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Keywords Outsourcing, Australia, Partnership, Business planning
Abstract This paper reports on data pertaining to outsourcing collected from a survey administered in 2002 in Australia. The underlying assumption was that outsourcing is becoming popular for sound business reasons such as economies of scale and enabling executives to concentrate on core business activities. This paper explores the outsourcing decision (to outsource, not to outsource, or to discontinue outsourcing), especially reasons for (not) outsourcing. Most of the reasons have been anticipated in the literature. The strongest group of reasons (termed "Operational") pertained to cost savings and improving performance, but outsourcing is also used to access skills and resources not available in-house. The most important impediment to outsourcing was ascertaining relevant costs, and formulating and quantifying requirements. We describe the methodology, report findings and allude to future research.
Outsourcing is a fashionable way of solving some business problems and there are numerous reports of its increasing use. Initially used primarily for information technology (IT), a wide variety of business process is now outsourced. The use of outsourcing is becoming more sophisticated; more organizations are outsourcing responsibility for business processes.
Lonsdale and Cox (2000, p. 450) note the difficulty of assessing the size of the outsourcing market, but nevertheless report its expansion. Casale (2000) reports that the United States market for all forms of outsourcing grew from about US $295B to US $340B between 1999 and 2000 (20 percent pertained to IT) and that small companies' use of outsourcing increased by 25 percent. Other authors estimating growth include: Behara et al. (1995, pp. 46-7), Casale (2001, pp. 2-3), and Strassmann (1997).
Robertson (2001) opines that "Revenue from the Australian [IT] outsourcing market was $A1.3B in 1997, and [is forecast] to be $A5.3B in 2004, or an average growth rate of 16 percent". Macrae (2002, pp. 45-6) reports forecasts of global outsourcing growth of 20 percent per annum; the Pacific Rim outsourcing market being $A51B in 2005; and the Australian IT outsourcing market being $A5.1B in 2005 (a growth rate of 12 percent).
Theoretical context
Lonsdale and Cox (2000, pp. 445-9) aptly summarize the history of outsourcing, noting that it is some kind of substitute for the once fashionable enthusiasms for conglomeration, horizontal integration, vertical integration, and internal integration. They...