a menu that includes contracts that reward output and contracts that reward inputs with appropriate penalties for delays. Forgetting a key element of the contract can greatly distort the vendor’s incentives and wreck performance.

C.I.I.S. News
Our inaugural spring academic workshop was a
great success with presentations on Web
Infomediaries in auto sales, revenue management, radiology workflow, and outsourcing in retail
banking. To see the program, visit www.simon.rochester.edu/centers/IIS_workshops.aspx.

Ask the Expert: What Are Information Intensive Services?

Edieal J. Pinker, center director: Information Intensive Services are segments of the service economy that are knowledge and data intensive. Examples include financial services, consulting services, the entertainment industry, supply chain logistics, technical support services and health care. These are the services that involve relatively high-paid and high-skilled labor.

Send your questions to CIIS@simon.rochester.edu