Evaluating the Driving Factors and the Suppressing Factors Related to IS Outsourcing in Four Finnish Information Systems Organizations

Abstract. This paper presents the results of a research project, in which the current situation related to the information systems (IS) outsourcing practices in four Finnish information systems development organizations was evaluated. The evaluation was based on employees’ own perceptions, and it consisted of analyzing the current IS outsourcing practices in the case companies, driving factors related to IS outsourcing, suppressing factors related to IS outsourcing, and an evaluation of the company’s readiness to utilize IS outsourcing. This qualitative study used grounded theory as the research method. The analysis elicited that the IS outsourcing decisions in these case companies have been mostly based on cost-related factors. The cost pressures are coming both from the shareholders and the customers. Cost reduction seemed to be the major single driver for outsourcing information system development (ISD) work. Besides, even if most of the case companies have already outsourced parts of their ISD projects, based on the interviewees ’ expressions the cost savings in these projects have not been remarkable. In some cases the total costs of the project have been estimated to be even higher. However, the case companies seem not to be familiar with the cost structure of the outsourced projects. The interviewees also felt that their company’s ISD practices were not ready for the use of outsourcing. The level of English skills and the lack of domain knowledge among subcontractors were the other mentioned suppressing factors related to IS outsourcing.