Outsourcing as a Strategic Tool for Organizational Sustainability
CHAPTER ONE
Objectives Of The Study
The general objective of this study is to examine the Outsourcing as a strategic tool for organizational sustainability. The specific objectives of the study are to:
(i) Examine the relationship between outsourcing strategy and job performance.
(ii) Determine the influence of workers welfare, employment status and benefits on job performance.
(iii) Explore the implications of outsourcing strategy and job performance in the banking industry.
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter presents the literature review. First a review of theories is presented highlighting on the theories on outsourcing. Secondly, a review of empirical studies that shows the relationship between outsourcing and operations performance of commercial banks and the conceptual argument. The summary and conclusion on the literature reviewed is also indicated as well as the research gap therein.
Theoretical Review
Outsourcing consists of different activities and each phenomenon can be described by several frameworks that are embedded in various theoretical approaches. Much of the studies on outsourcing have been affected by three approaches: Resource-Based View, Core Competency Approach, and Transaction Cost Theory.
Resource-based View
The core premise of the resource-based view is that resources and capabilities can vary significantly across firms, and that these differences can be stable (Barney and Hesterly, 1996). If resources and capabilities of a firm are mixed and deployed in a proper way they can create competitive advantage for the firm. The resource-based view in outsourcing builds from a proposition that an organization that lacks valuable, rare, inimitable and organized resources and capabilities, shall seek for an external provider in order to overcome that weakness. Therefore the most prominent use of the theory is in the Preparation phase of the outsourcing process for defining the decision making framework and in the vendor selection phase for selecting an appropriate vendor. The theory has been also used to explain some of the key issues of the managing relationship and reconsideration phases.
The resource-based view in outsourcing builds from a proposition that an organization that lacks valuable, rare, inimitable and organized resources and capabilities, shall seek for an external provider in order to overcome that weakness (Penrose E, 1959; Henry A, 2008). According to Perunović and Pedersen, the most prominent use of the resource-based theory in outsourcing process is the preparation phase for defining the decision making framework and in the vendor selection phase for selecting an appropriate vendor (Perunović Z, 2007). Organizations will plug gaps in resources and capabilities in the most cost-effective manner to maintain a distinctive product and its competitive advantage (Urquhart C, 2002).
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This section gives a detailed analysis of the research design, target population, sampling technique, data collection instruments and procedures and data analysis.
Research Design
A descriptive survey design will be used for this study. With such a study, information will be obtained to meet the underlying purposes and objectives of the study. Descriptive survey will be useful in investigating the existing relationships among the variables that will be captured in this study.
CHAPTER FOUR
ANALYSIS, RESULTS AND DISCUSSION
Introduction
This chapter comprised of data analysis, findings and interpretation. Results were presented in tables and diagrams. The analyzed data was arranged under themes that reflected the research objectives.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Introduction
This chapter addresses the summary of the findings, the conclusions and the recommendations.
Summary of Findings
This section provides a summary of the findings from the analysis. This is done in line with the objectives of the study.
IT Outsourcing
The findings revealed that IT outsourcing has a positive and significant effect on the operational performance of banks. This is also supported by the statements in the questionnaire which majority of the respondents agreed.
This findings agree with that of Bahli and Rivard, (2005) who argued that the decision to outsource IT-related activities, be they operational, system development, or business process activities, has three main objectives: to reduce costs, to improve service quality, and to place greater focus on core business activities. Traditionally, firms managed their IT infrastructure through their in-house IS organizations under what is termed “in sourcing.” The outsourcing of information technology (IT) has recently emerged as an important phenomenon that is accompanied by profound implications for the shape of the new information systems (IS) organization.
System Outsourcing
The findings showed that system outsourcing has a positive and significant effect on the operational performance of banks. This is also supported by the statements in the questionnaire which majority of the respondents agreed.
This is consistent with that of Masella, & Rangone, (2000) who argued that current information technology is capable of handling the most demanding customer requirements. When desired, order information can be exchanged between trading partners. The benefit of fast Information Flow is directly related to work balancing. It makes little sense for a bank to accumulate orders at a local branch for a week, mail them to head office, process the orders in a batch, and return them to branch to achieve fast delivery. Internet communication of orders direct from the customer, combined with slower, less costly surface transportation, may achieve even faster and more constant delivery service at a lower total cost. The key objective is to balance components of the logistical system.
Application Outsourcing
The findings indicated that application outsourcing has a positive but insignificant effect on the operational performance of banks. This is also supported by the statements in the questionnaire which majority of the respondents agreed.
This finding agrees with that of Gupta, Gupta 1992, Gonzalez, Gasco & Llopis (2010) who argues that applications outsourcing enable commercial banking institutions to achieve greater transparency and efficiency of their infrastructure and business processes, which facilitates the achievement of their strategic operational goals. It gives banks the opportunities to access to world class skills, realize fast project start-up and borrow best examples in the banking industry. All of these translate into lower costs and higher quality, which increase the competitiveness of banks.
Conclusion
Based on the findings, the study concluded that IT outsourcing, system outsourcing, and business process outsourcing have a positive and a significant effect on operational performance of banks. Applications outsourcing has a positive but insignificant effect on operational performance of banks.
The study concluded that outsourcing is a critical element of organizational strategy, as a powerful vehicle to reduce costs and improve performance. There is no doubt that the rapid change will affect today’s business world, in other words it will revolutionize the traditional business and job paradigms. This volatile and changing atmosphere compels commercial banks to adapt their structures and strategies to a greater degree than they used to do. Nowadays, organizations trend to become small core big network forms. Thus, companies choose a limited number of tasks to do and entrust the rest of their tasks to an outside supplier. Therefore, the significance of outsourcing and its key role in illustrating network center organizations is clear.
Recommendations
Based on the findings and conclusion above, the commercial Banks need to gain ability to meet increasing needs through reducing costs and increasing flexibility in delivering services and outsourcing is one of the important ways to reach these goals.
A firm should consider its customer needs when executing outsourcing practices in order to meet their expectations; this cannot be achieved without top management support. The management should allocate resources necessary for management practices through employee training and managing of relationships with its partners and customers. Communication is an essential component in operations management practices process since it ensures an effective response to customers’ service problems to meet the needs of the customers.
REFERENCES
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