Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-25T20:52:50.876Z Has data issue: false hasContentIssue false
  • English
  • Français

The Outsourcing Debate: Theories and Findings

Published online by Cambridge University Press:  25 February 2016

Stewart R. Clegg ,
Steve Burdon  and
Natalia Nikolova
Stewart R. Clegg
Affiliation:
School of Management, The University of Technology, Sydney, PO Box 123, Broadway NSW 2007, Australia, Phone: +61 2 9514 3934, Fax: +61 2 9514 3312, Email: [email protected]
Steve Burdon
Affiliation:
School of Management, The University of Technology, Sydney, PO Box 123, Broadway NSW 2007, Australia, Phone: +61 2 9514 3072, Fax: +61 2 9514 3371, Email: [email protected]
Natalia Nikolova
Affiliation:
School of Management, The University of Technology, Sydney, PO Box 123, Broadway NSW 2007, Australia, Phone: +61 2 9514 3645, Fax: +61 2 9514 3602, Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper addresses the issue of services outsourcing by looking at both theoretical and empirical arguments. Previous debates have often concentrated on the motives for adopting the practice rather than the outcomes. These various themes can be discussed under the twin concepts of the cost and efficiency argument and the fashion and isomorphism approach. Our research provides strong evidence to support the cost efficiency argument. On average, significant cost advantages were sought and delivered, as well as improvements in service levels and systems. Many organisations in the current environment in Australia look at outsourcing not only as a method of increasing efficiency but also as gaining competitive advantage through harnessing the superior specialist skills and experience of the outsourcing provider who takes someone's back office function and transforms them into their front office. A 10% net cost saving was considered necessary by an organisation before embarking on an organisational change that was disruptive and in some cases involved downside risks. Even if other efficiency gains such as service levels or systems improvements were required, so were 10%+ cost savings. A number of the organisations thought their skills in managing outsourcing had improved considerably such that they were in a position to move from a client/server relationship to a partnership model (i.e. an alliance).

Keywords

outsourcingcosts savingsqualitative and quantitative research
Type
Research Article
Information
Journal of Management & Organization , Volume 11 , Issue 2 , March 2005 , pp. 37 - 52
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2005

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abrahamson, E. 1991. Managerial fads and fashions: The diffusion and rejection of innovations. Academy of Management Review, 16(2): 586–612.10.5465/amr.1991.4279484Google Scholar
Alvesson, M. 1995. The meaning and meaningless of postmodernism: Some ironic remarks. Organization Studies, 16(6): 1047–1076.10.1177/017084069501600606Google Scholar
Barthelemy, J. 2001. The hidden costs of IT outsourcing. Sloan Management Review, (Spring): 60–69.Google Scholar
Benson, J., & Ieronimo, N. 1996. Outsourcing decisions: Evidence from Australia-based enterprises. International Labour Review, 135(1): 59–73.Google Scholar
Benson, J. & Littler, C. 2002. Outsourcing and workforce reductions: An empirical study of Australian organisations. Asia Pacific Business Review, 8(3): 16–30.10.1080/713999154Google Scholar
BIS Shrapnel 2001. Maintenance in Australia 2001-2016. North Sydney.Google Scholar
BIS Shrapnel 2004. Maintenance in Australia 2003-2018. North Sydney.Google Scholar
Bon, R., & Luck, R. 1999. Outsourcing of property-related management functions in Europe and North America, 1993-1998. Construction Management and Economics, 17: 409–412.10.1080/014461999371321Google Scholar
Boyson, S., Corsi, T., & Dresner, M. 1999. Managing effective third party logistics relationships: What does it take? Journal of Business Logistics, 20(1): 73–98Google Scholar
Brynjolffson, E. 2004. Productivity's technology iceberg. MIT Technology Review. http://www.technologyreview.com/articles/print_version/wo_brynjolfsson031004.asp. Accessed March 10, 2004.Google Scholar
Clarke, T., & Clegg, S. 1998. Management paradigms for the new millennium. International Journal of Management Reviews, 2(1): 45–64.Google Scholar
Crozier, M. 1964. The bureaucratic phenomenon. London: Tavistock.Google Scholar
Cubbin, J., Domberger, S., & Meadowcroft, S. 1987. Competitive tendering and refuse collection: Identifying the sources of efficiency gains. Fiscal Studies, 8(3): 49–58.Google Scholar
DiMaggio, P., & Powell, W. 1983. The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48: 147–160.Google Scholar
Doig, S. J., Ritter, R. C., Speckhals, K., & Woodson, D. 2001. Has outsourcing gone too far? The McKinsey Quarterly, 4: 24–37.Google Scholar
Domberger, S. 1998. The contracting organization, A strategic guide to outsourcing. Oxford: Oxford University Press.Google Scholar
Domberger, S., & Fernandez, P. 1999. Public-private partnerships for service delivery. Business Strategy Review, 10(4): 29–39.Google Scholar
Domberger, S., & Hall, C. 1996. Contracting for public services: A review of antipodean experience. Public Administration, 74: 129–147.Google Scholar
Domberger, S., & Rimmer, S. 1994. Competitive tendering and contracting in the public sector: A survey. International Journal of the Economics of Business, 1(3): 439–453.Google Scholar
Domberger, S., Fernandez, P., & Fiebig, D. 1996. Modelling the price and performance of information technology services contracts. Working Paper CTC 03-96, Sydney: Australian Graduate School of Management.Google Scholar
Domberger, S., Hall, C., & Lik Li, E. 1995. The determinants of price and quality in competitively tendered contracts. The Economic Journal, 105(11): 1454–1470.Google Scholar
Domberger, S., Jensen, P., & Stonecash, R. 2002. Examining the magnitude and sources of cost savings associated with outsourcing. Public Performance & Management Review, 26(2): 148–168.Google Scholar
Domberger, S., Meadowcroft, S., & Thompson, D. 1986. Competition and efficiency: The case of refuse collection. Fiscal Studies, 4(4): 69–87.Google Scholar
Domberger, S., Meadowcroft, S., & Thompson, D. 1988. Competition and efficiency in refuse collection: A reply. Fiscal Studies, 9(1): 86–90.Google Scholar
Eisenhardt, K. 1989. Building theories from case study research. Academy of Management Review, 14(4): 532–550.Google Scholar
Elmuti, D., Kathawala, Y., & Monippallil, M. 1998. Outsourcing to gain a competitive advantage. Industrial Management, 40(3): 20–24.Google Scholar
Fischli, I. 1996. Outsourcing: a new management tool or just a fad? Bulletin of the American Society for Information Science, 22(4): 20–21.Google Scholar
Flyvbjerg, B. 2001. Making social sciences matter: Why social inquiry fails and how it can succeed again. Cambridge: Cambridge University Press.Google Scholar
Ganley, J., & Grahl, J. 1988. Competition and efficiency in refuse collection: A critical comment. Fiscal Studies, 9(1): 80–85.Google Scholar
Gilley, M., & Rasheed, A. 2000. Making more by doing less: An analysis of outsourcing and its effects on firm performance. Journal of Management, 26(4): 763–790.Google Scholar
Gottfredson, M., Puryear, R., & Phillipos, S. 2005. Strategic sourcing: from periphery to core. Harvard Business Review, 83(2): 132–139Google Scholar
Hickson, D. J., Hinings, C. R., Lee, C. A., Schneck, R. E. & Pennings, J. M. 1971. A Strategie contingencies' theory of intraorgani-zational power. Administrative Science Quarterly, 16(2): 216–229.Google Scholar
Hodge, G. 1998. Contracting public sector services: A meta-analytic perspective of the international evidence. Australian Journal of Public Administration, 57(4): 98–110.Google Scholar
Hodge, G. 1999. Competitive tendering and contracting out: Rhetoric or reality? Public Productivity & Management Review, 22(4): 455–469.Google Scholar
Holcombe, R. 1991. Privatisation of municipal wastewater treatment. Public Budgeting and Finance, 11(3): 28–42.Google Scholar
Holmes, J., Burdon, S., & Terrill, D. 2003. Productivity and organizational transformation: Optimising investment in ICT. Canberra: National Office of Information Economy.Google Scholar
Hunter, J. D., & Cooksey, R. W. 2004. The decision to outsource: a case study of the complex interplay between strategic wisdom and behavioural reality. Journal of the Australian and New Zealand Academy of Management, 10(2): 26–40.Google Scholar
Hunter, J. D., & Gates, G. R. 1998. Outsourcing: functional, fashionable, or foolish? In Griffin, G. (Ed.), Management theory and practice: Moving to a new era: 133–144. Melbourne: Macmillan.Google Scholar
Lacity, M., Willcocks, L., & Feeny, D. 1996. The value of selective IT sourcing. Sloan Management Review, (Spring): 13–25.Google Scholar
Lonsdale, C., & Cox, A. 2000. Rhe historical development of outsourcing: the latest fad? Industrial Management and Data Systems, 100: 444–450.Google Scholar
Macaulay, S. 1966. Law and the balance of power. The automobile manufacturers and their dealers. New York: Russell Sage Foundation.Google Scholar
McDavid, J. 1985. The Canadian experience with privatising residential solid waste collection services. Public Administration Review, 45(5): 602–608.Google Scholar
McEntee, G. 1985. City services: Can free enterprise outperform the public sector?Business and Society Review: 43–47.Google Scholar
Miles, M. B. And Huberman, M. 1994. Qualitative data analysis. Thousand Oaks: Sage.Google Scholar
Paddon, M. 1991. The real costs of contracting out: Re-assessing the Australian debate from UK experience. Discussion Paper No 21, Public Sector Research Centre: University of New South Wales, Sydney.Google Scholar
Paddon, M. 1993. Competitive tendering and contracting out in British local government 1979-1992. Discussion Paper No 30, Public Sector Research Centre: University of New South Wales, Sydney.Google Scholar
Paddon, M. & Thanki, R. 1995. Submission from Public Sector Research Centre UNSW by M. Paddon and R. Thanki. In Paddon, M. & Thanki, R. (Eds.), Australia's contracting public services: Critical views of contracting-out by the public sector. Public Sector Research Centre Collected Papers No 2, Sydney: University of New South Wales.Google Scholar
Quiggin, J. 1994. The fiscal gains from contracting out: Transfers of efficiency improvements. Australian Economic Review, (3rd Quarter): 97–102.Google Scholar
Quiggin, J. 1996. Competitive tendering and contracting in the Australian public sector. Australian Journal of Public Administration, 55(3): 49–58.Google Scholar
Rimmer, S. 1994. Competitive tendering and contracting: Theory and research. Australian Economic Review, (3rd Quarter 1994): 79–85.Google Scholar
Rimmer, S. 1998. ‘Competitive tendering and outsourcing - initiatives and methods’. Australian Journal of Public Administration, 57(4): 75–84.Google Scholar
Rothery, B. & Roberts, L. 1995. The truth about outsourcing. Aldershot: Gower.Google Scholar
Savas, E. S. 1993. It's time to privatise. Government Union Review and Public Policy Digest, 14(1): 37–52.Google Scholar
Silverman, D. 1993. Interpreting qualitative data: Methods for analysing talk, text and interaction. London: Sage.Google Scholar
Slater, R. 1992. What's driving the outsourcing bandwagon? Bankers Monthly, 109 (6): 23–24.Google Scholar
Walker, R. & Walker, B. 2000. Privatisation: Sell off or sell out: The Australian experience. Sydney: ABC Books.Google Scholar