Oficina d’Estudis Jurídics de la Mancomunitat de Catalunya

In this section, the literature on application areas for outsourcing and the difficulties of managing outsourcing relationships are discussed. Since the publication of seminal FM studies in recent decades, researchers have initiated a number of significant investigations into outsourcing relationships. Clients often cannot understand the unsatisfactory performance of the service providers in a specific FM outsourcing contract. The research rationale is to test a possible causal link between FM outsourcing relationship types and outsourcing performance, indicating that the existing knowledge of service provider performance management remains inadequate and under-developed.

Key application areas

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subject areas (Boer, Gaytan, and Arroyo, 2006). Some evaluations of outsourcing, favourable (e.g. Sharpe, 1997) and unfavourable (e.g. Stein, 1997), are founded on “ideology” and management “fashion” (Hendry, 1995; Alexander and Young, 1996). The strategic management and purchasing and supply literatures focus on the outsourcing process (McFarlan and Nolan, 1995; Krause et al., 1998; Gunasekaran and Ngai, 2005). Examples of these strands of literature include transaction cost economics (e.g. Williamson, 1975), the resource-based view (e.g. Richardson, 1972), strategic management (e.g. Quinn and Hilmer, 1994), sustaining competitive advantage (e.g. Barney, 1991, 1997) and evolutionary economics (e.g. Mahnke, 2001). Furthermore, in the literature on specific functional or technical areas, outsourcing has become an established theme (Boer, Gaytan, and Arroyo, 2006). Examples can be found in the literature on ICT (e.g. Grover et al., 1994; Kakabadse and Kakabadse, 2000), human resource (HR) management (e.g. Lever, 1997) and logistics (e.g. Andersson and Norrman, 2002; Rabinovich et al., 1999; Boyson et al., 1999; Bolumole, 2001). In-depth studies have been proposed to explore economic and financial aspects, with great attention paid to cost analysis, especially concerning hidden costs and moral hazards (Kippenberger, 1997a, b; Fill and Visser, 2000). Harland et al. (2005) observe that research on outsourcing has focused on particular support services, notably FM, logistics and IT provision. Generally speaking, outsourcing is becoming less extraordinary in business environments.

a) Neglect of outsourcing relationships

Given the vast amount of literature dedicated to outsourcing and its undisputed economic significance, it is somewhat surprising that the number of practical, prescriptive contributions remains relatively small (McIvor, 2000). The bulk of the

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literature seems to focus on the reasons for outsourcing, its pros and cons, critical success factors and which activities are primarily outsourced in certain industries (Lieb and Randall, 1996; Boyson et al., 1999). Processual studies of outsourcing are rare (Marshall et al., 2004), and despite its large diffusion through business cases and electronic or paper documentation, there is a need for a structured procedure to govern the evolution of a generic outsourcing process (Fagan, 1991; Finizio et al., 2001; Kakabadse and Kakabadse, 2000; Lonsdale and Cox, 2000; Van Mieghem, 1999).

b) Poor risk management in outsourcing relationships

Outsourcing relationship management problems are perceived from a strategic vantage that emphasises the risks and advantages that can arise from the practice of outsourcing to highlight the importance of contract management (Graham, 1993; Lonsdale, 1999; McIvor, 2000; Udo, 2000; Zhu et al., 2001). The organisational and methodological aspects have been treated in most cases (White and James, 1998; Embleton and Wright, 1998; Hines and Rich, 1998; May, 1998; Udo, 2000). Nevertheless, risk management in outsourcing relationships is still lacking. Harland et al. (2005) observe that there is little research evidence to assess whether outsourcing is a mechanism for failing to solve internal problems, moving risk out of the firm, or exploring the mixed insourcing and outsourcing models. A more holistic view of outsourcing is needed, one that links local and organisational issues with sector-level actions through a conceptual framework for outsourcing.

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An overall lack of skills and expertise exists among organisations that must master strategic and collaborative relationship management (Harland et al., 2005). Lonsdale (1999) and Cox (1996) highlight this deficiency while Marshall (2001) reveals the significant shortage of management approaches.

d) Inefficient practices and processes in FM services

Imbalances in the allocation of FM resources creates waste. Two main problems are highlighted in the literature. The first involves negligence. Krumm et al. (1998) point to the absence of a substantial body of empirical research into the link between FM’s knowledge of resources and their practices and processes. This link remains unclear. Organisations lack the internal data or tools to effectively collect the data required to align the real estate strategy with the overall business objectives (Acoba and Foster, 2003). Furthermore, Nutt (2000) discovers that facility design and management knowledge is undeveloped. The interface between FM knowledge and facility design knowledge at the strategic level must be addressed, and it is vital that the effect of management on design, and that of design on management, be fully understood. The existing conceptual models of FM practices and processes do not include a structural method. The procedures also lack decision criteria for positioning FM in different circumstances (Barrett, 2000; Chotipanich, 2004; Krumm et. al., 1998).

The second issue deals with communicative obstacles. FM practice can only be effectively implemented through close interactions between the FM function and the operational and strategic levels. However, communication between senior management clients and FM practice groups may be obstructed (Acoba and

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Foster, 2003; Barrett, 2000). Thus, the outsourcing services might operate in a handicapped manner due to the lack of an efficient two-way channel. This may lead to discrepancies between the expected and actual performance of FM service providers in the outsourcing process due to unclear client guidance. For instance, Krumm et al. (1996) note that organisations may internally meet novel hardships in the corporate alignment process. When decentralisation cannot be solved, such communication gaps will inevitably be discovered.