Outsourcing: An Exploratory Study

Abstract

Outsourcing has become a strategy to increase an organization’s competitive advantage by enabling them to focus on activities or processes that create value or on those that they do best.  This study sought to determine the reasons why companies resort to outsourcing: the kinds of jobs they usually outsource; the outsourcing related problems they encounter; and the patterns that can be seen in the sample.  This study revealed that the firms in the sample resorted to outsourcing in order to reduce cost and to enable them to focus on the activities that are more critical to their firms.  Among the activities that the sample firms outsource are certain human resource management functions such as recruitment and training; janitorial services and maintenance of building and ground; and sales and distribution.  The most common problem encountered is poor quality of service or output. It seems that this study generated more questions than answers.  The results of this study point to the need to refine the operational definition of outsourcing.  Because outsourcing has several forms, it seems that different sets of factors explain each form.  There is therefore the need to look into each form of outsourcing separately to gain a better understanding of the phenomenon. It may also be meaningful to know why firms resort to a particular form of outsourcing for specific activities.