Service outsourcing decisions – a process framework

Abstract

Purpose The purpose of this paper is to compare service outsourcing decisions between public and private organizations and against a theoretical decision-making framework to both understand differences across the sectors and to provide an outsourcing framework more suitable specifically for outsourcing (and for the public sector). Design/methodology/approach Multiple case studies, i.e. a study of phenomena (here outsourcing process) at various sites is used as an approach. Findings Findings indicate that public sector organizations are trailing behind private sector organizations in how the decision-making process is conducted and resourced. The authors suggest regular evaluation of service functions internally as a starting point for the outsourcing service decision-making process. Additionally, the market analysis should be done prior to cost analysis and benchmarking as the availability of suppliers more qualified than the internal process defines the make or buy decision. Research limitations/implications The newly developed framework based on empirical evidence includes the following phases: regular evaluation of service functions, market analysis, cost analysis and benchmarking and evaluating relevant service activities. Applying the framework improves the efficient delivery of outsourced public services and brings public sector outsourcing closer to the professionalism currently present in the private sector. Originality/value Choosing between in-house and outsourced service delivery is a fundamental decision in both private and public sector organizations. Previous outsourcing research has mostly focused on the private sector, with limited focus on the public sector’s outsourcing processes, yet understanding of the service outsourcing process is important in ensuring organizational competitiveness and cost efficiency.

A fuzzy approach to assess outsourcing risks in Brazilian navy industrial military organizations

“…Lonsdale (1999) argues that firms achieve poor outsourcing results because managers fail to consider its risks and develop safeguards. Recent articles propose holistic decision processes including different criteria (Lee et al, 2012;Taponen and Kauppi, 2020). Rehme et al (2013) present several frameworks for outsourcing decisions, while Gunasekaran et al (2015) discuss the use of performance measures and metrics.…”

“…Through outsourcing, organizations expect to obtain several benefits: reduced costs, focus on core competences, access to more advanced technologies. However, there are significant risks that may materialize if outsourcing is not successful (Harland et al, 2005;Kremic et al, 2006;Giosa and Morales, 2017;Taponen and Kauppi, 2020). Problems such as sacrificed service quality, accountability issues, poor service coordination, reduced flexibility and information leakages have been raised by both private and public sector organizations.…”

“…Problems such as sacrificed service quality, accountability issues, poor service coordination, reduced flexibility and information leakages have been raised by both private and public sector organizations. Moreover, costs may even increase, despite the goal of cost reduction (Kremic et al, 2006;Taponen and Kauppi, 2020).…”

“…This involves a make-or-buy decision, whereby a foreign supplier provides goods or services that could have been produced by the company (Kakabadse and Kakabadse, 2000;Harland et al, 2005;). While Prahalad and Hamel (1990) suggest that companies do not outsource core competencies, others argue that even core activities could be transferred (Harland et al, 2005;Strange and Magnani, 2017;Taponen and Kauppi, 2020).…”

Outsourcing Provider Selection Model in Public Sector

“…This challenge that emanates as a result of lack of internal expertise to handle IT activities (software development) amongst decision-makers, IT practitioners, and heads of departments in the public sector is gradually becoming thing of the past as outsourcing activities continue to come into play (4). No doubt recent studies also indicated outsourcing activities in the public sector is highly beneficial for decision-makers, IT practitioners, and heads of departments as it allows them to fully concentrate on their assigned professional activities rather than wasting time on activities that are unrelated to their expertise which may invariably affect their stipulated strategic objectives (5,6). However, researches have proven the challenge still faced by IT practitioners who could not avoid selecting the wrong IT provider during the outsourcing selection process due to uncertain situations faced in human perceptions or assessment in decision making (7,8,9).…”