A practical framework for understanding the outsourcing process

Abstract

Over the last number of years, outsourcing has become an important issue for many organisations. The potential for outsourcing has moved from peripheral activities such as cleaning and catering to critical activities such as design and manufacturing. However, there is evidence to suggest that organisations are not achieving the desired benefits from outsourcing. Outsourcing decisions are rarely taken within a thoroughly strategic perspective with many firms adopting a short‐term perspective and being motivated primarily by the search for short‐term cost reductions. The aim is to illustrate that outsourcing should be carried out from a strategic perspective and integrated into the overall strategy of the organisation by proposing an outsourcing framework. The framework attempts to overcome some of the problems associated with outsourcing by integrating a number of key strands related to outsourcing including a value chain perspective, core competency thinking and supply base influences into the decision‐making process.