Analysis of a large-scale IT outsourcing "failure": what lessons can we learn?

Rouse, Anne and Corbitt, Brian 2006, Analysis of a large-scale IT outsourcing "failure": what lessons can we learn?. In Kehal, Harbhajan and Singh, Varinder (ed), Outsourcing and offshoring in the 21st Century: a socio-economic perspective, Idea Group Publishing, Hershey, Pa., pp.447-464.

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Title Analysis of a large-scale IT outsourcing "failure": what lessons can we learn?
Author(s) Rouse, Anne
Corbitt, Brian
Title of book Outsourcing and offshoring in the 21st Century: a socio-economic perspective
Editor(s) Kehal, Harbhajan
Singh, Varinder
Publication date 2006
Chapter number 20
Total chapters 20
Start page 447
End page 464
Total pages 18
Publisher Idea Group Publishing
Place of Publication Hershey, Pa.
Keyword(s) Case Study
IS Project Failures
IT costs
Outsourcing of IS
Summary Much of the research that has been carried out into outsourcing is based on relatively successful case studies. Yet drawing inferences from case studies when those with largely negative outcomes rarely see the light of day represents a significant problem. When negative cases are systematically unrepresented, there is less opportunity to subject theory to scrutiny. This chapter goes some way towards redressing this trend, by reporting on a large scale “selective” outsourcing arrangement that has been publicly described as a failure — the Australian Federal Government’s “whole of government” IT infrastructure outsourcing initiative. This initiative, originally promoted as likely to lead to a billion dollar saving, was abandoned early in 2001, after a damning public report by the Australian Auditor General. However, a detailed study of the initiative suggests that the “failure” occurred despite the project adhering to many of the recommended guidelines for successful outsourcing that had been derived from earlier case analysis. The findings have important implications for decision makers confronted with outsourcing choices. The study suggests that the risks of outsourcing are often downplayed, or ignored in the rush to reap the expected benefits. The study also suggests that expectations of savings from outsourcing IT are often substantially higher than those that have been empirically confirmed in the field. Decision makers are advised that key assumptions about costs, savings, managerial effort, and the effects of outsourcing on operational performance might be incorrect, and to plan for their outsourcing activity accordingly. They should pay particular attention to coordination and transaction costs, as these tend to be overlooked in the business case. These costs will be magnified if “best in breed” multiple-vendor outsourcing is chosen, and if contracts are kept short. Decision-makers are also warned of the difficulties they are likely to have at the end of an outsourcing contract if there is not a large and robust pool of alternative vendors willing to bid against the incumbent.
ISBN 159140875X
Language eng
Field of Research 080609 Information Systems Management
Socio Economic Objective 970108 Expanding Knowledge in the Information and Computing Sciences
HERDC Research category B1 Book chapter
Copyright notice ©2006, Idea Group Publishing
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Document type: Book Chapter
Collection: Deakin Graduate School of Business
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