The Evaluation of the Outsourcing of Information Systems: A Survey of Large Enterprises

This research used an employee performance measurement questionnaire (PMQ), to investigate types of Information System (IS) outsourcing, the constructs and practical indicators used to evaluate IS outsourcing performance. The differences between perceptions of the performance of IS outsourcing with respect to various organisational characteristics was also considered. The result of the survey reveals that most large corporations develop and maintain their own IS; the next largest group delegates initial IS development to software companies and takes over IS development, suggesting that the IS outsourcing market still has growth potential. With regard to performance evaluation, the majority of the large Taiwanese corporations do not perform evaluations on a regular basis while some other corporations evaluate performance every six to 12 months. Evaluating the performance of IS outsourcing is not common practice among large corporations in Taiwan. Even companies that do evaluate performance tend to do so on an irregular basis, implying that large domestic corporations tend to evaluate IS outsourcing as required. Additionally, MANOVA testing showed the following six organisational characteristics to significantly influence perceptions of IS outsourcing performance: 1. education level of evaluator, 2.types of industry, 3. degree of IS outsourcing, 4.frequency of evaluation of performance of IS outsourcing, 5.style of communication between the outsourcer and the contractor, 6.competency of the evaluators involved in IS outsourcing decision making. 1 Introduction Outsourcing Information Systems (IS) enables organisations to remain focused on their own strategies, while giving aspects of their business to experts from outside and represents a trend in management (Pepper, 1996). Willcocks et al. (1995) have demonstrated that in Europe and North America inappropriate evaluations before/after outsourcing, and inadequate contracts are the main causes of large hidden costs and the failure of outsourcing. Continuous supervision and proper adjustment to the development of the system not only ensure a successful outcome but also reduce the waste of resources (Keen and Scoot, 1978). The necessity of having an effective performance measurement system with indicators is rapidly growing, alongside the implementation of IS outsourcing. Finding an appropriate performance measurement system for evaluating IS outsourcing has become increasingly important in today's competitive environment. Post outsourcing control and evaluation measure the extent to which goals are reached as references for new system development. This kind of feedback is critical to enable an enterprise to determine the adequacy of any decisions made and to refine its strategy according to the results of a review, so that the development of an IS meet the needs of a company and ensures competitiveness (Liu and Lin, 1995). Outsourcing partnerships, theories of organisation, social exchange theories, partnership theory and knowledge sharing (Lee, 2001 ) have been the subject of numerous outsourcing studies (Kern and Willcoks, 2000; Lee, 2001). Organisational structure, size of market, and structure of market have been shown to markedly affect the relationship and negotiations between the parties involved (Applegate and Montealegre, 1991 ; Kern and Willcoks, 2000; Sabherwal, 2003). The primary aims of this study are as follows: 1.To determine the practice of IS outsourcing in industries and the performance evaluation of IS outsourcing, using a survey. 2.To establish a complete set of IS outsourcing performance indicators empirically 3.To discuss the perceived discrepancy between organisational characteristics and IS outsourcing performance indicators. Previous studies have claimed that 70% of companies that attempt to implement performance measurement systems fail (McCunn, 1998). The contribution of this study provides a guideline for designing an appropriate IS outsourcing performance evaluation system to increase an enterprise's performance and competitiveness, for the benefit of those who are implementing, or intend to implement, IS outsourcing. …