IT outsourcing decision processes and related decision models
thesisposted on 01.03.2017, 00:00 by Westphal, Peter
This research was triggered by reports that management is uncertain about the process to be undertaken when deciding to outsource. A study published by Gartner (2008) shows that a surprisingly large number of organizations that decide to outsource are not following a structured approach, sometimes the decision is even found to be ad-hoc. The same empirical research also suggests that many organizations are not satisfied with their outsourcing arrangements with managers’ expectations not being fulfilled. This thesis is an exploratory study that is divided into two phases. Phase 1 adopts a multiple case study approach (Yin, 2009) subscribing to the interpretive paradigm, followed by a longitudinal case study for Phase 2. The thesis explores two main research questions: 1) How do real world decision makers approach an outsourcing decision, and what influences the adoption of decision frameworks and decision models?; and 2) What is the connection between the outsourcing decision-making process and the outcome of the outsourcing decision? Related sub-questions are explored. The thesis reviews the Information Technology Outsourcing (ITO) literature to find that there is a plethora of decision models, which is in conflict with Gartner’s finding that outsourcing decisions are often made without a clear strategy, and with other researchers who find that models are not known by practitioners (Brannemo, 2005). A taxonomy of decision models is developed to provide insights on the applicability and limitations of the various decision- making models prescribed in the academic literature. Moreover, from the review of the ITO literature it is also found that that there is a lack of empirical research on actual ITO decision processes and the effect they might have on outsourcing outcomes. In an attempt to better understand ITO decisions by researching decision-making, the strategic decision-making literature is reviewed, and from the literature a research framework is developed that is based on a seminal paper by Bell, Bromiley and Bryson (1997). In Phase 1, outsourcing decisions by six large, Australian-based companies are reviewed. Of the six organisations reviewed, three organisations were outsourcing for the first time. At these organisations, a powerful stakeholder, who pushed the idea from inception through to implementation, triggered the decision, which according to Nutt (2008) can be classified as Idea Imposition process. The three other organisations studied were Routinieres at outsourcing decision-making through prior outsourcing experience. At these organisations, decision makers followed a more rigorous and formalised decision process, which according to Nutt (2008) can be classified as a Discovery process. The thesis finds that the adoption of Discovery processes leads to better results than Idea Imposition processes. We conclude that decision makers should adhere to more rational and formalized Discovery process resulting in better decision outcomes.