Reasons Leading to the Ineffectiveness of Information Systems Outsourcing in Minimising Costs

Abstract

This project is concerned with the factors that are responsible for the failure of Information Technology outsourcing in reducing the costs for companies. Even though there is a substantial amount of evidence in the literature that confirms the problem of IT outsourcing ineffectiveness, researchers and practitioners are still a long way from adopting a common view on the factors that can lead to inefficient outsourcing. This lack of understanding has serious managerial implications since it is hindering the ability of managers to make outsourcing decisions and manage their IT functions in a cost-efficient way.

Case study research, involving interviews with IT managers, was consequently undertaken in an attempt to shed more light on the complex issues that affect the effectiveness of IT outsourcing operations. A methodical investigation of the literature offered important insights on the research problem and formed the basis on which the interviews were structured. A pattern that emerged was that the lack of involvement of IT managers in the outsourcing process can have a negative impact on the cost efficiency of IT outsourcing. Such an involvement should be substantial and appropriate and should be present in all phases of the outsourcing deal. Before and after the outsourcing contract is signed, the IT manager needs to be actively involved with key issues such as vendor selection, contract preparation, vendor incentives and analysis of the activities that would benefit the most from an outsourcing arrangement. The insights of this research, therefore, contribute to the understanding of the cost effective aspect of IT outsourcing and encourage managers to take a more dynamic role in outsourcing management. Ultimately, each piece of research on the cost efficiency of IT outsourcing is a step forward in reducing outsourcing failures.