This paper reviews research studies of information technology outsourcing (ITO) practice and provides substantial evidence that researchers have meaningfully and significantly addressed the call for academics to produce knowledge relevant to practitioners. Based on a review of 191 IT outsourcing articles, we extract the insights for practice on six key ITO topics relevant to practitioners. The first three topics relate to the early 1990s focus on determinants of IT outsourcing, IT outsourcing strategy, and mitigating IT outsourcing risks. A focus on best practices and client and supplier capabilities developed from the mid-1990s and is traced through to the late 2000s, while relationship management is shown to be a perennial and challenging issue throughout the nearly 20 years under study. More recently studies have developed around offshore outsourcing, business process outsourcing and the rise, decline and resurrection of application service provision. The paper concludes by pointing to future challenges and developments.
This paper provides substantial evidence that information technology outsourcing (ITO) research has meaningfully and significantly addressed the call by Lee, 1999 and Westfall, 1999 for academics to produce knowledge relevant to practitioners. The ITO academic literature that studies practice is widely cited and indicates that academics have clearly served to disseminate learning. In addition, thoughtful practitioners have published their IT outsourcing experiences in academic outlets (Cross, 1995 and Huber, 1993), further fueling the ability of academics to abstract lessons for practice. In several ways then, ITO research has been an exemplar of how information systems (IS) academics can study and inform practice.
ITO research aimed at studying and influencing practice has examined multiple aspects of the phenomena, from reasons why organizations outsource through to the long-term consequences of outsourcing from both client and supplier perspectives. The first published outputs from academic research appeared in 1991, which documented companies pursuing large-scale domestic IT outsourcing ( Applegate and Montealegre, 1991 and Huber, 1993). More quantitative research and multiple-case studies followed, focusing on why firms outsource (Loh and Venkatraman, 1992a) and how firms benefit (or do not benefit) from IT outsourcing ( Lacity and Hirschheim, 1993 and Willcocks and Fitzgerald, 1993). Between 1994 and 2000, at least 79 other academic studies were published (Dibbern et al., 2004), many geared towards practice. Since the beginning of 2009, we found 357 published papers on ITO.
In effect, research on practice has documented the 20 year rise to globalism of IT and business services outsourcing. The key quest for clients has been how to leverage the ever expanding services market for significant business advantage. The common denominator in the findings: researchers have uncovered no quick fix. Much depends on experiential learning and sheer hard work. Executives must conquer a significant learning curve and build key in-house capabilities in order to successfully exploit outsourcing opportunities. They need to accept that outsourcing is not about giving up management, but managing in a different way.
Suppliers have also faced learning curves in their attempts to differentiate their services, find new markets, and deal with new competition from potentially anywhere in the world. Maturing their ability to deliver fully on the promise of cost-effective service delivery, strong relationships and back-office transformation has been a constant challenge. As the 2007 economic downturn turned into 2008 recession, suppliers’ abilities to develop and leverage requisite capabilities in ITO, BPO and “bestshoring” have become ever more critical.
The sheer dynamism of modern business and public sectors makes any lessons derived more important to learn and apply, and trends more important to watch and take suitable action on. Looking forward, McDonald (2007) suggests IT leaders need to develop an enterprise capability, comprising nine elements that are standardized, integrated, and operated together to achieve strategic goals. The nine elements address human capital, organization, processes, facilities and equipment technology, applications, information, rules and metrics, and specific tasks. Many of these elements will be sourced through a comprehensive portfolio of in-house workers, contract workers, and third party suppliers. Lacity et al. (2008) predict 13 trends about the size and growth of ITO and BPO markets, about suppliers located around the world, and about particular sourcing models including application service provision, insourcing, nearshoring, rural sourcing, knowledge process outsourcing, freelance outsourcing, and captive centers. They also identify five perennial, prickly, future challenges for practice pertaining to business back office alignment, client and supplier incentives, knowledge transfer, knowledge retention, and sustainability of outsourcing relationships.
