Outsourcing: Lessons from the Literature

Abstract

In recent years the use of outsourcing in Australia has increased in both the public and private sectors. This article examines the reasons, effects and implications associated with the outsourcing decision. The literature explores the reasons for outsourcing that range from those based on costs to those based on competitive advantage, labour market flexibility and self-interest of decision makers. The relevant literature also highlights the controversy surrounding the effects of outsourcing. The discussion also examines outsourcing's effect on industrial relations and human resource areas, such as labour market flexibility, morale, turnover, absenteeism and safety, as well as the measurement of contract performance, management control and accountability issues. It argues that human resource implications must be examined in addition to those based on economic criteria and that systems, which measure the effects of outsourcing against objectives, need to be introduced. The paper concludes that further research is needed in areas of workforce management that explore the complete consequences of such organisational restructuring.