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Factors influencing the outsourcing decisions: a study of the banking sector in India

Ravi Kumar Jain (ICFAI Business School, IFHE University, Hyderabad, India)
Ramachandran Natarajan (College of Business, Tennessee Technological University, Cookeville, Tennessee, USA)

Strategic Outsourcing: An International Journal

ISSN: 1753-8297

Article publication date: 22 November 2011

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Abstract

Purpose

This paper is an empirical study of outsourcing practices in the banking sector in India. The purpose of the paper is to investigate the impact of factors which influence the decision makers' attitude towards outsourcing.

Design/methodology/approach

Based on a review of the existing literature, an attitudinal model of outsourcing was developed. This model was used to: identify the key factors of benefits, risks, roadblocks, and criticality of outsourcing; develop the instrument to measure the factors; and formulate hypotheses concerning the impact of these factors. The constructs in the instrument that measured these factors were validated by factor analysis.

Findings

The impacts of perceived benefits, perceived roadblocks, and perceived criticality on the attitudes towards outsourcing were found to be strong and statistically significant. The impact of perceived risk was weak and statistically insignificant. The model explaining the combined impact of these four factors on outsourcing attitudes was also statistically significant.

Research limitations/implications

An important insight from this study is that the clients, at least in the banking sector in India, tend to value in outsourcing quality factors such as process improvement, services improvement and cost transparency more than cost savings. The results of the study provide a basis for rethinking the value proposition offered by outsourcing vendors and for refocusing the research on outsourcing of services in particular.

Originality/value

While most studies on outsourcing tend to be theoretical and/or focus on outsourcing from developed to developing countries, this is an empirical study focusing on outsourcing by organizations based in developing countries such as India. Therefore, the results are not confounded by differences in culture‐specific communications, business practices, and regulatory regimes between the countries.

Keywords

Citation

Jain, R.K. and Natarajan, R. (2011), "Factors influencing the outsourcing decisions: a study of the banking sector in India", Strategic Outsourcing: An International Journal, Vol. 4 No. 3, pp. 294-322. https://doi.org/10.1108/17538291111185485

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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