Revisiting IT outsourcing risks: re-analysis of a recent survey

Since its inception, the literature on IT outsourcing has acknowledged that the strategy has the potential for substantial benefits, but also the likelihood of significant risks. However, these risks have not deterred the growth of IT outsourcing. This may be because the literature has not fully explored the probability of encountering IT outsourcing risks, and, conversely, the probability of success, leaving open the possibility that many decision-makers enter into IT outsourcing with unwarranted optimism. This paper reports on the experiences of 240 organizations engaged in IT outsourcing taken from a survey of the largest 1000 sites in Australia. The survey revealed some surprising findings. Certain widely promoted benefits of outsourcing were observed (access to skilled staff, positive vendor service and improved business flexibility), but a range of benefits that were similarly promoted were reported by only a minority of respondents. These included strategic benefits, cost savings, economies of scale, and technology benefits. Consequently, only around a third (36%) of respondents reported satisfaction with their outsourcing arrangement(s). Using the survey data, the study establishes that a range of risks were more prevalent, and less manageable than has previously been reported. The paper then considers the implications these findings have for decision-makers.