Managing core outsourcing to address fast market growth: a study of an Indian mobile telecom service provider

Abstract

The strategic management literature defines outsourcing as

a fundamental strategic decision to reject the internalization of an activity. This means that outsourcing can arise in two ways. First, it may involve the substitution of market transactions for internal activities. This occurs when an organization ceases performing an activity in-house and shifts it to an outside supplier. Second, outsourcing may arise through abstention. That is, a firm may decide never to engage in a given activity and thus abstain from it altogether, even though it is well within the firm's managerial, technical, and financial capacity to do so.

(Gilley, Rasheed and Shammari, 2006) Among the various benefits associated with outsourcing, locating activities where they function more efficiently and effectively with the right balance of cost, flexibility, and risk is often cited as the most salient outcome (Kelly and Poole, 2006; Linder, 2004).

While there have been a large number of studies on the outsourcing of functional activity, more specifically on peripheral outsourcing (the outsourcing of non core activities), little is known about core outsourcing, that is the outsourcing of strategically relevant, core activities and the internal capabilities that an organization must develop to parlay core outsourcing into an improved market position. This gap is egregious because unless the link between core outsourcing, governance process, and competitive advantage is clearly established, organizations may not be able to deliver intended outcomes through core outsourcing.