Analysis of a Large-Scale IT Outsourcing "Failure": What Lessons Can We Learn?

Analysis of a Large-Scale IT Outsourcing "Failure": What Lessons Can We Learn?

Anne C. Rouse (Deakin Univeristy, Australia) and Brian J. Corbitt (Shinawatra University, Thailand)
DOI: 10.4018/978-1-59140-875-8.ch020
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Abstract

Much of the research that has been carried out into outsourcing is based on relatively successful case studies. Yet drawing inferences from case studies when those with largely negative outcomes rarely see the light of day represents a significant problem. When negative cases are systematically unrepresented, there is less opportunity to subject theory to scrutiny. This chapter goes some way towards redressing this trend, by reporting on a large scale “selective” outsourcing arrangement that has been publicly described as a failure — the Australian Federal Government’s “whole of government” IT infrastructure outsourcing initiative. This initiative, originally promoted as likely to lead to a billion dollar saving, was abandoned early in 2001, after a damning public report by the Australian Auditor General. However, a detailed study of the initiative suggests that the “failure” occurred despite the project adhering to many of the recommended guidelines for successful outsourcing that had been derived from earlier case analysis. The findings have important implications for decision makers confronted with outsourcing choices. The study suggests that the risks of outsourcing are often downplayed, or ignored in the rush to reap the expected benefits. The study also suggests that expectations of savings from outsourcing IT are often substantially higher than those that have been empirically confirmed in the field. Decision makers are advised that key assumptions about costs, savings, managerial effort, and the effects of outsourcing on operational performance might be incorrect, and to plan for their outsourcing activity accordingly. They should pay particular attention to coordination and transaction costs, as these tend to be overlooked in the business case. These costs will be magnified if “best in breed” multiple-vendor outsourcing is chosen, and if contracts are kept short. Decision-makers are also warned of the difficulties they are likely to have at the end of an outsourcing contract if there is not a large and robust pool of alternative vendors willing to bid against the incumbent.

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Dedication
Harbhajan Kehal, Varinder Singh
Table of Contents
Acknowledgments
Chapter 1
Glauco De Vita, Catherine L. Wang
This chapter tracks the evolution of outsourcing theory and practice in order to develop a taxonomy of outsourcing generations. Our taxonomy... Sample PDF
Development of Outsourcing Theory and Practice: A Taxonomy of Outsourcing Generations
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Chapter 2
Subrata Chakrabarty
Many terminologies have grown out of the outsourcing and offshoring bandwagon. While the corporate world continues to experience these phenomena... Sample PDF
Making Sense of the Sourcing and Shoring Maze: Various Outsourcing and Offshoring Activities
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Chapter 3
Ashima Goyal
This chapter shows that ICTs make possible a more inclusive global trade, since now labour intensive components of production can be unbundled and... Sample PDF
Global Sourcing: East-West Divide or Synthesis?
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Chapter 4
Parthasarathi Banerjee
This chapter investigates conditions when economic profit can be made from outsourcing. In order to have profit a firm must pursue strategies of... Sample PDF
Strategies of Outsourcing: From De-Risking to Uncertainty
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Chapter 5
Fjodor Ruzic
In today’s dynamic e-business environment where fast time to market is imperative, where information and telecommunications technology is costly and... Sample PDF
New Ethics for E-Business Offshore Outsourcing
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Chapter 6
Smita Gupta, Narendra S. Chaudhari
Offshore outsourcing is a term covering a range of information technology (IT) and business services delivered to companies in developed countries... Sample PDF
Information Technology Offshoring Outsourcing: A Perspective kof Advanced Countries
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Chapter 7
Jurgis Samulevicius, Val Samonis
A major phenomenon of globalization, outsourcing is a complex and controversial issue. It occurs when companies contract out activities previously... Sample PDF
Business Process Outsourcing to Emerging Markets: A Knowledge Management Approach to Models and Strategies
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Chapter 8
Luke Ho, Anthony S. Atkins
In recent years, outsourcing deals have increased in number and the strategic importance of the decision-making process has correspondingly... Sample PDF
Outsourcing Decision-Making: A Review of Strategic Frameworksand Proposal of a Multi-Perspective Approach
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Chapter 9
Alev M. Efendioglu
Recently, outsourcing/offshoring has gained significant exposure in the popular as well as academic publications, with authors arguing the many... Sample PDF
Outsourcing and Offshoring: Issues and Impacts on Venture Capital
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Chapter 10
Siri Terjesen
This chapter reviews the outsourcing and offshoring of finance activities and the socioeconomic implications for home and host countries. Part one... Sample PDF
Outsourcing and Offshoring Finance Activities
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Chapter 11
Kirk St. Amant
This chapter examines the role of open source software (OSS) in international outsourcing practices that involve the transfer of knowledge work from... Sample PDF
Open Source and Outsourcing: A Perspective on Software Use and Professional Practices Related to International Outsourcing Activities
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Chapter 12
Subrata Chakrabarty
The primary purpose of this chapter is to present descriptive real-life case studies of different offshore-outsourced custom software development... Sample PDF
Real Life Case Studies of Offshore Outsourced IS Projects: Analysis of Issues and Socio-Economic Paradigms
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Chapter 13
Varadharajan Sridhar, Sangeeta S. Bharadwaj
IT-enabled services (ITES) in India have registered tremendous growth in recent years. Availability of English speaking trained manpower and low... Sample PDF
Growth of Outsourced IT-Enabled Services in India: A Systems Dynamics Approach
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Chapter 14
Nicholas B. Beaumont
This chapter notes and explains the increasing use of outsourcing and service level agreements (SLAs); proposes and describes an outsourcing... Sample PDF
An Overview of Service Level Agreements
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Chapter 15
Piyush Sharma, Rajiv Mathur, Abhinav Dhawan
Offshore outsourcing is a fast-growing aspect of the world economy today and it has drawn attention from policy makers as well as public at large in... Sample PDF
Understanding Consumer Reactions to Offshore Outsourcing of Customer Services
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Chapter 16
Michael Amberg, Martin Wiener
Increasing competition in globalized markets drives IT offshoring worldwide. In the United States, the relocation of IT activities and processes to... Sample PDF
IT Offshoring: A German Perspective
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Chapter 17
Felix R. Doldán Tie, Paula Luna Huertas, Francisco Jose Martínez Lopez, Carlos Piñeiro Sanchez
The practice of information systems/information technology (IS/IT) outsourcing is a major issue which has received much attention, as shown by the... Sample PDF
Information Systems/Information Technology Outsourcing in Spain: A Critical Empirical Analysis
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Chapter 18
Arjun K. Paiu, Subhajit Basu
The practice of information systems/information technology (IS/IT) outsourcing is a major issue which has received much attention, as shown by the... Sample PDF
Emerging Legal Challenges in Offshore Outsourcing of IT-Enabled Services
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Chapter 19
A. Hoecst, P. Trott
In this chapter we argue that firms have responded to the intense pressure from markets and financial operators to reduce asset investments by... Sample PDF
Does Strategic Outsourcing Undermine the Innovative Capability of Organizations?
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Chapter 20
Anne C. Rouse, Brian J. Corbitt
Much of the research that has been carried out into outsourcing is based on relatively successful case studies. Yet drawing inferences from case... Sample PDF
Analysis of a Large-Scale IT Outsourcing "Failure": What Lessons Can We Learn?
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About the Authors