Global IT Outsourcing: Current Trends, Risks, and Cultural Issues

Abstract

Enterprises inside and outside the IT industry have long used offshore developments and outsourcing methods to reduce information system development and maintenance costs and as a source of specialized, low-wage workers. In the last decade, there has been a spur of activities in offshore outsourcing, which is driven by the e-business revolution and a worldwide demand for IT skills. This contributed to the growth of IT-related industries in countries such as Ireland and India. Meanwhile, vendors from the Philippines, Russia, Hungary, China, Taiwan, Mexico, and other countries entered the market; and in some cases, adapted business models established by Indian firms that have dominated the services sector in the past decade. The emergence of new offshore centers has been marked by new approaches and skill sets, adding to the services and value propositions that define the offshore sector today. In this paper, we will identify the main risk factors and best practices in global IT outsourcing. In addition, we will delve into some important issues on IT outsourcing, particularly the challenges as well as the benefits. Finally, we will 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 management to identify risk factors and take the necessary remedial steps.