A US Client's Learning from Outsourcing IT Work Offshore

Joseph W. Rottman () and Mary C. Lacity ()
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Joseph W. Rottman: University of Missouri-St. Louis
Mary C. Lacity: University of Missouri-St. Louis, One University Boulevard, St. Louis

A chapter in Information Systems Outsourcing, 2009, pp 443-469 from Springer

Abstract: Offshore outsourcing is the outsourcing of information technology (IT) work to a 3rd party supplier located on a different continent than the client.1 Although client organizations have outsourced manufacturing services offshore for decades, the practice of offshore outsourcing IT services is still maturing. The offshore IT outsourcing (ITO) market (primarily India) will conservatively represent about 25% of the global $56 billion ITO market by 2008 (E-business Strategies, 2006). Forrester, McKinsey and NASSCOM predict that India alone could grab $142 billion of the ITO market by 2009 (E-business Strategies; Ross, 2004). Although there have been recent reports that India is struggling with high turnover, wage increases, and infrastructure issues associated with rapid growth (McCue, 2005; Srivastava, 2005), evidence suggests that India will continue to be a dominant player in the global ITO market (Carmel & Tjia, 2005; Engardio, 2006; Minevich & Richter, 2005). Western clients, particularly in the US, are attracted to offshore outsourcing to India (and other destinations) because of the promised benefits of lower IT costs, faster delivery speed, the ability to focus in-house IT staff on more higher-value work, access to supplier resources and capabilities, and process improvement (Carmel & Tjia, 2005). But juxtaposed to the promised benefits of offshore outsourcing, many IT executives we interviewed struggle to realize its full potential. Although offshore outsourcing is technically possible because any work that can be digitized can be moved, there are many managerial challenges. One common complaint was that overall cost savings was less than anticipated due to the high transaction costs associated with finding suppliers, coordinating, and monitoring work done offshore. Other common complaints were that quality was initially poor, delivery was slow, and personnel issues such as high supplier turnover interfered with success (Lacity M.C. & Rottman J.W., 2008).

Keywords: Social Capital; Successful Project; Project Rating; Small Supplier; Facilitate Knowledge Transfer (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-88851-2_20

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DOI: 10.1007/978-3-540-88851-2_20

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