Outsourcing is theorized to promote reform or improvement of service quality. The logic of it is the same as the logic of the market: When a contractor's work is dependent on satisfying the customer, the contractor is more likely to perform in ways that will meet customers' needs (Dubberly, Ronald A. 1998a).
“Outsourcing has reached the highest level of the manufacturing supply chain: R&D. By outsourcing R&D offshore, original equipment manufacturers (OEMs) can freeze a portion of their R&D budgets while growing their product offerings. Even R&D powerhouses such as IBM, HP and Motorola have frozen—or even reduced—their R&D budgets since 2000. "[Outsourcing] is a tremendous opportunity for cost savings on R&D," says Jack Faber, vice president of operations, enterprise systems for HP”. http://www.cio.com/archive/011505/outsourcing.html
Improvements of this type are most likely to occur when the outsourcing situation sets in place multiple service providers from which citizens or consumers can choose. The production of quality improvements may be the most controversial of the supposed benefits of service outsourcing. This is the case because while quality can be easy to define in some service areas such as road building, automotive maintenance, or water treatment, it is much more difficult to define in areas such as health and human services, design and planning services, and education. Measuring quality and performance in these areas tends to be both difficult and expensive. Hence, if quality performance measures are included in a service contract, the cost of outsourcing will typically rise. Moreover, in the human services, performance on outcome objectives is typically dependent on the work of several independent agencies. As such, private contractors are typically either unwilling to contract for performance or, if they mistakenly do so, will often fail to meet the contracted goal. Also, the degree to which outsourcing leads to.......
