of 3 - Center for Global Outsourcings

Introduction
The drive for greater efficiencies and cost reductions has forced many organizations to specialize in
a limited number of key areas [1]. Outsourcing has moved on from focusing on peripheral activities
such as cleaning, catering and security, to encompass more critical business activities such as
design, manufacture, marketing, human resource management and logistics. Many organizations
are increasingly considering outsourcing as a critical element of their organizational strategy [2].
Outsourcing was seen as primarily a cost-reduction strategy in the past, organizations now see cost
reduction as just one of several reasons to outsource. Deloitte [3] Consulting finds that outsourcing
is still highly driven by cost savings objectives a finding supported by Kakabadse and Kakabadse's
[4] research. In addition, organizations outsource in order to access needed expertise and
capabilities. Organizations believe that costs savings can be delivered primarily through vendors'
economies of scale [3], however the literature abounds with warnings that this objective is not
always easily achieved. Many books and articles on outsourcing begin by highlighting the failure
rate [5]. Bellou [6] notes researchers are divided as to the underlying reasons for failure: some
suggest "that paying the wrong price, buying for the wrong reason, selecting the wrong partner, and
buying at the wrong time are some of the most prominent ones" (pp. 69- 70). Lacity et al. [7] studied
the reasons outsourcing deals often failed to produce the anticipated results, noting that many
outsourcing deals were undertaken based upon the vendor's proclaimed ability to provide
outstanding reliability, outstanding customer service, and outstanding access to outsourcing
activities, but that this tactic could easily backfire when the product did not meet the unrealistic
expectation produced by such hyperbole. Enlow and Ertel [8] find the majority of outsource buyers
and service providers have at least 30% of their annual contract value at stake based on how well
their relationships are managed. Both parties are required to work together effectively to produce
optimum results. Differences between organizational cultures are exacerbated without effective
communication [9]. Sengupta [10] stated that if the cultural and communications fit was wrong, or if
support strategies differed, or if sales teams competed for the same clients, revenues and
relationships would suffer. Cultural compatibility is a vital component in selecting the correct partner.
Edwards and Langford [11] note the significance of consultative, contributory and collaborative
relationships. A cooperative attitude, expressed through behavior and communication is critical. In
available researches, the relationship between vendor and client’s cultural congruence of and
satisfaction of outsourcing has not been identified clearly. If cultural congruence effected on
satisfaction of outsourcing, it would be effective in outsourcing decision making. Also, the
relationship between the culture of an organization and its outsourcing rate hasn’t been studied so
far.
In this paper, three hypotheses are discussed and studied in Iran’s constructional companies.
Research Design and Approach
Descriptive research involves gathering data that describe features such as client and vendor
culture and client’s satisfaction. In the present case, data were organized, tabulated, and analyzed.
A structured questionnaire was used to gather data from the managers and employees regarding
client, satisfaction. In order to answer this question, whether there is relationship between
organizational culture and tendency to outsourcing, first we measured organizational culture of client
companies (by OCAI) and the percentage of outsourced activities/processes in under investigated
companies. The OCAI instrument and framework recognizes four dominant culture types (i.e., clan,
adhocracy, market, and hierarchy). [12] Then we examined the meaningful coordination between
each type of organizational culture (clan, adhocracy, hierarchy and market) and tendency to
outsourcing by using SPSS statistical software. In order to answer this question, whether there is
relationship between cultural congruence and the rate of satisfaction of outsourcing, first client and
vendor’s cultural congruence have been measured (by designed formula). Then the rate of client’s
satisfaction of outsourcing has been measured (by questionnaire). These questionnaires have
Tenth Annual International Daejeon, South Korea P a g e | 48
Smart Sourcing Conference June 28-29, 2012