Industry insight
Discussion and conclusion
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Week 5 framework
7. Discussion and conclusion
That outsourcing can benefit firms in myriad ways is well argued. Some of the key advantages that firms target through outsourcing are lower costs, access to superior capabilities and innovation of specialized suppliers; in the process, freeing up of firms resources for better focus on its core competencies which provide it sustained competitive advantage. Recognizing that the identification of core-competencies is a 243 Framework for performing outsourcing capability tricky task ( Boguslauskas and Kvedaraviciene, 2009 ; Quinn and Hilmer, 1994 ), literature is understandably replete with scholars cautioning firms to be careful not to outsource key elements of its core-competencies. Significantly, Hendry (1995) emphasizes that when indulging in outsourcing its processes, firms are ignoring the power of collective learning ( Prahalad and Hamel, 1990 ) and the value of informal information, communication and coordination which happens within the boundaries of the firm leads to unique competencies. Non-core as defined today and designated for outsourcing might be having synergies and tacit interdependencies with the core even today with the linkages unknown to the focal firm itself ( Bryce and Useem, 1998 ), leading to loss in value when outsourced. Furthermore, what is core and peripheral is a matter of current definition which might not stand the scrutiny of time especially in domains where the pace of change is high ( Bryce and Useem, 1998 ) and some argue that it is but an academic debate ( Kakabadse and Kakabadse, 2005 ). Thus, even when firms are supposedly outsourcing non-core processes, it is not unreasonable to contend that with the supposed non-core, chunks of elements that would be contributing to the current core in a causally ambiguous and socially complex manner ( Barney, 1991 ) unknown ex ante to the focal firm are being taken out of the firm boundaries and so are the potential contributors to future core competencies. In addition, the attachment that the suppliers’ employees would have for the well-being of the focal firm is not cot comparable to what employees feel for their own firms. Organizations are distinct boundaries within which the desire to belong is very high and the natural instinct for the employees is to want their group to benefit more than other groups ( Kogut and Zander, 1996 ). When outsourcing a process, the organization invariably chips away at this element as also the collective binding force of the organization, its informal communication and coordination capabilities ( Hendry, 1995 ; Kogut and Zander, 1996 ). It is with this understanding of the indeterminacy of what contributes to the core competency now and in the future, as well as the implicit effects of non-core on the core, that I propose the intensity of connectivity (product of number of connections and the depth of those connections) that a process which is being considered for outsourcing has with other processes in the organization as a key factor to be considered when drawing up the management strategy for the outsourcing of the process. The other factor being considered for arriving at effective management strategy for the outsourced process is the rate at which innovation is being fostered (for the focal process) by potential suppliers, over and above the focal firm’s rate of improvements. This factor indicates the extent of opportunity that the market is offering to the focal firm for outsourcing a Download 329.89 Kb. Do'stlaringiz bilan baham: |
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