Drivers and obstacles of outsourcing practices in China

PURPOSE - To explore the key factors that motivate organizations in China to outsource and the obstacles these companies are facing in comparison with the situation in Western developed countries. DESIGN/METHODOLOGY/APPROACH - A case study approach was adopted with primary data collected through in-depth interviews with six companies in China and secondary data aggregated from company reports and documents. Research findings were analyzed within and across all case studies to identify key drivers and obstacles of outsourcing. FINDINGS - Economic factor is a strong motivation for outsourcing in China, of which cost reduction, cost saving, and capital investment reduction are the main concerns. Strategic considerations, such as the use of outsourcing to accelerate re-engineering benefits, to focus on core competence, to increase flexibility, and to facilitate market penetration, are identified. Environmental factors like information technology (IT) development and capability of supplier can influence organizations' decisions to outsource. Meanwhile, companies in China have encountered obstacles and problems in the outsourcing process. They include the lack of capable service providers, loss of control, poor transportation and IT infrastructure, presence of local protection regulations, and lack of overall post-outsourcing measurement. ORIGINALITY/VALUE - This paper presents a systematic exploration of the drivers and the obstacles of outsourcing in China and provides a framework that may guide business organizations to make better outsourcing decisions. It may assist organizations to clearly define their expectations, develop strategic outsourcing plans, and make appropriate decisions to achieve outsourcing objectives.