Outsourcing in the private and public sectors: an unpredictable IT strategy

Abstract

IT outsourcing has grown considerably in the private sector, with IT software and service suppliers reporting increased revenues. Similarly in the public sector, the introduction of market testing and compulsory competitive tendering (CCT) will inevitably lead to the contracting-out of significant levels of IT work. This may lead to the demise of some public sector IT departments where external bids are favoured over those offered by the in-house team. This paper is divided into two sections. First, it considers some of the relevant literature on IT outsourcing in both private and public sector British and American organizations. It draws together important themes which explain the attraction of IT outsourcing to senior executives. Second, it introduces the results from a questionnaire survey of nearly 200 UK private and public sector organizations on IT outsourcing. In particular it looks at the proportion of organizations that claims to use outsourcing, how contracts are negotiated and the type of IT solutions preferred by IT managers. The central argument is that IT outsourcing poses significant challenges to both private and public sector organizations and is not simply a quick-fix panacea. Moreover, public sector IT managers would do well to analyse some of the less favourable reports from private sector outsourcing as they gear themselves up for CCT in the months ahead.