To outsource IT or not?: recent research on economics and evaluation practice

Abstract

The paper reports findings from 26 longitudinal case studies of information technology (IT) outsourcing researched in the 1993–95 period. The primary focus is on evaluation practices in the lead up to making IT sourcing decisions. The pre-existing IT evaluation system was found to be a help or a major hindrance as a basis from which to assess outsourcing vendor bids. Difficulties experienced in evaluating in-house performance are highlighted. Issues include evaluating total IT contribution, identifying full costs, benchmarking and external comparisons, the role of charging systems, and the adoption of service level agreements by the in-house operation. Organizational experiences on assessing vendor bids against in-house options are then detailed. These are presented in distilled form as ‘a rich picture’ representative case study, together with additional lessons derived from the research. Finally we highlight the emerging evaluation approach shared by organizations that made effective sourcing decisions.