Abstract
IT Outsourcing contracts are a specific and complex set of IT services that require providers to give special attention to manage a long relationship at optimal cost. The challenge is to identify the best cost structure, cost methodology and IT services variance, in order to manage a service with the highest level of standardization. Due to the specificity of this work, the research methodology chosen is case study research applied to seven contracts. This research shows that IT Outsourcing providers suffer from several sources of variance in services and increasing contract costs. However, due to economic downturn and competition, organizations are pursuing cost reductions, and providers should take this opportunity to trade-off customization (a characteristic of IT Outsourcing contracts) for standardization (a quality of cloud offering). The conclusions of the research show that providers need to have a well developed cost management system and mechanisms to control services variance in order to gain useful information about how their performance in a contract might affect a different one, because some contracts are silos, but others can use a common structure.
Highlights
Today organizations face hard challenges to keep their businesses above breakeven point
The comparison between contracts shows that information technology (IT) Outsourcing contracts have a common cost structure grounded on direct and indirect costs that are adapted for every contract based on scope, but the concept of cost driver is not used
IT Outsourcing contracts need specific metrics and cost drivers to be consistent throughout the entire life cycle
Summary
Today organizations face hard challenges to keep their businesses above breakeven point. Markets are shrinking and managers are focused on optimization and cost reduction. In this context, new opportunities arise for Outsourcing providers (KPMG, 2012) as well as customer organizations that can (re)negotiate contracts to reflect changing market conditions or move operations to Outsourcing. Journal of Outsourcing & Organizational Information Management 2. Brown & Wilson, 2005) as organizations gradually started to outsource non-core business processes to reduce operational costs, obtain higher efficiency standards and increase competitiveness. In order to respond to highly demanding customers, providers need to define a specific strategy for each contract (Cullen, Seddon & Willcocks, 2005; Cullen, 2009)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: Journal of Outsourcing & Organizational Information Management
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.