Uncovering the strengths and weaknesses of outsourcing core business deliverables: the case of selected state-owned enterprises in South Africa

Abstract

Background: The outsourcing phenomenon is one of the extensive areas of business in the world. It is a practice among both private and public organisations and an important element in business strategy. Consequently, the execution of maintenance and repairs of equipment are core business deliverables of the power plant maintenance (PPM) department of the selected state-owned enterprise (SOE). Whilst internal employees normally perform such functions, the PPM department outsources them to external service providers. Objective: This study explored the contributing factors influencing outsourcing of core business deliverables. Method: The study was conducted in the PPM department of the selected SOE. Of the 152 individuals located across eight of the provinces in South Africa, identified for participation in the study, 135 participated. It was cross-sectional in nature and included participants from the management of the PPM department as well as its technical officials. Descriptive, correlation and regression analysis were used to test the three objectives, namely to assess the contributing factors influencing outsourcing of core business deliverables, to establish the effect of outsourcing core business deliverables on business performance and to examine the risks of outsourcing core business deliverables. Results: Outsourcing core business deliverables provide flexibility to the PPM department by enabling it to meet unexpected demands. However, it results in the leaking of confidential information to external service providers. Conclusion: Organisations that decide to outsource, must consider the benefits and risks carefully and take measures to mitigate the related risks.