The Pros And Cons Of Outsourcing

The significant level of outsourcing programs used across all business sectors is well documented in the literature (Bender 1999; Quinn 2000; Dun and Bradstreet 2000; Klaas, McClendon and Gainey 2001). Past research has progressed along several paths. First, some researchers have focused on motivations and reasons for outsourcing activities (Conner and Prahalad 1996; Greer et al. 1999; Sinderman 1995; Mullin 1996; Grant 1996; Frayer Scannell and Thomas 2000). According to this perspective, the global imperative for outsourcing accelerates as firms evolve from sellers of products and services abroad to setting up operations in foreign countries and staffing those operations with host countries or third party nationals (Greer et al. 1999). Most corporations believe that in order to compete globally, they have to look at efficiency and cost containment rather than relying strictly on revenue increases (Conner and Prahalad 1996). As companies seek to enhance their competitive positions in an increasingly global marketplace, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses (Mullin 1996; Grant 1996).

Other researchers have identified several outsourcing issues, trends and strategies that companies take in establishing and effectively managing their outsourcing activities (Sinderman 1995; Carney 1997). The trend is for outsourcing relationships to function more as partnerships. Outsourcing providers are taking increasing responsibility in realms that have traditionally remained in-house, such as corporate strategy, information management, business investment, and internal quality initiatives (Sinderman 1995; Carne...

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...r complexity, suggest the need to know more about how to effectively utilize this strategy. Consequently, more information is needed to understand successful outsourcing and problems encountered in outsourcing activities and its impact on overall organizational performance. The claims by proponents of outsourcing strategy suggested four research questions that guided this investigation of the relationships between outsourcing programs and organizational performance:

1. To what extent does the degree of familiarity and utilization of the outsourcing strategy vary across a variety of settings?

2. Why do organizations undertake outsourcing projects?

3. Do outsourcing programs achieve their stated objectives of improving organizational performance, productivity, marketshare, and quality?

4. What factors are associated with the success or failure of outsourcing programs?