Issues and recommendations in evaluating and managing the benefits of public sector IS/IT outsourcing

Abstract

PurposeThe main purpose of this paper is threefold: to understand public‐sector outsourcing in Australia; to examine the linkage between IS/IT outsourcing and the use of evaluation methodologies; and to identify issues that are critical in evaluating and managing IS/IT outsourcing contracts in public‐sector organizations.Design/methodology/approachA survey of the top 500 Australian organizations and two in‐depth case studies of two Australian public‐sector organizations were conducted.FindingsSeveral key issues for IS/IT outsourcing were identified – problems in evaluating outsourcing contracts, embedded contract mentality, ability to manage contracts, and staff transition management.Practical implicationsOutsourcing organizations need to implement changes carefully and assess their in‐house capabilities. They also need to fully understand and apply the IS/IT investment evaluation and benefits realization processes. In order to reach the magnitude of improvements ascribed to IS/IT outsourcing organizations need to undertake proper risk assessment and effectively manage outsourcing relationships. These all have to be done before and during the vendor/technology selection assessment and contract negotiation process.Originality/valueIS/IT outsourcing in the public sector is particularly under‐studied. This study identifies several key issues for organizations undertaking IS/IT outsourcing. Recommendations are provided to assist outsourcing organizations in dealing with these issues.