Outsourcing is the practice of hiring outside professional services to meet in-house needs of an organization. Outsourcing by a firm may be either tactical or strategic. Outsourcing is considered tactical when it is implemented in order to solve specific problems being experienced by the firm. Strategic outsourcing on the other hand is concerned with building long term value for the firm through long term relationships. The firm seeking to outsource works with best in class service providers whom it integrates into its operations. The outsourcing firm considers the vendors offering services as business partners and the emphasis is on mutual benefit. The purpose of this project is to establish the factors that influenced Airtel Kenya’s decision to outsource some of its functions to external vendors, to establish what process was followed and to also establish the effects of strategic outsourcing on the business of Airtel Kenya. The research design was that of a case study and senior members of the Airtel Kenya, Executive Committee were interviewed. The decision to outsource at Airtel Kenya was largely driven by the parent company Bharti Airtel of India which had extensive outsourcing experience in India. However, forces in the macro environment and the competitive environment provided justification for the implementation of the decision. Because of the top down nature of the decision, formal steps necessary to evaluate whether outsourcing was needed by the Company were omitted. The local teams were also not given adequate time to prepare for the transition to the outsource partners. As a result the implementation faced a number of challenges which could have been avoided by ownership of the process by local teams and providing adequate time to plan for the outsourcing. The study found that the Company nonetheless, experienced a raft of benefits such as the ability to focus on the core business of the Company and become more customer-centric; the Company gained access to superior services of the vendors; gained efficiency; helped the company to manage the vendors’ ability to constrain the company’s profitability; enabled the company to manage technological risks; attain cost control; attain standardization across many related operations and to a limited extent save costs. The study findings recommend that the success of strategic outsourcing is dependent on governance structures in place to manage the vendors output. Water tight contracts are needed to manage the roles and responsibilities of the company and the vendor and provide for consequence management. Adequate time also needs to be given to the senior management of the Company for them to transition the services to the outsource vendor as well as manage the impact of the transition on staff. The study was limited by the unavailability of financial and transactional cost information by reason of confidentiality. As a result the study does not establish the actual cost benefit of outsourcing that the company attained or hoped to attain or how outsourcing contributed to the financial performance of the company. The study suggests that further studies should be carried out to determine how widespread is the practice of outsourcing in Kenya and what is the effect of outsourcing on the Kenyan economy? Such further studies would help the government develop appropriate policies on outsourcing.

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