Identifying the Concept of Modularity in IS/IT Outsourcing Cases: Some Empirical Evidence

Introduction

Globalization of the world economy and digitalization has accelerated the advancements of information systems and information technology (IS/IT). IS/IT services are often outsourced to external partners for multiple reasons, but the main drivers are savings in cost, access to specialized expertise and technology, and focus on core competences. Outsourcing of IS/IT projects became a common practice among contemporary organizations in developed and in emerging economies. Literature suggests over 94% of ‘Fortune 500’ companies are outsourcing at least one major business function (Modarress, Ansari, & Thies, 2014). Despite the prevalence and long experiences of CIO’s in IS/IT project outsourcing, the failure of such projects is very common. The literature suggests that at least one in three projects was considered a failure and many projects were delayed, ran over budget, and were not able to meet their pre-defined targets (Delens, Peters, Verhoef, & Van Vlijmen, 2016; Jabangwe, Smite, & Hesbo, 2016; Schmidt, Zoller, & Rosenkranz, 2016; Wojewoda & Hastie, 2015). A pertinent question deals with how IS/IT project outsourcing failure may be addressed. So far, the literature includes many suggestions offered by both scholars and practitioners. Peterson and Carco (1998) suggested to streamline operations and ‘fix the problem’ before outsourcing IS/IT services. Various suggestions were introduced: the interested reader is referred to (1) Lambert, Emmelhainz, and Gardner (1999) who introduced their ‘Partnership Model’; (2) Greaver (1999) who formulated ‘seven steps to successful outsourcing’; (3) Logan (2000) who proposed two solutions in order to avoid failure in IS/IT project outsourcing. She suggests firstly, diagnosing the relationship from both sides of the contract and secondly, engaging agency theory to help design the types of contracts and relationships necessary to provide and support an environment of trust; (4) Lee (2001) who suggested knowledge sharing; (5) Rottman (2008) who elaborates on the importance of ‘knowledge transfer’; (6) Harris, Herron and Iwanicki (2008) who stressed the importance of a high quality ‘service level agreement’ (SLA); (7) Karimi-Alaghehband and Rivard (2012) who proposed a model of IS/IT outsourcing success grounded in dynamic capabilities perspective; (8) Ishizaka & Blakiston, (2012) who proposed the “18 C’s model” for a successful long-term outsourcing arrangement; and (9) Zheng and Abbott (2013) who argued that reconfiguration of organizational resources is vital to be successful in outsourcing. Despite the introduction of such remedies, the empirical research referred to above continue to attest to the high failure rate of IS/IT project outsourcing. It seems that these remedies, if used, turned out to be partially successful at best. The remainder of this paper is structured as follows. The second section will describe in brief the literature review and the third section will describe the theoretical lens considered for this study, and at the end of this section, research questions are formulated. Afterwards, in the fourth section the adopted methodology will be discussed. In section five, case analysis, findings, and the reflections from the authors will be presented. In the sixth section, conclusions and in the seventh section future research directions will be discussed. The eighth section will present a glossary of the terminologies and concepts used in this chapter. The ninth section will suggest the readers some additional literature for further reading.