Lessons for Effective Government IT Outsourcing

Abstract

Information technology (IT) tends to be viewed as ancillary to core government functions. Consequently, IT is often outsourced to the private sector. Unfortunately, there is a long line of failed outsourced projects. This article uses two New Zealand case studies, the particularly public failure of the recent school payroll system and the successful introduction of electronic immigration processing, to examine how the design and governance of outsourced government IT projects could be improved. It concludes that an awareness of historic trends is important for project success, that governments need to be more active in combating market based transaction costs and that contract management becomes a core government competency when projects are outsourced. It also argues that better change management and cognisance of design-reality gaps would positively impact the outcomes of future projects.