Effect of outsourcing on organizational
performance in Rwanda
Christine Uwamahoro Kayumba
Umeå School of Business and Economics Master's Program in Finance
Acknowledgement
The long period of time spent while researching and writing this thesis was a long journey demanding, challenging and sometimes frustrating. I could never have managed to successfully pass through it without the support received from different individuals, I therefore owe them individually and collectively a big debt of gratitude. Firstly, I thank the almighty God to have guided me for this journey I am finishing.
I extend my thanks to USBE management and staff for the knowledge and skills I and skills I acquired them.
I owe most profound thanks to my supervisor Mr. Peter Hultén who did everything possible towards this research work. His continued support and guidance up to the final phase of this work is widely recognized.
I wish to record my gratitude thanks to my parents, my classmates and friends for their unstilted encouragement, sacrifice and material support in preparation of this research work.
I further thank the management of BRALIRWA ltd, Airtel-Tigo and MTN Rwanda that granted me permission to carry out my research study from their organization and most especially the general managers for having allocated part of their valuable time to my research questionnaire, may God bless them all.
Table of content
Chapter 1: Introduction...1
1.1 Introduction of the study...1
1.2 Organizational performance...3
1.3 Problem statement...3
1.4 Purpose of the study...4
1.4.1 General objective...4
1.4.2 Specific objectives...4
1.5 Research questions...5
1.6 Importance of study...5
1.7 Disposition of thesis...7
Chapter 2: Theoretical framework...8
2.1 Conceptual framework...8 2.2 Concept of outsourcing...8 2.3 Related studies...9 2.4 Outsourcing theories...11 2.5 Outsourcing activities...12 2.5.1Core activities...13
2.5.2 Critical but non-core activities...13
2.6 The outsourcing decision...15
2.7 Organizational performance...16
2.7.1Indicators of organization performance...17
2.7.1.1 Cost efficiency...17
2.7.1.2 Productivity...18
2.7.1.3 Profitability...20
2.8 Conceptual Model and Hypothesis...21
Chapter 3: Methodology...22
3.1 Pre-conceptions...22
3.2 Choice of the study...22
Chapter 4: Empirical Findings...33
4.1 Systematic presentation of data...33
4.2 Analysis and interpretations of data...33
4.2.1 Profile of the respondents...33
4.2.2 Outsourced activities...34
4.2.3 Reasons of outsourcing...36
4.2.4 Organization performance...37
4.2.4.1 Effect of outsourcing on cost efficiency...38
4.2.4.2 Effect of outsourcing on productivity... 39
4.2.4.3 Effect of outsourcing on profitability...40
Chapter 5: Analysis...41
5.1 Correlations between variables...41
5.2 Hypothesis results...42 5.2.1 Hypothesis 1...42 5.2.2 Hypothesis 2...45 5.2.3 Hypothesis 3...45 5.2.4 Hypothesis 4...46 5.2.5 Hypothesis 5...47 Chapter 6: Discussion...49
6.1 Findings about hypothesis...46
6.2Further findings on research questions...51
Chapter 7: Conclusion... ...54
7.1 Concluding remarks...54
7.2 Implication of the study... ... ...55
7.2 Suggestion for further research...56
7.3 Limitation of the study...56
References...57
Appendix...62
Appendix 1: Questionnaire...62
Appendix 2: Global responses on respondents’ profile...67
Appendix 3: Views of respondents on effect of outsourcing on cost efficiency...68
Appendix 3: Views of respondents on effect of outsourcing on productivity…...70
Appendix 3: Views of respondents on effect of outsourcing on profitability…...73
List of figures and tables
Figure 1: Disposition of the study... ...7
Figure 2: Concept framework ... ...8
Figure 3: Core and non-core activities...14
Figure 4: Concept Model…… ... ...21
Figure 5: Inductive and deductive...24
Table 1: Measurement…………...25
Table 2: Sample size………...28
Table 3: Reliability………...29
Table 4: Respondent’s profile of the organization...34
Table 5 Outsourcing activities...35
Table 6: Views of respondents on the reasons of outsourcing...36
Table 7: Views of respondents on the effect of outsourcing on cost efficiency...37
Table 8: Views of respondents on the effect of outsourcing on cost productivity...38
Table 9: Views of respondents on the effect of outsourcing on profitability...39
Table 10: Correlation results... ...41
Table 11: Hypothesis1... ...42
Table 12: Pairwise comparisons... ...43
Table 13: Hypothesis 2... ...45
Table 14: Hypothesis 3... ...46
Table 15: Hypothesis 4...46
Abstract
Many organizations have started using outsourcing strategy over the years but still many organizations didn’t realize the full benefit of it. Some have experienced low productivity, their they failed to attain expected cost saving and their profitability have not been balanced or stable. The present research investigated the effect of outsourcing on the organizational performance (cost efficiency, productivity and profitability) in Rwanda. Three sample companies have been selected from Telecom and manufacturing Industry of Rwanda. The results of study were based on a sample of 111 staffs selected by using convenient and purposive sampling; source of data was obtained using primary and secondary source of data and collected using questionnaire and documentation. Data has been treated with Statistical Package for the Social Sciences (SPSS)’s software and presented in tables. The findings of the study were presented and analyzed in detail following the objectives of the study.
The specific objectives of this study was to identify activities or services outsourced by organizations in Rwanda, to find out the main reasons of outsourcing for organizations in Rwanda; to assess the level of their performance as a result of outsourcing strategy and finally, to establish the relationship between outsourcing activities and organizational performance. Three hypotheses were formulated to measure the relationship between outsourcing and performance. The findings of this research have shown that all organizations part of this research outsource some of their core activities ( such as operation management, service management, advertisement and sales) and non-core activities (such as information system, maintenance, human resources activities, distribution, logistics, security, cleaning, man power). The results have shown that organizations in Rwanda outsource in order to access special expertise as shown by all respondents at rate of 100% and to reduce costs as shown by respondents at rate of 96%. Furthermore, the findings shown that outsourcing activities contributed to the organizational performance as revealed by respondents regarding their views on effect of outsourcing on cost efficiency, productivity and profitability. Moreover, the findings show that there is a weak positive and significant relationship between outsourcing activities and cost efficiency while it shows a weak and moderate positive insignificant relationship between outsourcing activities with productivity and profitability respectively.
CHAPTER 1 INTRODUCTION
Like any kind of the research, this study focuses on both outsourcing and organizational performance as the study’s independent and dependent variables respectively. Indeed, the study’s findings will be of great use since it will reveal to which extent the outsourcing contribute toward the organizational performance. This chapter presents the background to the study, statement of the problem, general objective of the study, specific objectives, research question, Importance of the study; limitation and organization of the study.
1.1 Background of the study
For most of the 20th century, a successful organization was described by its capability in
managing and controlling all of its resources and operations. In the 1960s, in order to maintain profits, organizations start to look for means to expand their market base and take benefit of economies of scale. This occur from the evolution of diversification as a well-known strategy (Lysons, 2000; p.1). When competition started to become more worldwide in the 1970’s and 1980’s, companies found that diversification had simply expanded their management system. Therefore, they had mislaid their flexibility (Lysons, 2000, p.2). In nowadays competition is increasing within businesses, organizations are considering new ways to increase competitive edge and generate value. Lyons and Farrington (2006, p.4) affirm that competitive edge is an important concern that allow an organization to pact with market dynamics and environmental effort better than its competitors. Organizations attempt to gain competitive advantage by outsourcing.
Outsourcing known as a good technique for management can be defined as the strategy of using outside resources to implement activities traditionally managed by internal staff. According to Letica (2016, p. 2) Outsourcing is a strategy by which an organization pact out some of their main services to specialized and efficient service providers, who turn into valued business partners. Kalawole and Agha (2015, p. 6) defined outsourcing as a decision by organizations to have an external supplier to perform a function that would have otherwise been performed internally by organization staff. Generally, most of the organizations search for the best service providers to whom to outsource their function, this gives them an opportunity to get their work done by professional which means good quality work.
Outsourcing has become one of the most important approach a business should adopt due to the increase of globalization and through this strategy, organizations can acquire a competitive advantage if products or services are implemented more effectively by outside service providers (Yang, Seongcheol, Changi, & Ja-Won, 2007, p. 27). For an organization to be able to adapt on market change and complications of anticipating the direction of such changes means that they have to emphasize on their core competencies and abilities (Mclvor, 2008, p. 4). Customarily, outsourcing is an abbreviation for” outside resource using”. Outside means to create value from external, not within the organization (Yang et al., 2007) Outsourcing is allocation of services that should be performed inside the company to an external service provide and has become one of the essential factors in several business strategies (Hern & Burke, 2006, p. 3)
ways to generate value. Organizations are embracing the technique of outsourcing as a way of increasing competition and expand into other markets (Elmuti,2004, p.6). Outsourcing has been implemented over last two decades with purpose to reduce cost. However, today the focus is to improve productivity, flexibility, speed, skills, innovation and access to new technologies (Elmuti, 2004). Still, outsourcing does generate some problems. The first challenge faced by organization is that outsourcing generally decrease company’s control over how some services or activities are performed by service provider which in result may raise the organization’s debt disclosure. Another big problem with outsourcing comes from the workers themselves as they fear loss of jobs (Malhorta, 2013, p. 4)
Outsourcing rise in 1960s and 1970(Quinn and Hilmer, 2004, p.12). Many issues about outsourcing brought by organization change trends toward globalization. Business environments are more and more becoming global in many organizations. Regional arrangements such as North America free Trade Agreement among United states, Canada and Mexico; the use of a single currency in European market and opening boards for every of all countries in Easter Africa encouraged the development of trade on global basis. As an outcome of this trend organizations have extended geographical depth of their business operations. This is to look at the market served as well as production sources for service delivery. Arising from these change organization have responded rapidly to the market change and gained opportunities such as gaining greater economies of scale, trading in wide range markets, ensuring high quality of service and obtaining lower cost labor sources for the service delivery. In this combat, organizations can’t guarantee this quality in all division on their own and forced to focus on those activities that they are specialized in the most and outsource the rest. Sometimes they prefer to outsource those activities that an organization can’t perform on its own, or activities that service provider can handle better and at a lower price. Outsourcing transfer those activities to organizations specialized in those activities and allow the organization to generate more value by emphasizing on its core activities.
However, even if organizations can benefit from outsourcing, some Rwandan organizations didn’t gain or realize the full benefits of outsourcing and encounter several difficulties like failing to provide effective and efficiency service delivery or planning. Rwanda is putting much effort in service sector, particularly the Business Process Outsourcing (BPO). Rwandan perspective on outsourcing was emphasized in the Rwanda Vision 2030 program which was revealed in 2010. The initiative was seen as a major pillar as well as driver of social and economic enhancement by process or way of resources and job creation. According to Mpambara (2012, p. 3) the purpose of government of Rwanda was to have a development goals in the use of technology as well as imitating countries like India and China which have succeeded in outsourcing. The advancement in manufacturing production and improvement in Information’s and Communications Technology (ICT) through the inclusion of fibre-optic cable infrastructure will increase outsourcing activities. Many jobs will be initiated for Rwandans and other non-local firms will be attracted to do business in Rwanda.
1.2 Organizational performance
Gamage (2014, P. 19) assert that, performance is measured by showing how efficient the organization is in use of resources to achieve its objectives or goals. It is the measure of fulfillment accomplished by individual, team, and organization. It consists of the actual output or results of an organization as evaluated or measured in comparison with its planned output (or goals and objectives). Performance measurement assess the parameters under which programs, investments, and acquisitions are meeting the targeted results (Perez & Machado, 2015, P. 20). According to Trade (2000) most of performance measures can bring together into one group of the following five general categories. The first category is effectiveness: A process demonstrating the degree to which the process output integrates to requirements. The second category is efficiency: A measures pointing out the degree to which the process achieves the enforced output at minimal resource cost. The third is quality: The extent to which a product or service meets customer requirements and expectations. The fourth is timeliness: A measures of whether or not a unit of work was done exactly and on time. Criteria must be settled to describe what constitutes timeliness for a given group of work. The criterion is generally based on customer demands. Productivity is the last category. It refers to the value added by the process divided by the cost of the labor and capital used.
Kaplan and Norton (1996) utilized a balanced scorecard approach to measures organizational performance from different aspects such as customer, internal, innovation & learning and financial aspect. To measure organizational performance Tangen (2005, P. 8) has used seven aspects such as effectiveness, efficiency, quality, innovation, cost and productivity and Bolat and Yilmuz (2009) have added social and profitability aspect too. From the above literature, we can say that organization performance is a process of accomplishing the pre-established goals by rising efficiency quality, innovation, cost, productivity, and profitability from the customer aspect and also from the organizational perspective. In this research the organization performance will be presented by non-financial performance analysis to identify the strengths and weaknesses of the firm that result from the use of outsourcing strategy.
Effect that outsourcing strategy has on organization performance can be measured by appraising the degree of achievement of the production, economic, customer satisfaction and other technological advantages of outsourcing contract. Customer satisfaction can be considered as the degree of acceptance or good condition between a customer need and outsourcing result. However, Grover et al., (1996) recognized outsourcing success as the advantages from outsourcing acquired by the organization as a result of choosing outsourcing as a strategy. Outsourcing success can be measured by use of different items such as; access to skilled personnel, management of resources, cost reduction, customer satisfaction and increased access to key information technologies or innovation etc.
1.3 Problem statement
outsourcing on organization performance is not well documented in Rwanda. Outsourcing studies in other countries give contradicting results, some findings give positive relationships between outsourcing and performance results, other researchers give no significant or sometimes negative results.
Most of experts anticipate that many organizations will outsource large numbers of services and functions in the upcoming years. Even though the findings of most early outsourcing drives were unsatisfied, current research show that organizations are improving their potential in consideration of managing outsourcing relationships (Lacity et al., 1998). Despite the difficulties continually being noted or faced by organizations with regards to their outsourcing arrangements, few empirical analysis regarding that issue have been conducted and still its impact is vague and unexplained puzzle in order words it has not yet been fully interpreted (Bolat et.al, 2015). Earlier work on outsourcing has been generally theoretical in nature looked generally on anecdotal evidence to underpinning assertions. Furthermore, as mentioned above the conclusions of those studies are contradictory. Many instinctively engaging arguments have been provided both for and against outsourcing as a technique of realizing a sustainable competitive advantage. For example, Quinn (2012, p. 19) come up with the statement saying that by allowing outside services provider to perform some of their functions, organizations may increase their organizational performance by focusing more attentively on the things they do best or core activities. However, Bettis, Bradley, and Hamel (2013, P.13) argue that outsourcing may reduce organizational innovation, may switch knowledge to the outside service provider, and may reduce control over organization’s functions or activities. By doing so, outsourcing may destroy long-run competitive advantage. Also, studies carried out by Deloitte (2014, P.9) revealed that most of large organizations that had outsourced failed to attain the expected cost saving. Deloitte continued by saying that even though outsourcing boost improved quality and minimize costs, it led to the loss of jobs and talented in-house workers.
Based on the facts presented, the researcher seeks to advance understanding about the effect of outsourcing on organizational performance with a case study of Rwanda by investigating on the relationship between outsourcing and organization performance in Rwanda which will add more knowledge to the existing literatures.
1.4 Purpose of the study
Purpose of this study is divided into two broad objectives: general objective and the specific objectives. Those objectives are stated as the following:
1.4.1 General Objective
The general objective of this study is to assess the relationship between outsourcing and organization performance of three companies in Rwanda where two companies are telecoms companies while one is a manufacturing company. To achieve this objective, the following specific objectives must be achieved.
1.4.2 Specific Objectives
1. To identify the services or activities outsourced by telecoms and manufacturing companies in Rwanda.
2. To identify the reason why Telecoms and manufacturing companies in Rwanda outsource.
4. To analyze the relationship between outsourcing activities and organizational performance in telecoms and manufacturing companies in Rwanda.
1.5 Research Questions
Research questions of this study are divided into 2: Main research question which is: Is there any significant relationship between outsourcing activities and performance of telecoms and manufacturing companies in Rwanda?
And sub-questions are formulated in order to help to answer the main question.
1. Which activities or services outsourced by telecoms and manufacturing companies in Rwanda?
2. Why telecoms and manufacturing companies in Rwanda outsource some of their activities or services?
3. What is the performance level of telecoms and manufacturing companies in Rwanda as a result of using outsourcing?
1.6 Importance of Study
Telecommunications companies in Rwanda are in charge or in control of the entire operation and all support necessity as well as network infrastructure like changing infrastructures needed to efficiently and effectively run their businesses. Manufacturing and telecommunication organizations in Rwanda are trying to reduce cost, provide better technique support, better quality of product and services and remain competitive on the market. Managers are attempting to outsourcing most of their operations and maintenance units that manage the network and information technology (IT). Despite this strategy, organizations are realizing that they are not obtaining the expected cost reduction, competitive advantage and network stability that the outsourcing strategy are anticipated to provide. The significance of this research relates to what activities to outsource, why to outsource, what degree outsourcing strategy adoption affect telecommunication and manufacturing companies and the impact of the adoption has on organization performance.
Before the use of outsourcing strategy, telecommunication and manufacturing companies in Rwanda were responsible for the whole management of core and non-core services or functions. Even though some companies are fighting to maintain with this arrangement, others are judging that it increasingly cost, hard or challenging to deal with. This complication has forced many organizations to depend more and more on external service providers and switching some of their business functions to third party provider whom they believe can perform these activities or functions well. Some organizations try to outsource for many reasons such as strategic or tactical reasons that allowing them to emphasize on their core competencies.
Currently due to the increase of new technologies and customer needs, competition within telecommunications and manufacturing companies are increasing. Managers are turning to outsourcing not only to cut down their operation or production costs but also to change their business model in order to become more competitive. While recognizing the great benefits that outsourcing present, it is important also to know that there are fundamental risks and difficulties linked with its adoption. In Rwanda and in the whole Africa, cultural mismatch, increasing of society obligation, decreasing local competence development and internet connectivity problems affecting output or quality of the service are few of the risks and difficulties of outsourcing strategy.
1.7 Disposition of study Chapter 1 Chapter 3 Chapter 2 Chapter 4 Chapter 5 pppPPPPPP
Introduction: This chapter introduce the topic and
background, problem statement, highlighted the possible research gap, followed by research question. Finally, importance of the study has been discussed
Methodology: This chapter will describe scientific methods
which will be used in the study. Will present the arguments for selecting a method and explain different research tools and their use in the study
Literature framework: This chapter will illustrate the all
importance aspects of the topic. It will discuss theory and models which have been used in regard to research topic.
Empirical Findings: This chapter will cover primary data
which will be collected through questionnaire and findings will be presented with the help of figures and charts
Analysis: This chapter will present the results of the hypothesis
which has been tested by using statistical tools. The remaining part consist of discussion which is constructed based on results
Discussion: This chapter include discussion about the findings
regarding hypothesis and results concerning research questions Chapter 6
Chapter 7
Conclusion: This chapter include concluding remarks,
CHAPTER 2:
THEORETICAL FRAMEWORK
2.1 Conceptual framework
In this study, the independent variable is outsourcing represented by outsourcing activities while dependent variable is organizational performance represented by cost efficiency, productivity and profitability. The arrow shows the relationship between independent variable in outsourcing activities and dependent variable in terms of organizational performance.
2. 2 Concept of outsourcing
Outsourcing is a management strategy by which a company assign an experienced and efficient service provider to perform their non-core functions, by doing so they can save time and money (Stroh and Treehuboff, 2003, p. 24). In other words, is a technique of acquiring goods and services by contract from an external supplier. It can also be marked as a contractual agreement among customers and one or more supplier to deliver services or programs that the customer is offering in-house (Fan, 2000, p. 215). Those services generally should be performed in house but sometimes organization can make an arrangement with another company to execute it from outside the organization (Nag, 2004, p. 121)Therefore, it is the shift of business units/ functions to external service providers (Dibbern et al., 2004) whereby, authority is appointed to third party to provide services under a business contract that includes service level agreements associated to cost, quality and timely delivery of product and service.
Type of outsourcing activities Core activities . Strategic management . Service development . Operation
Critical but non-core activities
It can be hard to define Outsourcing in a significant way. Gilley and Rasheed (2000, p.335 suggested a key definition of outsourcing as shifting internal activities to external providers. Bosire et al (2013) extends the definition to acquiring a product or service from outside the organization even though this looks too broad and not so much useful. A more exact definition given by Gilley and Rasheed (2000, P.4) considers outsourcing as acquiring a good or service either primarily sourced internally or which can be sourced externally.
Outsourcing generates an image of lots of outsourced jobs moving worldwide, however vendors who obtain outsourcing contracts may be in the same town or country or they may be situated globally or internationally. Vendors or service provider might be companies or individuals working in-office with the outsourcer in a third place relying on the type of work involved. Even if outsourcing is not new it has received a bigger consideration since the 1990s (Walker et al, 2006, p.45). Academics and firms attribute more focus on outsourcing in manufacturing, even if professional services are growingly outsourced entirely or in particular. Example of function or services that are often outsourced consist of security, service call centers, Human resources, accounting and tax preparation, health services like analysis of lab results, cleaning, catering, maintenance for vehicles etc (Harland et al., 2005, p. 352)
Outsourcing is less used in operational process like chemical or mental production, automated firms where low labor costs have less importance and where heavy production have higher transportation costs that can impact the organizational profitability (Awino and Mutua, 2014, p. 23). Literature on outsourcing involve theoretical concepts of vertical disintegration and make or buy decisions. Previous theoretical study emphasized on vertical integration that drawn up the stage for outsourcing theory particularly acquisitions and mergers in the 1960-80s (Shil and Chiang, 2011, p. 19), Based on vertical disintegration outsourcing was observed as a new organizational model (Maltz, 1994, p. 62). In 1980s, outsourcing was using conditions for make or buy decisions (Dirrheimer et al, 2004, p. 17). Available capacity and expertise within the organization, quality concerns, operation and reputation risk, strategies used, cost of different options, nature of goods and services encompass factors of make or buy decisions (Stevenson, 2007, p.21).
2.3 Related studies
This section contains some of other studies related to outsourcing and its performance. Petronile (2013), studied the impact of outsourcing on organizational performance among book publishing industry in Kenya, problematic of her study based on how the highly competitive environment along with customers’ demands for tailored products and services has forced companies to continuously evaluate, improve and reengineer their operation. The research design adopted was descriptive. The population of the study was made up of 30 firms operating in the publishing industry in Kenya. The study used primary data collected through self-administered structured questionnaire. The study’s finding was that the firms outsource printing services, support services, distribution, production, advertising services and technology services. It also found that outsourcing of functions influences the performance of publishing firms because it enhances productivity, flexibility, better quality of product, operating cost reduction, technology advancement and customer satisfaction. The study recommended that the firms should continue outsourcing other services which they do not have competitive advantage over its competitors so that they can continue improving their performance.
practices motivated by increased competition between manufacturing and service delivery organizations has accelerated firms to generate value of money through efficient use of limited resources. The study used a stratified sampling technique to reach at 120 sample elements for the study. Questionnaire were administrated and the data collected were analyzed by using regression analysis. The findings showed that firms that outsource some of their activities experience a reduction of average cost, increase sales turnover and profitability, improve expertise, enhance service quality and save time for core activities. But it was recommended for organizations to continue to control more the contractor’s activities in order to ensure compliance with best practices.
Akinbola (2012) did a research regarding the effects of outsourcing strategies on the organizational performance of fast foods industry in Lagos, problematic of this study based on how the fast food industry in Nigeria was enduring very rapid innovation and explosive growth. 300 questionnaires were administered to 10 chosen fast food organization in Lagos to get primary data that conducted correct research questions and three hypotheses were tested appropriately. The study found that outsourcing so far has positively affected the performance of fast food industry and the empirical findings determined that the industry has benefited from outsourcing its business process to reduce cost operation. The study found that outsourcing of certain technical form of business that has to do with knowledge and professionalism improve customers’ relationship. The study recommended that fast food companies should maintain business relationships that would help in transaction negotiation with outsourcing vendors to boost the profitability of organizations.
Musubika (2010), studied about the impact of outsourcing on organizational performance in Century Bottling Company Limited, problematic of the study based on the benefits and challenges organizations face in outsourcing their non-core activities. The data was gathered and then analyzed to meet the purpose of the study though with various limitations ranging from financial constraints to time constraints. The findings show that organizations outsource to get special expertise, speed up delivery of services, decrease cost and get enough time to focus on their core activities. The study recommends that organizations should outsource some of their services so as to reduce costs and emphasize on core activities. The gap is that the research has not emphasized on the contribution of outsourced activities on the organizational performance.
Muweesi (2011), studied about the effect of outsourcing on organizational performance in private organizations in Uganda a case study of Uganda Telecommunication Limited, problematic of the study based on how Uganda telecommunication Limited have outsource part of their business activities such as selling airtime and provision mobile money services as a way of improving their performance. However, they have not entirely realized the full benefit of outsourcing. This study used quantitative method as a research design, purposive sampling technique was used to select the managers while simple random was used to select the rest of respondents. The findings disclosed that outsourcing of Uganda Telecommunication Limited positively contributed to cost efficiency. The study determined that outsourcing at Uganda Telecommunication Limited in some way positively contributed to profitability at a lower level. Concluded by recommending the companies that are part of Uganda Telecommunication Limited to outsource more in order to benefit more on cost efficiency.
a big role. They used questionnaires, interviews and observation to collect data and analysis was made manually. All studies found that the outsourcing activities contribute to the firm’s performance. Outsourcing has been credited to increase the organization growth in terms of profitability and productivity. But the common gap is that the evidence provided by all those studies about outsourcing and its positive impact on the organizational performance is vague. Therefore, this study will greatly emphasize on that gap in order to clarify and complete them.
2. 4 Outsourcing theories
This section reviews the theoretical framework on which the concept of Outsourcing for organization performance is based on. Outsourcing is based on many theories, this study will be supported by the following theories: resource-based view theory, agency theory, knowledge theory and transaction cost economics.
Transaction cost economics theory arguments that an organization wants to balance transaction cost and production cost in their decision to insource or outsource (Charles, 2013, p. 9). Organizations offer a service function in house, when it is economically more cost effective than buying the similar service function from the third party. For this purpose, when transaction cost is high the organization prefer to provide the service function internally rather than buying from external provider. Transaction cost economics is recognized to provide the best decision-making instruments to assist organizations to decide to outsource and to prepare themselves for upcoming outsourcing arrangements. This helps in making effective decisions concerning outsourcing. Even if it has some disadvantages, particularly when it comes to the requirement of assets transactions necessary to outsource activities. The fewer requirements for assets transactions there are the easier to create more comprehensive and detailed contracts and the better probability of outsourcing an activity and vice versa. To put it easily, an activity is outsourced if a total profit after increasing income and reducing costs is higher than the total transaction costs of outsourcing.
Resource-based theory deals with identifying and utilizing existing resources more effectively within the organization (Johansson, 2004, P. 32). The Resource Based View examines the relationship between internal qualities of a company and its situation, although it rejects two traditional assumptions in the Porter neoclassical model. The model suggests that a sustainable competitive advantage count on the market position and anticipate that companies that have fewer internal skills and resources are more feasible to outsource its activities. This approach looks a company as a set of unique strategic resources, able to create a sustainable competitive advantage. Its objectives to figure out competitive advantages and limitations of resources in adopting these advantages, as well as to look at a company’s capability to identify such advantages, develop and protect them (Bustinza et al., 2010). The resource-based view in outsourcing, develops from a recommendation of an organization that lacks useful, insufficient, exceptional resources and capabilities, organization should look for an external provider in order to overcome that weakness. Therefore, those resources are useful for the organization because it assists the organization to carry out strategies in an effective way that enhance efficiency and effectiveness of the organization.
Knowledge sharing play an important role in the success of outsourcing arrangement where it create a positive impact in managing relationship between partners. Vendors can adopt opportunistic behavior for its own advantage at any time the opportunity or chance arises. Opportunism can be described as the tendency to mislead clients in order to obtain high benefit. Opportunism is expected to appear in relationships where there is an agent (or vendor) and a principal (or client or outsourcer). Moral, social norms, and damage of reputation reduce the risk of opportunism to a certain level but cannot avoid all opportunistic behaviors (Wilkins, 2009). Opportunism generally consist of three indications, which are moral hazard, adverse selection and imperfect commitment. Moral hazard arises when it is not feasible for the client to consider the vendor’s behavior without acquiring additional costs. In cases where the outsourcer cannot notice poor performance, the vendor can accuse poor performance on factors above its control. Adverse selection rise when the client cannot investigate the vendor’s characteristics. If the client fails to deal with adverse selection, the client will meet complications in selecting a suitable vendor. Finally, lack of commitment which indicate the incapacity of the vendor and the client to entirely perpetrate in business relationship (Bremmer, 2008).
2.5 Outsourcing Activities
Outsourcing is mainly divided into two different areas; Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) (Moses Kerniba 2009, p.5). Business Process Outsourcing (BPO) is a wide concept concerning to outsourcing in all fields of economic activity. It can be described as an organization involving into agreement with another organization to operate and perform one or more of its business activities or sub-activities (Sharma, 2004, p.8). Examples of BPO services include information technology systems management, financial services, business consulting, call center service, human resources services, marketing, legal services, medical billing, software development, web design and web development while knowledge Process Outsourcing on the other hand is outsourcing in which knowledge and information linked to the service provided is performed by workers in a different organizations or by a subsidiary of the same company. Examples of KPO services involve knowledge processing services, intellectual property research, data and analytical research, medical services, pharmaceuticals services, writing/content development services, database development services and so on.
According to Susomrith and Brown (2013, p. 334), Outsourcing activities are divided into three types such as Core activities, Non-core critical activities and Non-core non- critical activities. Çiçek and Özer (2011, p. 54) described core activities as strategic tasks that enhance customer value and ride profits of the organization; non-core critical activities are detailed as day to day duties that add a small-value but they are not a profit center while non-core non-critical activities is defined as activities that doesn’t provide any competitive advantage. They are less able to damage or harm the organization in the short term even though they are still significant. They are related to gardening, food service, cleaning, catering, security and so on. On the other hand, Hern and Burke (2006, p.13) suggested two similar general types of outsourcing strategy that are minor outsourcing and core outsourcing. The first type arises when organizations obtain less strategically relevant, minor activities from external service providers.
organizations within the industry. In addition, it is suggested that each of these outsourcing strategies is not a unidimensional approach. Rather, outsourcing strategies can be conceptualized as acquiring two important properties, breadth and depth. Breadth is described as the number of activities outsourced while depth is described as a percentage of the total number of activities in which the organization could be employed. Outsourcing strategies change highly in their breadth. On the one hand, many organizations prefer to manage most of their activities internally and therefore, have approximately cramped outsourcing strategies. Such organizations may set to outsource only a few activities at the same time maintaining a solid supervision over others. In contrast, other organizations choose to take plenty approach to their outsourcing strategies by subcontracting many minor activities, and even some activities much closer to their core activities.
Through BPO, organizations are capable to emphasize on its core competencies without being stressed by the demands of bureaucratic limits (Kakabadse 2002, P.7). BPO has become a collective strategy for organizations that deliver all or part of business operation to an external service provider for the purpose of cost effectiveness and increased efficiency, strategic outsourcing can be seen as an organizational agreement that arises when organizations count on intermediate markets to supply specialized capabilities that are added to existing capabilities used along organization’s value chain (Holcomb and Hitt 2007, p.21). Nowadays many organizations give much attention on enhancing profitability and financial benefits of organizations that might be suddenly lower than initial expectations (McIvor, 2000, p. 9). Organization report problems over quality of the goods or services when outsourcing entire or a part of the value chain (Clegg, 2005, p. 29). Administrating the outsourcing relationship necessitates a new management expertise, decision making approaches, training and quality controls (Harland et al., 2005). For the long term, organizations may ruin their entire capacity, over the long term, firms may hollow out their overall capacity, fail to understand market shifts, and lose their capacity to meet fundamental changes in the organizations.
2.5.1 Core Activities
Core activities are transformative and necessitate innovative ideas (Agyemang et al, 2014, p. 11) They are fundamental defining activities of an organization, if the organization gave those activities to an external party, it would be engendering a competitor or harm itself. Those core activities are:
a) Strategic management: activities that are implemented at the highest managerial and involve important information about execution and evaluation of cross functional decisions that enable the organization to realize long-term goals.
b) Operations: Operations activities are those activities which convert inputs into final outputs, either goods or services. In most cases, business functions are classified as operations since they are related to the industry code of the establishment or the activities are most directly associated with that code. The specific function and the production of a good or the arrangement of a service.
c) Product or service development: Activities that are associated with bringing a new improved or redesigned product or services to market. Most of these activities are research, marketing analysis, design, and engineering activities.
2.5.2 Critical but non-core activities
Critical but non-core activities are routine working activities and can be completed faster, at lower cost and clients can depend on vendors to perform such activity (Jyoti, 2017, p. 21). They are the essential defining activities of an organization, if are not performed especially well, will place an organization at a competitive disadvantage or although create a risk. There are much company’s failures to manage their activities processes appropriately lead to product insufficiency and loss of market share. One example of critical but non-core activity for a producer is logistics, but it is a core activity for Transportation Company like procurement, logistics, and distribution. Those activities are linked with acquiring and storing inputs and shipping finished products to customers. Critical and non-core activities include also general management like accounting, managing finances, maintenance services, information system, human resources management etc (Jyoti, 2017, p. 38). Each company that is involved in outsourcing need to decide how many and which specific activities to outsource. This decision is based on the characteristics of core and non-core activities. As mentioned above Core activities are activities which determine the competitive benefit of the company. core activities are important for the companies in order to obtain high customer value and that is why it is evident that non-core activities should be outsourced. However, it is necessary to view the company’s capability to compete in performing the core activities and prepare a cost analysis (Odnokonnaya,2017, P. 13)
Figure1: core and non-core activities (Quinn, 1999, P.10)
Based on the information in Figure 1, the list of activities that the organizations should not outsource are:
1. Core activities which lead the company to gain the biggest profit.
2. Activities in which company is specialized an d has a good competence or expert system 3. Functions with high customer effect, because in case of outsourcing
company gives up a part of the control for customers’ feedbacks and has no possibility to reply or act fast.
4. Activities that are ineffective and directly cause various challenges for a company. It is better at the beginning to solve all problems in-house. 5, Activities that need specialized knowledge.
organization’s mission. Whether outsourcing or in-sourcing, the decision should be based on a stable business case analysis of possible choice.
2. 6 The Outsourcing Decision
Traditionally, most non-core activities in telecommunication sector have been performed in house-staff employed by the organization. Recently some of telecommunication companies have contracted out some of its services or activities to private service providers. Examples include outsourcing of human resource, marketing, security services and general maintenance (Schwarz 2009, p. 6). Outsourcing is a strategic management tool, and the decisions differ highly within the facility management world. Kakabadse and Kakabadse (2002, p. 82) observed that outsourcing cannot be observed as a new idea in management. Kakabadse further interpreted that the externalization of functions and services initially being performed in-house to outside providers do arise for many several motives and reasons in different agreements subject to the nature and culture of the organization.
According to Power, Desouza and Bonifazi (2006, p. 25), reasons why companies engage into outsourcing are, Cost savings; Focus on core activities; Access to resources and knowledge; Increased sophistication of Information Technology. Not to ignore cost reduction in telecommunications, higher level of digitalization and informatization and other cooperative tools. Equivalently, Brown and Wilson (2015, p.9) listed seven advantages of outsourcing: access to outstanding capabilities; allocation of resources for other objectives; reexamine problematic services or functions; enhance company focus; reduce operating costs; Minimize organization risk; and Gain access to resources not accessible internally. Furthermore, Dyer, Kale and Singh (2001, p. 31) tried to explain four benefits of strategic partnerships which are to improve knowledge management; increase external transparency; provide internal coordination; and facilitate responsibility.
For some organizations, the decision is a matter of costs and benefits, so whatever saves money is the best decision. Nonetheless, Gilley et al (2000, p.11) contended that outsourcing decision should be studied in light of the possibility of adding value and economic efficiency to organization’s services. Yang and Huang (2000, p. 94) on the other hand launch doubts on if outsourcing is economically efficient due to the presence of transaction costs. Liu and Scholnick (2011, p. 21) also explained that outsourcing management research emphasizing on core competences recognized the outsourcing as being pushed by the services role and position with recognition to an organization’s core assets, trait and abilities. Elmuti (2004, P. 15) describes outsourcing as an organizational transformation strategy that can create the opportunity for enhanced performance. It states that while many organizations have had big success in outsourcing others have also confronted serious challenges and defeats. Emphasizes on the success or failure of an outsourced decision was helped the organizations to making sure that they outsource the right business function or activity.
In manufacturing for-example when repair service and maintenance of equipment is performed internally, the organization has to maintain (stock) all the spare parts, provide training to the maintenance personnel and increase their knowledge on changing technologies regularly (Murthy & Eccleston, 2002, p.15). All these activities lead to the increase of operating costs therefore the need for outsourcing contract is to reduce the cost and useless time of material by utilizing efficient and effective maintenance strategies provided by the service provider which also enhance system and increases their lifetime, (Tseng et al,2009, p.26). Outsourcing brings about flexibility, organization are free to build up and justify resources, and be more innovative as it focuses on what it does best. The organization can enhance efficiency and reduce organization risks by making sure that the service provider follows rules of the service level arrangement.
Captivating the analysis about outsourcing as another step, researchers have conducted a study on various motivations for outsourcing and report in business case. The bottom line motivates many organizations to outsourcing with intentions of increasing profits or determining the best cost effective for make or buy solution (Ellram & Billington,2001, p. 8)A large number of studies have come to the conclusion that increase of profit is the key driver or the main reason for outsourcing decisions where organizations can reduce the use of assets, decrease operational cost and capital expenses, decrease costs on workforce of organization whose functions are outsourced (Jiang and Young 2007, p.37). Other organizations perceive outsourcing as a business strategy where they can put more effort on core competencies, influence complementary assets and enhance flexibility to answer to market changes (Luvison and Bendixen, 2010, p. 11). In conclusion, organizations report outsourcing as a strategy to enhance quality of goods or services in conditions where available staff, technology or systems are failing (Gewald, 2010, p. 43). Since outsourcing has become a popular strategy, Researchers, practitioners and governments have seriously investigated at its results. In the beginning, organizations focus on short-term benefit mostly when the organization miss effective decision framework to evaluate merits and demerits involved in outsourcing (Lonsdale, 1999, p. 71).
2. 7 Organizational Performance
A BPO service provider make a distinction itself from a conventional third-party application Service provider (ASP) by either establishing a new technology or using existing technology in a new way to enhance a business process. Business process outsourcing has evolved into a crucial component of organizational restructuring and business development initiatives (Saxena & Bharadwaj, 2009, p. 24). Organizations are looking beyond regular barriers of the organization to attain performance enhancements. Through BPO, organizations are capable to emphasize on its core competencies without being stressed by the demands of bureaucratic limits (Kakabadse, 2002 p.16). BPO has become a collective strategy for organizations that deliver all part of a business operation to an external service provider for the purpose of cost effectiveness and increase efficiency. Strategic outsourcing can be seen as an organizational agreement that arises when organizations count on intermediate markets to supply specialized capabilities that can add value to the organization productivity (Holcomb and Hitt 2007, p.21).
2.7.1 Indicators of Organizational Performance
Sink and Langley (1997) states that within modern business trends was a movement by many organizations to review their priorities and emphasize their resources on a limited number of chosen activities and operations. The result was a growing disposition by organizations to outsource selected operations including logistics activities. They bring together the organization performance dimensions into three categories: cost efficiency, productivity and profitability. The objective of these dimensions is to provide an overall aspect of the organization performance features at the moment of outsourcing.
2.7.1.1 Cost efficiency
Organizations should deal with outsourcing when it is believed that some functions can be done faster, cheaper, or better by an outside service provider (Barthelmy and Adsit, 2003).
Functions that are not core competencies of the organization are contestant for being contracted out. However, any skill or knowledge that permits an organization to serve its customer base better, that pact directly with the product or services it is upsetting to put out of the door, is one that must persist in-house. Cost efficiency remains the initial explanation for the improvement of outsourcing. Firms appraise outsourcing to regulate if recent operation costs can be decreased and if saved resources can be reinvested in operations that are more competitive Maudos et al (2002, P. 12).
Some researchers mention that outsourcing is the important source of cost reduction for organization to access economies of scale and the rare expertise that a wide outsourcing vendor can give, all of which in turn will serve to increase the organizational performance (Isaksson and Lantz, 2015, p. 9). A study by Jiang, Frazier & Prater (2006) detects that outsourcing agreements shift organizations' assets to a service provider that can convert fixed costs and operating expenses into variable costs. On the application side, outsourcing can reduce the engagement of fixed cost, human resource expenses and other overhead costs through arrangement that provide development of skills and knowledge on a needed basis.
outsourcing is a targerted 20% cost reduction, with actual savings coming from direct labor and variable costs.
b) Saving labor cost: According to Benson (1999, P. 11) outsourcing may provide a workable strategy if firms target to save on labor costs. A UK survey by Manpower emphasizing on the advances accumulating to firms from outsourcing services, found that 68 percent of firms outsource at least some services, the main reason being cost reduction. In support Klaas et al (2001, P. 52) also focused that outsourcing can be utilized to economize on production cost, in particular by substituting in-house production with acquiring of components. They also argued organizations that do everything themselves have much higher research development, marketing and delivery expenses, all of which must be passed on to customers. An outside provider’s cost structure and economy of scale can provide a firm a chance to be more competent.
c) Focusing human resources: According to Bettis, Bradley, and Hamel (1992, P. 18),
employing and training staff for short-term can be very costly, and interim employees don’t always meet your expectations. Outsourcing lets you emphasize on your human resources where you need them most. Linder (2004, P. 22) argued that most organizations simply can’t be able to match the in-house support services that big companies manage. Outsourcing can assist small firms act “big” by offering them access to the same economies of scale, energy, and expertise that large companies use.
d) Cost-effective: the fact that senior managers sometimes choose to assign outside firms
with critical tasks is, senior management usually finds outside firms to be more cost-effective. While middle managers often affirm that they can hire a person to do it cheaper and upper management view things in another way. They know they will generally pay at least less per hour to outsource, but they also perceive that the job will be done on time and in an anticipated form. If it is not, they can get somebody else without going through the difficulties or frustration of hiring and firing employees. The vision, function, and economics ride the need for outsourcing (Greee et al, 1999, P. 46)
e) Convert fixed cost to variable cost: The third financial reason for outsourcing is an
opportunity to convert fixed costs into variable costs. For example, a company may generate components for its service internally, but it is not needed to create those components routinely throughout the year, preferably few times annually. Those components may not be difficult in any way and could easily be sourced from outside. Even though the usage is occasional, retaining capacity causes costs throughout the year. Outsourcing is a one way to solve this problem. (Mc Carthy and Anagnostou, 2004, P. 37). By outsourcing service costs decline and investments in plant and equipment can be reduced (Gilley and Rasheed, 2000, P. 24). This reduced investment in service delivery capacity by lowering fixed costs and convert them into variable costs (Ibid; Kakabadse and Kakabadse, 2000). Converting fixed costs into variable have a direct impact on companies’ business implications, for example a return on assets (ROA) and a net profit can be enhanced (Kumar and Eickhoff, 2005, P. 83). However, Jiang, Frazier and Prater (2006) didn’t find sufficient evidence to
conclude that outsourcing have a positive impact on productivity of organization.
2.7.1.2 Productivity
accomplishing a given performance level (Fixler & Siegel, 1999, P. 105). Organization productivity is the ability of an organization, institution, or business to generate desired results with a minimum consumption of energy, time, money, personnel, and materials (Shields & Brown, 2015, P. 75)
According to Okeke-Ezeanyanwu (2017, P. 27) effect of outsourcing on productivity is to improve productivity, returns and capacity or quality for business production. Outsourcing is considered as a process to provide enhanced productivity. However, many organizations never get the full benefits of an outsourcing relationship with productivity. Relationship between outsourcing and productivity fail when is observed as short-term or tactical answer, rather than part of long-term strategic plans. The process of examining and/or implementing an outsourcing solution must be organized and fully documented to attain the desired result. To achieve a profitable outsourcing implementation, the organization must pass through different phases such as planning, analysis, Design, implementation, and operations phases. Yu and Lindsay (2011, p.21) declare that the decision to outsource can lead to increase productivity for businesses.
For outsourcing to be successful in increasing or improving productivity, the decision needs to be a primed one. Good, hard, detailed information in the hands of durable management can help to escape a costly step, one that is not easily reverse. Basically, immediate response times to strategic opportunities and threats are significant for outsourcing in any form in order to be successful in enhancing or increasing productivity (Fritsch and Wahrenburg, 2008, P. 3). The success rate of outsourcing strategies demands a discreet consideration of the components of a good outsourcing agreement which can help to prevent many of the significant risk determinants (Harward, 2013). Effective management of the outsourcing relationships is an organizational obligation. Görzig and Stephan (2002) utilized German data for a sample of big organizations to investigate the benefits of outsourcing. They revealed that companies that involve in outsourcing gain benefits, in terms of increasing returns per employee. The decision to outsource should determine the critical role of information and processes in organizations, involving the role that systems perform. If an entire function is to be outsourced, sufficient arrangement or plans should be made in the outsourcing contract to deal with recent and future concerns of the organization. Especial consideration should be given to the potential need for innovative solutions to be implemented by the outsourcer, and to the timing of these actions. Contrary to the mentioned authors above, it has been proved that successful implementation of an outsourcing strategy has been credited with assisting or facilitating to increase capacity, enhancing quality of services and improving management of resources (Elmuti, 2003, P. 19).
According to Quinn and Hilmer (1994, P.13), every business has limited resources, and every manager has limited time and attention. Outsourcing can help your business to exchange its attention from minor activities toward work that meet the customer needs, and it can assist managers to discover their priorities more clearly and specifically by enhancing the use of their resources. According to Elmuti (2003, 34), personnel expenses and customer, satisfaction were the primary motive behind outsourcing; however, it also to maintain the required infrastructure and have flexible services to meet markets demands, various studies tried to explain the relationship between productivity and outsourcing.
service-based economies provide many opportunities for organizations to increase profits through outsourcing (Quinn, 1999, p.24). When outsourcing is performed correctly, it can boost profitability.
2.7.1.3 Profitability
Profitability is associate to the proficiency of a company or industry at generating earnings (Adu-Gyamfi, 2015, P.9). It is the amount of output per unit of input (labor, equipment and capital) or the capability of a firm to generate net income or a measure that demonstrates how well an organization is performing in terms of its ability to generate profit. Commonly profitability is the capability to earn a profit. The calculation or computation of profitability is equal to Gross Profit/Net Sales*100 both terms of the equation come from the company’s income statement.
According to Görg and Hanley (2004, p.114) effect of outsourcing on profitability are value enhancing, increase of competition such as a use of a new technology and profitability margin. An essential question to ask is whether outsourcing is value enhancing or in particular whether the firm that begins outsourcing represents higher profitability as a result. Fundamentally, this question renders down to the transactions cost question generally posed: should an organization generate its own inputs by some model of takeover/merger or should it explore to get possibly more competitively priced inputs on the open market? To the best of some researcher’s knowledge there are only a very limited number of accurate statistical or econometric studies viewing or searching at this issue. The evidence has been generated in different papers, however, Chaffey (2008, p. 31) suggests that the value-enhancing link between outsourcing and profitability is not clearly determined or explained. Particularly, Marjit and Mukherjee (2008, P.12) did not show any evidence that outsourcing lead to higher profits in Japanese service firms. Distinction between outsourcing of services and non-services inputs, Gorzing and Stephan (2002, p.13) found that outsourcing of materials is positively correlated with profits, while there is a negative relationship between profitability and outsourced services for a sample of German service organizations. Currently, organizations are forced to look for new ways to generate value due to the increase of competition. Today’s world has embraced the strategy of outsourcing and companies have adopted its principles to help them to extend into other markets (Quinn ,2000, P. 5).
2.8 Conceptual Model and Hypothesis
2.8.1 Hypothesis Development
HO1: There is no significant difference in cost efficiency between organizations.
H11: There is a significant difference in cost efficiency between organizations.
HO2: There is no significant difference in productivity between organizations.
H12: There is a significant difference in productivity between organizations.
HO3: There is no significant difference in profitability between organizations.
H13: There is a significant difference in profitability between organizations.
H04: There is no significant relationship between cost efficiency and productivity
H14: There is a significant relationship between cost efficiency and productivity
H05: There is no significant relationship between productivity and profitability
CHAPTER 3 METHODOLOGY
The aim of this chapter is to present and explain the process chosen by the researcher to conduct this study. The logic behind selection of a particular methods and design are discussed in detail. The chapter starts with the pre-conceptions of the author and choice of the topic. Then the research philosophy, research approaches, research strategy and design are presented. The last section of the chapter is followed by the questionnaire guideline, sampling technique, sample design, company selection, the measurement techniques data analysis, ethical considerations and sources of criticism.
3.1 Pre-conceptions
The preconceptions of a researcher generally affect research work. Author’s prior knowledge, experience, behavior, and attitude have an effect on how the researcher think and interpret the things. Similarly, I believe that my prior knowledge and experience will affect my research. I am a business student and studied different business courses in my academic life. I have gone through different management theories, literature, and models which helped me in this study. I have one year of experience in service industry and I worked on different projects related to outsourcing which helped me in this research. I have an exposure of different behavior and views about outsourcing strategy as I was dealing with service providers, I used to evaluate their performance and its effect to the company services. I believe that experienced learning is more long enduring compared to academic learning. Overall, I think that my academic and practical learning has played a significant role in completing this study.
3.2 Choice of Study
My main field is business administration but with a specialization in Finance. This fact gave me a great opportunity to explore and share my ideas on different aspects of management. When I decided to search for a subject that has a potential to create and maintain the interest of many people, I remembered the discussion I used to have with my colleague at my prior work concerning why do we outsource as a company, why not the company can’t hire people to perform services internally. We always had such debate because sometimes our service provider was not able to perform services on time even sometimes the services weren’t executed in a proper way. After remembering that I started reviewing the articles that developed my intention to study about outsourcing strategy from the perspectives of organization performance. I found literatures on both variables and I realized that outsourcing and performance are very broad topics. Already a lot of research has been done on each issue independently and also combined in different perspectives.
