Assessment of outsourcing practice and its effect on institutional performance in Ethiopian private banks

The purpose of the study was to assess outsourcing practice and its effect on institutional performance in Ethiopian private commercial banks in Dire Dawa District. A descriptive and explanatory survey research design was employed and using both quantitative and qualitative methods. Stratified random sampling technique was used to select the respondents. The study targeted 136 respondents but 116 were returned fully completed, giving a response rate of 85%. The primary data gathered in the form of self-administer questionnaires with a Likert typed scale. Both descriptive and ordered logistics regression were employed to satisfy specific objectives of this study. The descriptive statistics result showed that Cost Driven as the first most important driver for outsourcing practice factors was higher aggregate mean and Standard Deviation were (3.90 and 1.298) respectively. The results from O logit regression analysis indicated that three outsourcing dimensions (Innovation Driven Outsourcing; Quality Driven Outsourcing and Cost Driven Outsourcing) have significant P-values < 5%, on the other hand, focus on core competencies driven outsourcing wasn’t significantly influence on institutional performance of private commercial banks since the P-values > 5%. The findings indicate some weaknesses in the focus on core competencies driven outsourcing. Thus, management team within private commercial banks strategic outsourcing is one way by which firms may build and sustain their core competencies, which is vital for survival. Therefore, a firm needs to create a focus around its core competencies, which entails handing over the activities of low strategic value to specialists who can do them better through strategic outsourcing.