Outsourcing in Commercial Banks of Bangladesh: Drivers, Benefits, and Barriers

This study purposes to analyze the drivers, benefits and barriers of outsourcing of Bangladeshi commercial banks. A descriptive and explanatory research design was adopted for the study by collecting data from a random sample of 260 employees who are directly or indirectly connected with outsourcing decision making in Islamic banks and conventional commercial banks. Structured questionnaire indicated drivers, benefits and barriers: exploratory factor analysis with reliability testing demonstrated sound constructs validity and internal consistency. The findings of the study show that the extent to which they outsource HR and organizational services, such as HRIS/HRIT (98.08%), workforce management (93.08%), or performance management (90.38%) was frequent due to optimization needs in terms of cost reduction, operational excellence, and customer satisfaction. Common outsourcing drivers are sophisticated technology, expert services, customer’ experiences and cost effectiveness. The comparison shows that Islamic banks perceive better customer services as motivating driver, significantly higher than conventional banks. The comparison also found Islamic banks perceived better competitive benefits resulting from outsourcing than conventional and rated these more important than conventional banks. Again, significant differences found in the value barrier and control barrier between conventional banks and Islamic banks as well as conventional banks perceiving significantly more of these obstacles than Islamic banks. So, the study reveals that Islamic banks is in better position compared to conventional banks in terms of motivating factors, benefits, and minimum barriers of outsourcing activities.