Outsourcing: assessing the risks and benefits for organisations, sectors and nations

Abstract

PurposeThis research aims to assess the risks and benefits of outsourcing for organisations, sectors and nations. The literature on outsourcing contains little evidence of research on holistic issues of its impact at systems levels beyond the firm, notably sectors and nations.Design/methodology/approachA Delphi study with senior strategists from private and public sectors captured perspectives and specific observations on benefits and risks of outsourcing. Emergent issues on outsourcing policy, strategy and decision‐making processes were synthesised into a framework for analysing factors associated with outsourcing.FindingsThe findings suggest that a more holistic view of outsourcing is needed, linking local, organisational issues with sector and national level actions and outcomes. In this way, aggregate risks and benefits can be assessed at different systems levels.Research limitations/implicationsFuture research might address the motivations for outsourcing; currently there is little research evidence to assess whether outsourcing is a mechanism for failing to solve internal problems, and moving responsibility and risk out of the firm. Additionally most outsourcing research to date has concentrated on an activity either being “in” or “out”; there is little research exploring the circumstances in which mixed models might be appropriate.Practical implicationsThe framework provides an aid to research and an aide memoire for managers considering outsourcing.Originality/valueThis paper contributes to knowledge on understanding of outsourcing at different systems levels, particularly highlighting the implications of outsourcing for sectors and nations. Previously most research has focused at the level of the firm or dyadic relationship.

What makes outsourcing effective? A transaction-cost economics analysis

“…For example, national differences influence supply chain and outsourcing decisions (Pagell et al 2005, Schoenherr 2010) and how such differences affect the institutional structure of outsourcing transactions and effectiveness of various governance mechanisms needs to be studied (Liu et al 2009, Youngdahl et al 2008. It is also unknown how much industry differences affect the selection and execution of governance mechanism (Rosen et al 2001, Hartland et al 2005. In any case, the TCE governance framework presented in this study provides a guideline for a more incisive analysis of how firms govern suppliers to control opportunism.…”

Design of Sustainable Outsourcing Services for Facilities Management: Critical Success Factors

“…This reflects that our existing knowledge of best-fit FM outsourcing with reference to service providers, clients, and end-users are insufficient and under-developed. It is critical not only to explore new skills for managing outsourcing relationships, but also to develop how to utilize these skills effectively [30]. The relationship between the firm and the service providers should be taken into account when addressing facility-related services [31].…”

Sustainable outsourcing: a practice survey and research opportunities

“…A great deal of work has been essentially concerned with the decision to outsource, what has been traditionally the operations management 'make versus buy' decision (Yoon and Naadimuthu, 1994;Probert, 1996). Stratton and Warburton (2006) looked at trade-offs for supply chains, Harland et al (2005) considered the risks and benefits. Three research areas that have arguably the largest impact on outsourcing theory and in particular, the make versus buy decision, are transaction cost economics (Williamson, 1979), resource dependence theory (Aldrich, 1976;Pfeffer and Salancik, 1978) and the resource-based view of the firm (Wernerfelt, 1984;Barney, 1991;Peteraf, 1993).…”