The influence of IT outsourcing on organisational success and innovation

Abstract

This study investigates the domain of IT outsourcing (ITO), focusing on its implications for organisational success or failure, and its impact on innovation. Through a comprehensive literature review, significant gaps were identified, including a lack of empirical studies assessing ITO outcomes for organisations, how ITO impacts innovation, and if an organisation’s industry impacts ITO success. In response, three research questions are formulated to address the identified gaps, leading to the creation of a novel conceptual model designed to evaluate the influence of ITO on organisations. Employing a deductive approach, the model informed a triangulation research approach, combining quantitative and qualitative data. A survey garnered responses from 112 senior IT professionals across three industries, complemented by eight interviews with senior and executive management. Findings indicate a concerning rate of perceived ITO failures and reveal that the specific industry of an organisation can affect ITO success. The study also concludes that ITO adversely impacts organisational innovation. Based on these insights, eight best practices are recommended to enhance ITO outcomes, including market research on vendor skillsets and experience, the establishment of well-structured contracts, adherence to SLAs without grace periods, shorter project durations, multi-sourcing strategies, bolstering internal IT capabilities, helping employees to understand ITO value, and rigorous governance. Acknowledging its limitations, this paper calls for future research involving broader industry representation and larger sample sizes to validate and expand upon these findings.