IT Outsourcing In Europe and The USA: Assessment Issues

Abstract

This paper combines findings from two studies of European and North American IT/IS outsourcing practice. The particular focus is on the economics of outsourcing, and contracting and performance measurement issues. The studies found weaknesses in organizations’ understanding of the economics imbedded in vendor bids, not least because in-house costs and performance of IS were not always fully known or identified. Sources of hidden costs are related to poor prior evaluation proactive and contracting. Building on the work of Lacity and Hirschheim (1993) some economic myths in IT outsourcing are identified. The paper then looks at respondent experiences in setting up measurement systems. The contexts in which tight and loose contracting can be successful are discussed. A process for setting up measures and service levels is then detailed. Finally the paper identifies six problem areas that practitioners need to be wary of when running measurement systems in respect of IT outsourcing contracts. On assessment, the paper concludes by stressing the importance of retaining in-house capability sufficient to actively manage the vendor, contract and measurement systems.