Outsourcing strategies of the security sector through acquisition procedures

Purpose – The aim of this research is to reveal the security‐related outsourcing strategies of the public sector and the military and the relevant logistics outcomes by examining buying tactics. Design/methodology/approach – A tentative model was devised from theoretical literature of how buyers use their negotiating power and relationships to achieve improved service quality and/or unit‐cost reductions. The model was tested using survey data from 149 respondents from the Finnish Defence Forces, and the public sector and industrial firms in Finland via structural equation modelling analysis. Findings – Contrary to the approach of classic economics, where negotiating power correlates with direct costs, the findings indicate that negotiating power and relationships do not affect direct costs in the public sector and military contexts, but rather that negotiating power and relationships correlate with an improved service level, which consequently decreases the indirect logistics costs. Research limitations/implications – By focusing on improvement in services in terms of their logistics service purchasing, the buyers reveal that their outsourcing strategy involves vertical outsourcing. The data are collected from one country, which may cause bias. Further studies would be required to test this research proposal in other countries. Practical implications – To obtain cost reductions, buyers of logistics services could learn from the public sector and the military on how to use negotiating power and relationships to obtain better service instead of short‐term cost reductions, as better service correlates with reduced costs in the long run. Originality/value – This study is important to practitioners as well as academics since there is little quantitative research available regarding strategic outsourcing modes and outcomes of adopting different modes.