Academic journal article Journal of Management and Organization

From the Shadows into the Light: Let's Get Real about Outsourcing

Academic journal article Journal of Management and Organization

From the Shadows into the Light: Let's Get Real about Outsourcing

Article excerpt

ABSTRACT

Despite the continued popularity of outsourcing amongst managers and management researchers alike, significant questions arguably remain as to the adequacy of the typical framing of the outsourcing decision. An extensive review of the literature revealed a skewed, partial and fragmented conceptualisation of the option, further exacerbated by a concerning tendency effectively to rank quantitative outcomes over qualitative outcomes, even ex post. In this article it is argued that a critical analysis of the theoretical frameworks that underlie this body of work suggests a more realistic conceptualisation of outsourcing, both for management researchers and management decision makers.

Keywords: outsourcing, contracting, complexity, decision making, cost economising, core versus non-core, flexibility, psychological contract, individual performance equation

INTRODUCTION

Gulati (2007, p. 775) alluded to the 'longstanding debate amongst management scholars concerning the rigour and/or methodological soundness of [management] research versus its relevance to managers'. Outsourcing seems to be a good example.

Outsourcing remains an integral part of the contemporary management lexicon, a popular management intervention, and recurrent topic of study by management researchers. Managers seem transfixed by the allure and promise of utopian solutions to complex organisational problems, while researchers continue to engage in a debate that seeks to either validate its adoption on sound empirical evidence (e.g. Beaumont & Sohal, 2004; Clegg, Burdon, & Nikolova, 2005) or, alternatively, propose reasons why concerns persist about its adoption despite the empirical tick of approval (e.g. Hunter & Cooksey, 2004; Hunter & Gates, 1998).

Worryingly, the prospects for reversing managerial ignorance (Rothery & Robertson, 1995) and high failure rates (Doig et al. 2001) associated with outsourcing decisions seem distant when cautionary warnings (e.g. ABC Radio National, 1998; Kochan, Wells, & Smith, 1992; Meredith, 1998), criticisms (e.g. Savas, 1993; Walker & Walker, 2000) and calls for a more holistic and critical approach to such decisions (e.g. Anderson & Anderson, 2000; Hunter & Gates, 1998; McCray & Clark, 1999) appear to be ignored.

This paper seeks to re-conceptualise the outsourcing decision to take account of the concerns expressed above. Theoretical perspectives that inform the contemplation of outsourcing are critically examined to (a) better understand the basis upon which these decisions have been made, and (b) propose a theoretical framework that more accurately reflects the real world contexts within which such decisions are made and pursued.

THEORETICAL PERSPECTIVES ON OUTSOURCING DECISIONS

The purpose of this section is to review the literature that pertains to make-or-buy decisions that underlie outsourcing by presenting and commenting on the important theoretical foundations and research output for outsourcing processes from economic, strategic, human resource and behavioural perspectives.

The first three of these disciplinary dimensions (the economic, strategic and human resource perspectives) represent the mainstream frameworks that have informed the rational and prescriptive approach to outsourcing decisions that Lacity and Hirschheim (1993) observe, while the fourth (the behavioural perspective) utilises knowledge drawn from the psychological and organisational behaviour (OB) literature.

Economic perspective

Consideration of the outsourcing option has been largely driven by economic and financial issues that have harnessed the principles of competitive tendering and contracting (CTC), or the process of identifying a preferred supplier (contractor) by evaluating offers (tenders) in order to determine whether goods and services are best sourced internally or externally (Aulich & Reynolds, 1993; Domberger & Hall, 1995; Domberger & Hensher, 1993; Hodge, 1996; Wisniewski, 1992). …

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