Outsourcing Failure Research Articles

Identifying Key Causal Factors of “Outsourcing Failure” in Government Procurement of Public Service Based on Interval Type‐2 Fuzzy DEMATEL‐Prospect Theory

ABSTRACTAccurately identifying the key causal factors of “outsourcing failure” in government procurement of public service (GPPS) is the focus when constructing its corrective mechanism. The research process and contributions of this paper unfold in two parts: First, based on the structure‐process‐outcome (SPO) model, from the three dimensions of structure, process and outcome, constructing a library of factors causing “outsourcing failure” in GPPS. Then aiming at the ambiguity, uncertainty, and risk preference of decision makers in the decision‐making process, this study proposes a method to identify the key causal factors of “outsourcing failure” in GPPS based on interval type‐2 fuzzy decision‐making trial and evaluation laboratory (DEMATEL)‐prospect theory. We take government procurement of home‐based care services in Jiangsu Province as an example. The results show that nine key causal factors were identified. Further, targeted correction suggestions are proposed to provide strong support and reference for improving the effect of GPPS outsourcing.

Risk management for energy efficiency in information technology project: a case of a government agencies in Indonesia

The Research and Development Agency and Books Secretariat is a government organizational unit that uses vendor services (outsourcing) in information technology (IT) projects. However, outsourcing does not guarantee that the project will run successfully (on time, within the estimated cost, and satisfactorily). Several examples of IT project outsourcing failures demonstrate the critical role of risk management. One of the frameworks used to develop risk management is the Project Management Body of Knowledge (PMBOK) approach. In this study, the level of risk is measured using quantitative methods. The results show that outsourcing IT projects with a reasonably high risk is found in analysing user requirements, project time, and vendor staff qualifications. Risk response planning and risk monitoring are critical stages after the risk level has been identified. The implementation of risk management is expected to be a guideline for organizations in implementing IT project outsourcing, thereby increasing the chances of project success.

The Challenges of Sustainable Development on Facilities Management Outsourcing Services: An Investigation in Educational Facilities

(1) Background: Generally, firms are reluctant to report outsourcing failures, no matter what industry they operate within. To eliminate poor performance of outsourced service providers, it is necessary to establish a specific outsourcing relationship model for facilities management (FM). The purpose of this paper is to study the concept of outsourcing relationships in relation to FM and to investigate the design of the critical success factors on sustainable outsourcing strategies through a discussion of four dimensions (ownership of FM assets, control of FM assets, competitive position and long-term plan). (2) Methods: Based on two questionnaire surveys, data were collected from 38 clients and 34 service providers. The study evaluated the FM outsourcing strategies from critical success factors in educational facilities in Hong Kong. (3) Results: This study explains the impact of FM outsourcing strategies on Hong Kong’s four commonly outsourced FM contracts including building maintenance, security, cleaning and catering from the clients’ and service providers’ point of view. (4) Conclusions: This is the outsourcing way forward in order to create a better working environment conducive for all the parties that would result in better sustainability of FM’s future and thus impact the economic objectives of sustainable development, in parallel with adding social and environmental value.

Requirements engineering issues causing software development outsourcing failure.

Software development outsourcing is becoming more and more famous because of the advantages like cost abatement, process enhancement, and coping with the scarcity of needed resources. Studies confirm that unfortunately a large proportion of the software development outsourcing projects fails to realize anticipated benefits. Investigations into the failures of such projects divulge that in several cases software development outsourcing projects are failed because of the issues that are associated with requirements engineering process. The objective of this study is the identification and the ranking of the commonly occurring issues of the requirements engineering process in the case of software development outsourcing. For this purpose, contemporary literature has been assessed rigorously, issues faced by practitioners have been identified and three questionnaire surveys have been organized by involving experienced software development outsourcing practitioners. The Delphi technique, cut-off value method and 50% rule have also been employed. The study explores 150 issues (129 issues from literature and 21 from industry) of requirements engineering process for software development outsourcing, groups the 150 issues into 7 identified categories and then extricates 43 customarily or commonly arising issues from the 150 issues. Founded on 'frequency of occurrence' the 43 customarily arising issues have been ranked with respect to respective categories (category-wise ranking) and with respect to all the categories (overall ranking). Categories of the customarily arising issues have also been ranked. The issues' identification and ranking contribute to design proactive software project management plan for dealing with software development outsourcing failures and attaining conjectured benefits of the software development outsourcing.

Secured Service Delivery Model for Outsourced Services in a Business Process Outsourcing Relationship

In business process outsourcing (BPO), the model of delivery of processed service and communication media between the client and service provider are critical factors in a successful client-provider relationship. The client’s business objectives would not be achieved if processed services are delivered through unsecured channels and truncated communication. This study explores these issues through a case study of seven medium and large scale Indian BPO service providers, followed up with a larger scale questionnaire-based on Indian providers. Analysis revealed that a significant number of providers have onshore and offshore clients whose processed services are delivered through secured channels. The choice of a delivery model is influenced by both the client and service provider when the provider is either a medium or large scale organization, whilst small scale providers do not contribute to decision making for choice of delivery model. Further, the study revealed that in successful outsourcing relationships, providers deliver services through remote access to a client’s server, email through a dedicated server, dashboard on a cloud, and teleconferencing. To improve security, these channels could be enclosed in any of the following: virtual private network (VPN), transport layer security (TLS)/secure socket layer (SSL), internet protocol security (IPsec) and third party platform, such as citrix. Thus, outsourcing relationships that are built around these security platforms, and decision making process surrounding the choice of a delivery model could reduce outsourcing failures witnessed in BPO relationships.

A Model for Offshore Information Systems Outsourcing Provider Selection in Developing Countries

Information systems outsourcing has become one of the most important aspects of strategic management. It is becoming the rule, rather than the exception in today’s globalized business environment. Many countries and regions have done numerous reforms to become the best offshore information systems outsourcing destinations in the world. For a long time, developing countries remained outside of this competition, but recently the trend has been changing. More developing countries are positioning themselves as viable alternatives to the traditional offshore destinations like India, Ireland and Czech Republic. Selecting an outsourcing provider is a daunting, delicate and very important task for organizations, and can be the cause of an outsourcing failure if not properly addressed. This paper proposes a model based on PROMETHEE (Preference Ranking Organization Method for Enrichment Evaluation) for selecting the best offshore information systems outsourcing provider among a list of developing countries. A case study of 8 African countries is presented in the last part of the paper to illustrate the model. Our model differs from others as it deals with the provider selection problem at country level while most of the existing models deal with the problem at firm level. Another particularity of this model is the set of criteria chosen to analyze the suitability of a country for being the right offshore information systems outsourcing destination.

Towards a framework for performing outsourcing capability

Purpose – The aim of this paper is to go beyond the “What to outsource” and “To Outsource or Not” debate. Recognizing outsourcing as a fast growing reality that firms have to depend upon, the paper concerns itself with optimal management of outsourcing arrangements through the practice of “outsourcing capability”. It argues that outsourcing failure can be mitigated if organizations see outsourcing as an “ongoing activity” to be managed as opposed to treating it as a one-time opportunistic “act”. Design/methodology/approach – Based on the review of existing literature and drawing upon recent instances of outsourcing successes and failures, the paper develops a conceptual framework which divides various organizational processes into four different classes. It delineates the varied aspects of “outsourcing capability” that a firm would need to use to manage these varied class of processes as and when they are outsourced. Findings – There is no “one-size-fits-all” approach to managing outsourced processes. Different processes require emphasis on different aspect of outsourcing capability if outsourcing is to deliver the envisaged benefits. Originality/value – The traditional focus in outsourcing literature has been on the core/non-core process with the recommendation to keep core processes in-house and outsource the non-core processes. This distinction can be transitory and hence detrimental in the era of hyper-competition. I argue that firms should instead focus on developing and refining aspects of “outsourcing capability” relevant to the varied class of processes that they wish/need to outsource.

Outsourcing Failure and Reintegration: The Influence of Contractual and External Factors

This paper discusses the reasons that drive organizations to interrupt outsourcing, reverse their previous decision, and then reintegrate activities formerly delegated to providers. Contractual approaches, mainly derived from Transaction Costs Economics, offer some plausible explanations for reintegration originating from outsourcing failure. These explanations are mainly related to asset specificity, poor contractual design, and deficient monitoring. The study of a real case of outsourcing interruption in industrial maintenance illustrates these different factors. However, some other determinants might complement the contractual and strategic background, namely bandwagon behavior and institutional pressure exerted by external actors. Finally, we propose an integrative framework that combines micro- and macro- levels of organizational analysis. We argue that some existing complementarities between the different theories we use here can shed some light on real organizational problems. Besides the implications for theory, our work can help managers to understand the dynamics of organizational boundaries, thus allowing them to make better choices in both outsourcing and reintegration decisions.

Explaining IT Outsourcing Satisfaction using Domberger’s Theory: An SME Perspective

IT outsourcing has emerged as an important tool for enabling organizations to gain access to specific skills and services, focus on their core competencies, and reduce the cost of IT service provision. With the increasing number of IT outsourcing failures, it is timely to identify the determinants of IT outsourcing satisfaction. This study investigates the types of IT function outsourced and examines the factors influencing customer satisfaction in IT outsourcing in Malaysian small- and medium-enterprises. Using an email questionnaire survey, data are collected from 100 firms listed on the Directory of Small and Medium Enterprises in Malaysia. Drawing from Domberger’s Theory of the Contracting Organization, four hypotheses are developed and tested in this study. Using the PLS path modelling technique, the findings show that focus on core competency, cost reduction, access to IT expertise and skills, and flexibility are positively related to customer satisfaction in IT outsourcing. The paper includes implications and recommendations for future studies.

Managing production outsourcing risks in China's apparel industry: a case study of two apparel retailers

PurposeThis paper aims to examine how Chinese apparel retailers manage their production outsourcing risks and why they elect to manage those risks in a particular manner.Design/methodology/approachThe investigation used the case study approach to explore factors driving two Chinese apparel retailers operating in different market environments to manage their production outsourcing risks.FindingsThe selection of production outsourcing risk management strategies hinges on what apparel retailers view as the most important value their products provide to customers. Product values were linked to specific product characteristics as well as the market environment in which the apparel retailers operated. The retailer that regarded product quality as a key value driver was found to place emphasis on manufacturer selection and use of a formal contract for process control. The retailer that viewed newness and variety as a value driver opted to cultivate a strong, committed business relationship based on Guanxi to achieve speed‐to‐market.Research limitations/implicationsAs a case study research, the findings of this study have their limitations in generalisability. Given that one of the retailers did not invoke Guanxi to cultivate a long‐term business relationship with its outsourced manufacturers, the role of Guanxi in outsourcing risk management in China deserves further exploration, as businesses in China become more globalised.Practical implications/valueThis study grounds mainstream outsourcing strategy literature on operational practice through case studies. It highlights the influence of both product characteristics and market environment in dictating the choice of outsourcing risk management strategies in apparel manufacturing.Originality/valueThe study views outsourcing risk management from the perspective of minimizing outsourcing failures, rather than achieving outsourcing success. It reveals that risk management behavior of apparel retailers was linked to the notion of value protection, which varied according to what they considered as their principal product value drivers.

Vendor’s Conduct and Contract Mechanism in IT Outsourcing Based on Information Inferiority

In IT outsourcing, contract defects often cause outsourcing failure. Many client firms do not know well how to design the contract because they have no way to access private information of vendors, so vendors are likely to conduct out of constraint. This work combined relational contract with conventional one to establish an integral management mechanism. It at first gave the cost-increment analysis method to improve relational contract design so that it would facilitate outsourcing contract to work efficiently. Then analyzed the relation between vendor profit-gaining and its varied conducts, and built up the method of contract design to allow vendor gaining profit only when it conducts following its true types. In the method, the private information was sorted into a variety of conduct types and universal decision was found out aiming all the types. The mechanism effectively incents and constrains vendors without relying on private information.

Conceptual framework on risk management in IT outsourcing projects

Outsourcing is becoming a trend nowadays. Malaysia also takes this opportunity and embraces in IT outsourcing. As a result, Malaysia has been ranked as the third most attractive destination for outsourcing after India and China. Despite increasing number of organizations that involve in IT outsourcing, it should be noted that IT outsourcing is not a panacea. It comes together with risks. The risks, if not managed, will lead to outsourcing failure. Even though other areas have adopted risk management as their patching material, the application of risk management in IT outsourcing was not quite accomplished. Risk management should be conducted in IT outsourcing as it will foresee risks that might disturb the smooth flowing of IT outsourcing and prevent or reduce the impact of risks if they occur. It should be conducted at early stage and should be continuously performed until the end of outsourcing life cycle. This paper presents a conceptual framework to manage risk in IT outsourcing. The framework will cover the process in risk management in IT outsourcing as well as the risk management principle that should be conducted at each and every phases of IT Outsourcing life cycle. A set of questionnaire was distributed to organizations to validate the conceptual framework. The findings showed that the consequences of not practicing risk management would result in poor controlling and managing of IT outsourcing projects. Based on the findings, future empirical and exploratory survey will be conducted and risk management in IT outsourcing framework will be developed.

Explaining Outsourcing Failure

This paper attempts to explain the phenomenon of outsourcing failure by integrating the Relational View and network-/graph theory. Whereas traditional transaction cost theory focuses on problems of ensuring cooperation (motivation) in vertical client-provider relations, we advocate extending the notion of transaction costs to include cooperation and coordination issues in vertical and horizontal relations. Our model depicts organizational structure as a set of nodes and relations (graph). Upon outsourcing, a subset of nodes is removed from the graph. Transaction costs are incurred as a function of both the number of relations across organizational boundaries and the extent of cooperation and coordination problems pertaining to any single relation. We compare production efficiency and transaction cost effects of three types of outsourcing (domestic, offshore, and FDI) vis-a-vis integration to derive a set of testable propositions on the determinants of outsourcing failure and success. Emphasizing the complexity of coordinating a multitude of horizontal, collaborative inter-firm relations, our research sheds a new light on outsourcing failure.

How are Public Sector Organizations Managing is Outsourcing Risks? An Analysis of Outsourcing Guidelines from Three Jurisdictions

In the past few years the public sector has witnessed some of the most spectacular information systems (IS) outsourcing failures. Public officials have come under fire for sloppy management of IS outsourcing engagements. Citizens are demanding legislation to control outsourcing practice and more accountability from public sector managers. In an effort to better understand the context of IS outsourcing management in the public sector, we analyze the IS outsourcing guidelines of three public jurisdictions: Alberta, Canada; Queensland, Australia, and Texas, USA. These guidelines offer insights into how some public organizations approach managing the risks inherent in the practice of IS outsourcing. In this paper we review the research literature on IS outsourcing to develop a risk framework and use it to analyze the guidelines. We use a content analysis methodology to identify the IS outsourcing risk factors and management mitigation strategies addressed by the guidelines. Our findings indicate that IS outsourcing risk factors are widely acknowledged in the literature but are not fully addressed in the IS outsourcing guidelines that public sector managers use for decision making and the management of IS outsourcing engagements. Our findings point to the need for better guidelines and more support for public sector managers who must make costly IS outsourcing decisions.