Analysing four types of IT sourcing decisions in the context of scale, client/supplier interdependency and risk mitigation

Abstract

The main thrust of the article is to distinguish between four types of IT sourcing decision: total outsourcing; multiple‐supplier sourcing; joint venture/strategic alliance sourcing; and insourcing. To illustrate each type, detailed case histories are used that analyse the reasons why specific IT sourcing decisions were adopted. Here, we consider total outsourcing at the London Stock Exchange; multiple‐supplier sourcing at ICI plc; joint venture project sourcing at CRESTCo Ltd; and insourcing at the Royal Bank of Scotland. The trend towards outsourcing is increasing in all industrial and commercial sectors. However, client organizations need to become more aware of some of the pitfalls, particularly in respect of large‐scale outsourcing deals to single or multiple suppliers. This is because the move to IT outsourcing engenders the need to develop new capabilities and skills to manage complex commercial contracts. We therefore conclude that, while many IT outsourcing contracts followed rationalization, cost‐cutting and disappointing results from in‐house IT provision, short‐termism and current uncertainties over market, business and political conditions pose problems for many organizations in deciding future outsourcing arrangements.