Abstract
Globally, information technology (IT) outsourcing has spread quickly in many countries and spending by organizations in IT outsourcing is increasing rapidly each year. According to Gartner (Blackmore, De Souza, Young, Goodness, and Silliman, 2005), total spending on IT outsourcing worldwide is likely to rise from US $184 billion in 2003 to US $256 billion in 2008. However, defining IT outsourcing is not an easy task as it can mean different things to different organizations. Hirschheim and Lacity (2000) define IT outsourcing as the “practice of transferring IT assets, leases, staff, and management responsibility for delivery of services from internal IT functions to third-party vendors.” Willcocks and Lester (1997) define outsourcing as the “commissioning of third-party management of IT assets or activities to deliver required results.” The scope and range of outsourcing services have also increased as well, as evidenced by the promotion of BPO (business process outsourcing), ASP (applications service providers), global outsourcing, R&D (research and development) outsourcing, and web and e-business outsourcing (Gonzales Gascon and Llopis, 2005; Huang, Lin, and Lin, 2005). While there is already much research on the economics of IT outsourcing, critical success factors for IT outsourcing decision-making and for outsourcing vendor management (Barthelemy and Geyer, 2004; Hirschheim and Lacity, 2000), there is very little literature on the actual linkage between IT outsourcing and the use of evaluation methodologies in organizations, especially in how these organizations evaluate their IT outsourcing contracts and ensure that the benefits expected from these contracts are delivered eventually. The aim of this paper is to examine issues surrounding the evaluation and benefits realization processes in Australian and Taiwanese organizations undertaking IT outsourcing. The paper first reviews relevant literature with respect to IT outsourcing, the evaluation of IT outsourcing, and IT benefits realization. Key findings from a survey of the top 2000 Australian organizations, as well as a survey to top 3000 Taiwanese organizations, will then be presented. The paper examines these findings and issues in light of these large organizations’ evaluation practices.
TopIntroduction
Globally, information technology (IT) outsourcing has spread quickly in many countries and spending by organizations in IT outsourcing is increasing rapidly each year. According to Gartner (Blackmore, De Souza, Young, Goodness, and Silliman, 2005), total spending on IT outsourcing worldwide is likely to rise from US $184 billion in 2003 to US $256 billion in 2008. However, defining IT outsourcing is not an easy task as it can mean different things to different organizations. Hirschheim and Lacity (2000) define IT outsourcing as the “practice of transferring IT assets, leases, staff, and management responsibility for delivery of services from internal IT functions to third-party vendors.” Willcocks and Lester (1997) define outsourcing as the “commissioning of third-party management of IT assets or activities to deliver required results.” The scope and range of outsourcing services have also increased as well, as evidenced by the promotion of BPO (business process outsourcing), ASP (applications service providers), global outsourcing, R&D (research and development) outsourcing, and web and e-business outsourcing (Gonzales Gascon and Llopis, 2005; Huang, Lin, and Lin, 2005).
While there is already much research on the economics of IT outsourcing, critical success factors for IT outsourcing decision-making and for outsourcing vendor management (Barthelemy and Geyer, 2004; Hirschheim and Lacity, 2000), there is very little literature on the actual linkage between IT outsourcing and the use of evaluation methodologies in organizations, especially in how these organizations evaluate their IT outsourcing contracts and ensure that the benefits expected from these contracts are delivered eventually.
The aim of this paper is to examine issues surrounding the evaluation and benefits realization processes in Australian and Taiwanese organizations undertaking IT outsourcing. The paper first reviews relevant literature with respect to IT outsourcing, the evaluation of IT outsourcing, and IT benefits realization. Key findings from a survey of the top 2000 Australian organizations, as well as a survey to top 3000 Taiwanese organizations, will then be presented. The paper examines these findings and issues in light of these large organizations’ evaluation practices.
Key Terms in this Chapter
IT Investment Evaluation: This is the weighing up process to rationally assess the value of any in-house IT assets and acquisition of software or hardware which are expected to improve business value of an organization’s information systems.
Benefits Realization: It is a managed and controlled process of checking, implementing, and adjusting expected results and continuous adjusting the path leading from investments to expected business benefits.
IT Investment Evaluation Methodologies: Approaches that are used to evaluate and monitor organizations’ IT investments.
IT Outsourcing: The practice of transferring IT assets, leases, staff, and management responsibility for delivery of services from internal IT functions to external contractors.
Survey Research: It is a research method using questionnaires to obtain the required information.
SPSS: It is a statistical and data management software package for analyzing collected questionnaire data.
IT Benefits Realization Methodologies: Approaches that are used to ensure that benefits expected in the IT investments by organizations are eventually delivered.