Risks, Benefits, and Challenges in Global IT Outsourcing: Perspectives and Practices

Many large organizations are increasingly outsourcing their IT functions. Factors like lower costs, improved productivity, higher quality, higher customer satisfaction, and ability to focus on core areas are some of the benefits of outsourcing. However, there are many challenges and risks associated with IT outsourcing. In this article, we identify the main risk factors and best practices in global IT outsourcing. In addition, we delve into some important issues on IT outsourcing, particularly the challenges along with benefits. Finally, we present case studies of two Global 200 organizations and validate some of the claims made by previous researchers on IT outsourcing. This study will help the management to identify the risk factors and take the necessary remedial steps. Hence, this study is timely and relevant from both an academic and a practitioner’s perspective. INTRODUCTION In today’s global economy, outsourcing has become a very common phenomenon. Many large organizations have outsourced some or all of their IT functions. Factors like lower costs, improved productivity, higher quality, higher customer satisfaction, time to market, and ability to focus on core areas are some of the benefits of outsourcing. However, there are many challenges and risks associated with IT outsourcing (Adeleye, Annansingh, & Nunes, 2004; Alvares et al., 1995; Bahli & Rivard, 2003; Beamish, Marcolin, & Mclellan, 1995; Cross, 1995; Dibbern & Goles, 2004; Feeny, Lacity, & Willcocks, 1995; Lacity & Willcocks; 1995, Lee, Huynh, Kwok, & Pi, 2003; Nam, Rajagopalan., Rao, & Chaudhury, 1996; Rothman, 2003; Sabherwal, 2003). IT Outsourcing is as an act of delegating or transferring some or all of the IT related deci-