Previously, the strategic outsourcing process was defined in this article followed by a thorough illustration of the decision-making process itself in this article. This article will continue that discussion by illustrating the main difficulties that might extend the time and efforts needed to finish the process, or even the barriers that can make it impossible.
A summary for these difficulties and barriers are presented below.
Strategic Outsourcing Difficulties
- Internal difficulties in the outsourcing decision process itself, which are coming from failing to implement the steps that were summarized in the previous article. For example:
- The outsourcing process may take longer time, efforts and even may become less effective if the right team is not formulated, and the strategic importance of the outsourcing process is not clarified with a proper mission and objectives.
- Selecting the wrong decision framework or model. As highlighted before, a combination of models and frameworks is recommended to reduce the decision errors.
- Not following the make or buy decision with proper steps to select the right vendor, managing the supplier’s relationship and controlling the outsourcing process.
- External difficulties when it is difficult to outsource a certain aspect of the company due to unavailability of competent suppliers (Christopher 2013) or when there is a difficulty to find such suppliers at a reasonable cost and quality (Stentoft et al. 2015; Nunes 2016).
Strategic Outsourcing Barriers
- Country size, for example, a large country like Brazil can provide enough local providers, hence reducing the possibility of outsourcing from external parties from outside the country (Barreto and Rocha (2003) in Nunes 2016).
- Language barrier when the outsourced company is in a different country (Christopher 2013; Stentoft et al. 2015; Nunes 2016), as a result, communication might be difficult and information sharing might be misunderstood or even expensive to settle any conflict down (Vagadia 2012, p.199).
- Cultural barrier where people can apply different interpretations based on their local culture, beliefs and values (Nunes 2016). As a result, business objectives might not be fulfilled as intended (Vagadia 2012, p.199).
- Time difference where the two companies are located into widely separated time zones (Christopher 2013). This can be solved by providing the option for a 24 hours coverage, but it still can be a barrier when there is a need for face to face communication (Vagadia 2012, p.199; Dettmer 2013).
- Local policies which might restrict the employment to local employees only (Bandyopadhyay et al. 2014) or might not provide the needed support in terms of infrastructure (Barreto and Rocha (2003) in Nunes 2016) and investment facilitation (Vagadia 2012, p.199).
Conclusions and Recommendations
According to the above points, it is recommended to follow a structured outsourcing decision process, set the right expectations as early as possible, in addition to proving a detailed plan on how to manage each of the previous difficulties and barriers. Effective management for such difficulties and barrier may incorporate extra costs; therefore, the total cost of ownership and the total cost of the supply chain are critical aspects to be examined as part of the outsourcing process.
Moreover, the rapid technological advancement in the business environment is not mentioned as a difficulty or a barrier. Most researchers recommended that technology facilitated the outsourcing process in terms of communication and information sharing. However, more research is needed to link the negative impact of this technology, such as the social media, on increasing the barriers and difficulties related to outsourcing in certain areas like cloud outsourcing and cloud computing.
Finally, the research in this area should be examined further to understand whether these difficulties and barriers are the same in different countries, industries and different companies’ sizes.
Bandyopadhyay, S., Marjit, S. & Yang, L., 2014. International oligopoly, barriers to outsourcing and domestic employment. The Canadian Journal of Economics, 47(4), p.1372.
Christopher, N., 2013. when should a Small Business. PC World, 31(3), p.29030.
Dettmer, B., 2013. International Service Transactions: Is Time a Trade Barrier in a Connected World? International Economic Journal, 28(2), pp.225–254.
Nunes, M.P., 2016. Motivations, Risks, Barriers, and Results Associated with the Adoption of Global Sourcing by Brazilian Companies: a Case-Based Study. Brazilian Business Review (English Edition), 13(2), pp.135–157.
Stentoft, J., Mikkelsen, O.S. & Johnsen, T.E., 2015. Going local: A trend towards insourcing of production? Supply Chain Forum: an International Journal, 16(1), pp.2–13.
Vagadia, B., 2012. Strategic Outsourcing: the alchemy to business transformation in a globally converged world 1st ed., London: Springer.