of 3 - Center for Global Outsourcings

Introduction
Outsourcing is contracting with another company or person to do a particular function. Almost
every organization outsources in some way. Typically, the function being outsourced is
considered non-core to the business. Outsourcing takes many forms. Organizations still hire
service providers to handle distinct business processes, such as benefits management. But
some organizations outsource whole operations. The last case could be considered as actual
implementation of the concept of the totally disaggregated corporation.
There is an abundance of literature on outsourcing, where many decision factors, benefits and
impacts have been presented although the relationships, and perceptions existing to understand
offshore outsourcing as a trend to the emergence of totally disaggregated corporations, viz.
outsourcing the most or even all of its operations have not been investigated, which is the
rationale and basis of this study.
Literature review
Findings from the literature suggest the issue of outsourcing has generated a great deal of
debate. Amongst those broadly in favour of outsourcing as a strategic response to increased
competition are Quinn and Hilmer (1994), who claim most organisations can substantially
leverage their resources through strategic outsourcing. This view was shared by Jennings
(1996) and Hinton (1996).
Those opposed to outsourcing suggest organisations that rely on outsourcing invite a disastrous
loss of competitiveness. Prahalad and Hamel (1990) suggest the skills that give rise to the next
generation of core competencies cannot be ‘rented in’ by outsourcing, and accordingly
organisational competitiveness may be seriously undermined. Flexibility can be a decisive factor
in an organisation’s success, and an outsourcing manoeuvre can usually contribute to its
internal and external flexibility (Bengt 2005).
Outsourcing may also be seen as the strategic use of resources outside the buying
organisation, performing activities that would otherwise have been carried out by in-house
personnel using internal resources (Ray 2007). Bagranoff, Simkin and Strand (2005) state that
advantages provided by outsourcing include; an attractive business solution, lower costs, avoids
seasonal fluctuations, and affords greater flexibility. Kremic, Tukel and Rom (2006) state
specialisations and economies of scale are mechanisms used to achieve these levels of
efficiency and cost savings due to outsourcing can be quite significant. Many businesses are
increasingly involved in outsourcing due to changes in technology, organisational structure,
strategic planning and customer demands (Ray 2008). Outsourcing is a hierarchical sequence
of decisions (Beaumont & Sohal 2004), with the fundamental decision being whether or not to
outsource a business process or activity. In summary, outsourcing may be seen as a strategic
or tactical initiative adopted by business to satisfy increasing demands of competitiveness and
sustainability through increased cost savings and improved core activity focus.
Hypotheses
For studying the concept of disaggregated corporation, we test the following hypotheses:
H1: The association between returns and comprehensive outsourcing is stronger in offshore
context.
H2: There is a significant association between outsourcing and human resources
management.
H3: There should be natural limits to outsourcing opportunities.
H4: Outsourcing market should have positively growing trend.
Tenth Annual International Daejeon, South Korea P a g e | 15
Smart Sourcing Conference June 28-29, 2012