Understanding IT Backsourcing Decision

Even though outsourcing is a popular means of meeting internal IT needs, press reports and statistics suggest that the decision to backsource is becoming increasingly common. Some organizations backsource upon expiration of contracts; others terminate existing contracts to implement backsourcing. In both cases, organizations incur high rebuilding fees and expensive contract termination fees. Still, many choose to incur these expenses and undergo the trouble of internalizing the once-outsourced functions. This makes backsourcing decision an interesting strategic turnaround. A review of existing literature shows that backsourcing decision has received little attention. This paper examines factors that motivate the decision to backsource. Based on four case studies, contributing factors to backsourcing decision are compared and contrasted. The findings suggest that organizations backsource to correct existing problems and to harvest new business opportunities. Specifically, when outsourcing contracts fail to meet expectations, organizations backsource to rebuild internal IT capabilities. Organizations also backsource when changes occur to their strategic goals, organizational structure, and IT role. Changes from external business environment such as mergers and alliance formation also contribute to backsourcing decision

Bringing IT Back Home: Developing Capacity for Change

IT outsourcing is a common means of meeting internal organizational IT needs today. Gartner Dataquest estimated that worldwide IT outsourcing will grow to $255 billion in 2008. Perhaps surprisingly, given its popularity, IT outsourcing has a high failure rate. When outsourcing relationships fail, organizations are forced to make costly changes to their sourcing strategy. One strategy is to bring the outsourced IT components back into the organizations and rebuild the entire IT department. The challenge is, how should organizations reabsorb these outsourced IT components to build the internal IT department? What types of capabilities do organizations need to develop or acquire to ensure a successful backsourcing process? This paper focuses on addressing the issue of IT backsourcing following a failed outsourcing relationship. It aims at explaining how organizations develop and acquire ‘capacity for change’ to facilitate the backsourcing process. The value of the study lies in the identification of useful strategies that facilitate the development of ‘capacity for change’. These strategies serve as best practices for future backsourcing efforts

East, west, would home really be best? On dissatisfaction with offshore-outsourcing and firms' inclination to backsource

With so many firms seemingly disenchanted with their experiences of offshore outsourcing one may well wonder why relatively few of these firms choose to ‘backsource’ – i.e., bring their offshored operations back in-house. Of all sourcing decisions that firms take, backsourcing is perhaps the least understood and least researched. In this article we draw on the behavioral theory of the firm (BTF) to propose a new model in which differences in firms' inclination to backsource are ascribed to the level of dissatisfaction at not having achieved offshoring aspirations. Building on BTF concepts of bounded rationality, problemistic search and satisficing decisions, the model suggests that how this dissatisfaction with offshoring affects a firm's inclination to backsource is dependent on managerial expectations regarding the technical challenges of reintegrating activities and the possible financial losses and decline in quality following backsourcing, as well as on internal political support and financial slack for backsourcing. SEM analysis of data from U.S. and U.K. firms shows support for the model. The study highlights the importance of recognizing the role of managerial perceptions and biases and subgroup political relations in shaping firms' backsourcing behaviors. We also discuss the study's contributions to research and practice

Understanding knowledge re-intergration in back sourcing

Backsourcing is the process where a client firm brings previously outsourced services from a supplier back in-house. Traditionally, the existing literature on backsourcing has focused on how firms reach the decision to bring back previously outsourced services. In this paper, we move beyond focusing on IT backsourcing decision to explore the process of backsourcing from a knowledge perspective. The predominant view in the relevant literature argues that the re-acquisition of knowledge by a client firm during backsourcing takes place similarly to knowledge acquisition by a supplier in a typical outsourcing process. In this paper, we argue that knowledge re-integration in backsourcing occurs differently from outsourcing projects mainly because of the existence of knowledge asymmetries between the client and the supplier. By examining seven backsourcing events, we reveal that knowledge transfer and re-integration in backsourcing emerges as a coordinative activity, complementing knowledge transfer mechanisms reported in the IS outsourcing literature

Adding experts’ perceptions to complement existing research on information systems backsourcing

This paper extends the existing literature on information systems (IS) backsourcing by the perception of practitioners. For this purpose, we conducted a series of qualitative, semi-structured interviews with IS sourcing experts. The interview questions focused on the participants’ perceptions and experiences with the topic, on identifying reasons for and against IS backsourcing, and on revealing relevant trends pertinent to IS backsourcing. We then compared those findings with two previously conducted comprehensive literature reviews on academic and practitioner literature on IS backsourcing. By following this approach, we contribute to the existing research by verifying previous findings, for example, the most important reasons why companies decide in favor of IS backsourcing. Additionally, we were able to enhance previous contributions as we highlight the significance of differentiating between the scope of IS backsourcing by looking at the underlying services which are potentially backsourced. Further, we identified the importance of managers’ personal preferences as an additional reason for IS backsourcing, for example, based on personal experiences or a perceived need for change. Based on our findings, we created a comprehensive overview of all aspects connected to the IS backsourcing process and derived opportunities for further research to contribute to the IS backsourcing research agenda

Development of service desk function through insourcing

Nowadays, the majority of tasks and interactions of daily life and work are dependent on information technology (IT). Thus, any type of malfunction in IT hampers smooth work and can lead to significant problems. To cope with risky situations, the IT service desk function supports the daily operations of businesses, keeping them running smoothly. The service desk is a fundamentally valuable function for businesses and users because it serves to maintain users’ work efficiency by solving their IT-related problems. Moreover, companies need to thoroughly consider how they best obtain the service desk function. Insourcing is a business practice where a company takes back in-house previously outsourced operations. This is a worthy alternative because, as time passes, companies, as well as their needs, change. However, surprisingly few studies focus on insourcing arrangements. The aim of this thesis is to increase understanding about the development of the service desk function through insourcing by studying both theoretical and practical insights about the whole service desk insourcing process. The research questions are: what are the general requirements for the development of the service desk function through insourcing? How have the objectives of the service desk insourcing project been realized in the case company? This thesis consists of two main parts: a literature review and a single-case study. The theoretical part compiles essentials of service desk insourcing, including two main subjects: the service desk function and execution of insourcing. The empirical part examines and evaluates the service desk insourcing project at the case company. This company insourced its service desk in the summer of 2015 from an external service provider in the Nordic countries. The development project has been carried out quite recently, and this enables intriguing observations to be made of the whole service desk insourcing process and the people who participated in it. The empirical part has been conducted through a text analysis of the project and a questionnaire targeting the service desk employees. The findings underline that the service desk insourcing process includes a starting point, a service desk insourcing decision, the implementation of the decision, an evaluation of the results, and plans for the future. The main conclusion drawn from this research is that the service desk insourcing proved to be a successful move at the case company. This thesis further accentuates that service desk insourcing can offer notable benefits for companies, and offers a viable alternative for organizing and developing the service desk function to meet the changing needs of business.siirretty Doriast

Unlocking path dependencies in Business Process Outsourcing decision making

The objective of this study is to examine the decision process and outcome at the end of an outsourcing contract and how this process evolves over time. Despite the vast amount of literature in IS Outsourcing, little is known about the determinants, the process, the context and the outcome of the last phase in an outsourcing relationship. In order to better understand the complexity and dynamics of the contract termination or extension, we will apply a process-theoretic logic. It draws on Path Dependence Theory which suggests that path decisions are rooted in circumstances or events that take place in precedent phases of the outsourcing process. Based on the results of 21 Business Process Outsourcing (BPO) cases, our findings confirm the existence of significant path-dependencies which lead to sub-optimal economic results. Once a business process has been outsourced, the client organizations get literally locked-in the chosen path and tend to continue the contract with the vendor, even if initial expectations did not accrue. In order to better understand the pattern of such path trajectories, a process model will be presented which integrates distinct stages of the service delivery phase, the expectations of the client organizations, and internal as well as external stimulation events that lead to expectation gaps. These stimulation events are necessary but non-sufficient conditions for breaking the path. In addition, significant resource commitments from the clients’ perspective are required for breaking the path. If these commitments are not be made, the lock-in situation prevails, i.e. back-sourcing or a vendor change is unlikely to take place

Adding experts’ perceptions to complement existing research on information systems backsourcing

This paper extends the existing literature on information systems (IS) backsourcing by the perception of practitioners. For this purpose, we conducted a series of qualitative, semi-structured interviews with IS sourcing experts. The interview questions focused on the participants’ perceptions and experiences with the topic, on identifying reasons for and against IS backsourcing, and on revealing relevant trends pertinent to IS backsourcing. We then compared those findings with two previously conducted comprehensive literature reviews on academic and practitioner literature on IS backsourcing. By following this approach, we contribute to the existing research by verifying previous findings, for example, the most important reasons why companies decide in favor of IS backsourcing. Additionally, we were able to enhance previous contributions as we highlight the significance of differentiating between the scope of IS backsourcing by looking at the underlying services which are potentially backsourced. Further, we identified the importance of managers’ personal preferences as an additional reason for IS backsourcing, for example, based on personal experiences or a perceived need for change. Based on our findings, we created a comprehensive overview of all aspects connected to the IS backsourcing process and derived opportunities for further research to contribute to the IS backsourcing research agenda

Digitalization and IT Backsourcing: Towards a Transformational Model for the German Automobile Industry

Many organisations are now confronted with the new phenomenon of digitalization and are faced with the challenge of formulating and implementing a company-wide digital transformation strategy. Digitalization is associated with significant and extremely rapid change, and, in some cases, even the replacement of established business models. In manufacturing companies, this transformation is part of what is often termed Industry 4.0 and, in large companies, where the provision of information technology (IT) has hitherto been outsourced (in whole or in part), the introduction of these new technologies may be the catalyst for IT backsourcing. This entails bringing previously outsourced activities back in-house to regain ownership and control, in order to be more flexible and respond more effectively to rapidly changing demands. This study reviews the extant literature to assess existing thinking on the motivation for backsourcing, and then examines the potential role of digitalization in driving IT backsourcing in the German automotive industry. A provisional conceptual framework for subsequent research is put forward, using a knowledge-based view of the firm. The study is in its initial stages, but the model is being developed through more in-depth interviews to provide operational guidance for practitioners and subsequent research studies