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The sourcing of business services to third party firms has grown dramatically over the last two decades (Bapna, Barua, Mani, & Mehra, 2010). Much of this growth has involved offshoring of work to remote locations; in information technology (IT) services, this has led to a burgeoning industry in Asia and the development of some very large IT services firms. The services industry is still quite labor-intensive, and firms continue to search for innovations that will lower costs or enhance effective service delivery. A recent study indicated that 29% of large client organizations had fired a service provider within the past twelve months (Healey, 2010). Such failures in service delivery are very expensive not only for clients but also for service providers, who have made client-specific investments in both labor and capital in order to efficiently provide services. In part because of these challenges, recent work has emphasized that any theory of service systems should include an understanding of service system improvements and failures (Chesbrough & Spohrer, 2006).
To address these concerns, many organizations have implemented process standardization frameworks. Broadly defined, process standardization is the use of documents, rules, guidelines, or activities aimed at achieving an optimum degree of order in a given context (ISO, 1996). In manufacturing industries, the application of formal process standards such as ISO 9000 and Six Sigma have enabled firms to reduce process variation and realize significant economic returns (Corbett, Montes-Sancho, & Kirsch, 2005; Schroeder, Linderman, Liedtke, &Choo, 2008; Levine & Toffel, 2010). Software development has also evolved into a mature industry, and many software firms have implemented process improvement programs such as the Capability Maturity Model Integration, or CMMI (Harter, Krishnan, &Slaughter, 2000; Gopal, Mukhopadhyay, & Krishnan, 2002). More recently, providers of business process outsourcing (BPO) services have begun to standardize their processes (Wüllenweber, Beimborn, Weitzel, & König, 2008; Narayanan, Jayaraman, Luo, & Swaminathan, 2010), though evidence on the implementation of formal standardization frameworks is lacking.
Implementing process improvement frameworks across a large, distributed organization can be extremely challenging. Organizations implementing process innovations often must decompose and recreate work routines several times before new capabilities can be developed (Pan, Pan, Chen, &Hsieh, 2007). Firms that obtain the greatest performance increases from process improvement frameworks oftentimes go beyond the minimum standards of the framework, tailoring processes to their specific needs (Naveh & Marcus, 2004). Recent work on the diffusion of ISO9000 and ISO13000 has demonstrated that firms customize these frameworks in order to obtain greater economic benefits, as well as to achieve greater conformance to perceived industrial and cultural norms (Albuquereque, Bronnenberg, & Corbett, 2007). In other words, firms must implement process improvement frameworks in a thorough and comprehensive manner in order to obtain optimal benefits from them; otherwise, they may experience zero, or even negative, returns (Beer, 2003).