AN EMPIRICAL-INVESTIGATION OF INFORMATION TECHNOLOGY SOURCING PRACTICES - LESSONS FROM EXPERIENCE

Citation
Mc. Lacity et Lp. Willcocks, AN EMPIRICAL-INVESTIGATION OF INFORMATION TECHNOLOGY SOURCING PRACTICES - LESSONS FROM EXPERIENCE, Management information systems quarterly, 22(3), 1998, pp. 363-408
Citations number
33
Categorie Soggetti
Management,"Information Science & Library Science","Computer Science Information Systems","Computer Science Information Systems
ISSN journal
02767783
Volume
22
Issue
3
Year of publication
1998
Pages
363 - 408
Database
ISI
SICI code
0276-7783(1998)22:3<363:AEOITS>2.0.ZU;2-A
Abstract
Following Kodak's landmark information technology (IT) outsourcing dec isions in 1989 the IT outsourcing market grew to 76 billion dollars in 1995. As the outsourcing market continues to grow and as new contract ing options emerge, the accumulated experiences of firms offer signifi cant opportunities for learning. This paper builds on a previous colle ction of data on 61 IT sourcing decisions made in 40 US. and U.K. orga nizations during the period 1991 to 1995. This paper reanalyzed transc ribed interviews from 145 participants. Using ''expected cost savings achieved'' as an indicator of success, five best practices were identi fied in the case companies. First, selective outsourcing decisions had higher success rates than total outsourcing or total insourcing decis ions. Second, senior executives and IT managers who made decisions tog ether had higher success rates than either stakeholder group acting al one. Third, organizations that invited both internal and external bids had higher success rates than organizations that merely compared exte rnal bids with current IT costs. Fourth, short-term contracts achieved higher success rates than long-term contracts. Fifth, detailed fee-fo r-service contracts had higher success rates than other types of fee-f or-service contracts. The critical elements of three contracting model s the described: fee-for-service contracts, strategic alliances/partne rships, and buying-in of vendor resources. When the practices generate d from the case studies are compared with current practices, we begin to understand which practices are proving robust and why new practices emerge. For example, in the participating companies, the rhetoric of a ''partnership'' was misused to describe contracts that are actually fee-for-service contracts. Today practitioners who understand the inhe rent conflicts in fixed fee-for-service contracts are demanding what t hey perceive to be more favorable contracting options, such as flexibl y-priced contracts, performance-based contracts, and strategic allianc es based on shared risks and rewards. This analysis reconciles some of the apparent discrepancies in past findings about the best ways to so urce IT.