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Mapping the outsourcing landscape

Jakki J. Mohr (Jeff and Martha Hamilton Distinguished Faculty Fellow, Regents Professor of Marketing, at the School of Business Administration, University of Montana, Missoula, Montana, USA)
Sanjit Sengupta (Professor of Marketing at the College of Business, San Francisco State University, San Francisco, California, USA)
Stanley F. Slater (Charles and Gwen Lillis Professor of Business Administration in the Department of Marketing, College of Business, Colorado State University, Fort Collins, Colorado, USA)

Journal of Business Strategy

ISSN: 0275-6668

Article publication date: 4 January 2011

5361

Abstract

Purpose

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This article develops a framework that helps clients and service providers make better decisions about whether and when to outsource, and on the appropriate type of outsourcing arrangement.

Design/methodology/approach

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The paper is conceptual in nature.

Findings

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Companies must align the governance of business functions to the underlying needs, resources, and desired outcomes. Simple procurement may suffice for acquiring standard business services such as cafeteria catering. When economies of scale exist and when transfer of explicit, codified knowledge is involved, straight‐forward transactional “lift and shift” IT and BP outsourcing arrangements will yield cost savings and efficiency. When transfer of know‐how is more tacit, and the goal is to add value to the client's customers beyond cost efficiency, longer‐term strategic outsourcing is appropriate. Finally, when there are risks to expropriation of proprietary knowledge and capital invested, transformational outsourcing is best.

Practical implications

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The client and service provider need to ensure they do not overcommit resources in the case of transactional outsourcing while being prepared to invest adequately in strategic and transformational outsourcing. The framework helps to answer the question of when transformational outsourcing arrangements are appropriate. It also makes explicit the various risks involved, so that appropriate governance can effectively address the risks.

Orginality/value

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Many authors have written about the pitfalls of outsourcing including rushing through the initiative and not having a formal governance program. To address these, our framework advocates a comprehensive review of the entire array of possibilities, from in‐house development to simple procurement of services in the open market, as alternatives to outsourcing.

Keywords

Citation

Mohr, J.J., Sengupta, S. and Slater, S.F. (2011), "Mapping the outsourcing landscape", Journal of Business Strategy, Vol. 32 No. 1, pp. 42-50. https://doi.org/10.1108/02756661111100319

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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