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Lazaro Mederos

DBA Graduate - 2018

Thesis title

Why are companies beginning to backsource? A look into the evolution of the outsourcing industry.


Vassili Joannides
Purpose The purpose of this research is to understand why some companies are beginning to backsource given the proven benefits that outsourcing provides. We initially aimed at confirming that backsourcing was indeed taking place, in order to further develop a management applicable model based on grounded theory that helps organizations optimize the insource/outsource ratio. Design/methodology/approach The research includes a pilot study that uncovers the backsourcing phenomenality and provides validity which justified moving forward through case studies. We aimed at understanding the perspective of the case study participants through qualitative research. This inductive research is anchored on six cases with the data collected through interview questionnaires that ultimately allowed for two models to be created grounded on Transactional Cost Economics Theory, Theory of Core Competency, and Stakeholder Theory. Findings Independent of business sector, some large multinationals are changing their outsourcing strategies away from the traditional outsourcing models. Some airline companies are moving forward on a traditional outsourcing approach and the retail industry is mainly backsourcing. Some other companies have implemented a hybrid diversified outsourcing strategy. But formal model to optimize the balance outsourcing/insourcing was identified, leading us to develop a decision tool.Research limitations/implications The main managerial limitation is that there is no proprietary software developed as a part of the models. Pending further testing of future research, this limitation could essentially be turned into a business venture to aid in outsourcing decisions. Future testing and research could lead to the creation of a business. The main academic limitation is the lack of results implementation of our LWM model on various companies’ sourcing dilemma. Future research should focus on a software implementation of the model, and its applications to various companies of different business sectors. Additionally, it would be interesting for future research to focus solely on outsourcers to see how they are reacting to industry changes.Practical implications The research provides three practical implications for managers and organizations through first providing an awareness of various backsourcing solutions. Secondly, it highlights that backsourcing strategies are not sector homogenous, and ultimately providing two new decision support models for organizations interested in outsourcing. Originality/value We developed two complementary backsourcing models easily applicable to management based on grounded theory. The first model, the Mederos Outsourcing Model is designed to serve as a guide for aligning organizational maturity level with tactical versus strategic outsourcing intentions. The Lazarus Weighted Model is the second original model which addresses the current gap in the academic literature and managerial practice lacking relevant outsourcing decision support tools.Keywords Backsourcing, insourcing, re-insourcing, outsourcing strategy, subcontracting