Flexibility Maneuvers in Outsourcing: An Empirical Assessment

In recent years, outsourcing has gained considerable management attention. However, the benefits of outsourcing are not without concessions. One major risk is losing the flexibility to change the extent, nature, or scope of the outsourced business services. Tan and Sia (2006) conceptualized outsourcing flexibility as robustness, modifiability, new capability, and ease of exit, and proposed a portfolio of pre-emptive, protective, exploitive, and corrective maneuvers to manage flexibility in outsourcing. In this paper, we seek to develop empirical insights on their proposed framework by operationalizing the conceptual constructs and carrying these propositions into empirical validation. A survey of 171 outsourcing projects in Singapore was conducted. The findings bear evidence of the importance of flexibility in outsourcing, given its strong association with outsourcing success. The results also suggest a need for organizations to be clear about their desired flexibility profiles as different flexibility maneuvers contribute differently to different dimensions of outsourcing flexibility. The findings also indicate the relative effectiveness between traditional contractual provision and the various flexibility maneuvers for robustness, modifiability, new capability, and ease of exit. We hope the deeper understanding will not only contribute to the effectiveness of outsourcing management but also spawn a new research agenda on outsourcing flexibility.