Information technology outsourcing in Europe and the USA: Assessment issues

Abstract

The paper combines findings from two studies of European and North American information technology/information systems outsourcing practice, and focuses on the economics of outsourcing, and contracting and performance measurement issues. The studies found weaknesses in organizational understanding of the economics imbedded in vendor bids, not least because in-house costs and performance of information systems were not always fully known or identified. Sources of hidden costs are related to poor prior evaluation practice and contracting. Building on previous work some economic myths in information technology outsourcing are identified. Respondent experiences in setting up measurement systems are discussed, including contexts in which tight and loose contracting can be successful and processes for setting up measures and service levels. Finally the paper identifies six problem areas that practitioners need to be wary of when running measurement systems in respect of information technology 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. © 1995.