A framework of total value orientation for strategic outsourcing decisions

Abstract

PurposeThis paper aims to provide a comprehensive framework of strategic value encompassing several critical dimensions of value creation/delivery process amidst transactions between organizations, which outsource their work to local/global service‐providing firms.Design/methodology/approachThe paper consolidates pertinent extant literature encompassing these value dimensions, into a cohesive framework of “total value orientation” (TVO) for strategic outsourcing decisions, juxtaposed with their respective antecedents/outcomes.FindingsThis research paper models the strategic outsourcing process as blending the three perspectives of shared value, respectively, outsourcing service‐provider value, client firm value, and relationship value, which converge toward manifesting into a common synergy labeled as “TVO” of the business system; thereby explaining how outsourcing has transitioned from a mere economically convenient and transaction cost optimizing‐business decision to a more strategically driven initiative based on shared governance and decision‐making.Practical implicationsThis integrated framework of comprehensiveness value assessment helps transacting firms in determining the efficacy of an outsourcing decision. The TVO perspective can be usefully extended beyond pure dyadic transaction relationships to a network of relationships between the client firm and its business partners. Such evaluation/measurement of value of the entire business system is critical for firms and organizations to develop greater competitiveness in today's world of global collaborations.Originality/valueThis articulated framework captures several value dimensions into a consolidated structure that reflects the effectiveness of the relationship network between transacting entities within the business system.