Outsourcing decision-making: does the process matter?

Abstract

There is a plethora of prescriptive Information Technology (IT) outsourcing decision-making models available in the academic literature; yet reported success rates of IT outsourcing transactions remain moderate. This paper investigates outsourcing decisions and asks: Does the process really matter? The paper first briefly reviews the IT outsourcing literature to find that there is a lack of empirical research on IT outsourcing decision processes and the effect they have on outsourcing outcomes. The paper fills this gap by applying constructs identified from the strategic decision-making literature investigating decision-making processes and their effect on outcomes at four large Australian-based companies. Two organisations studied had decided to offshore outsource application development and were outsourcing for the first time with the decision being triggered by a powerful stakeholder who pushed the idea from inception to implementation. The other two organisations studied had already outsourced and were looking to renew their contracts where a rigorous and highly formalised decision process was followed. We find that the decision-making context affects the adoption of a decision process type, and that the adoption of different process types leads to different results. Decision-makers should adhere to more rational and formalised decision-making processes resulting in better decision outcomes.