Global IT/IS Outsourcing: Expectations, Considerations and Implications

ABSTRACT This paper discusses the issues of global IT/IS outsourcing from four interrelated aspects: forming an appropriate global IT strategy, using proper global IT platforms, managing international data sharing, and surviving the cultural environment. It aims at providing a comprehensive framework for both the global outsourcing providers and clients to fully understand and evaluate the expectations, considerations and implications of global IT/IS outsourcing, so that they can form a successful long-term strategic alliance. INTRODUCTION Globalization has been a major driving force of world economy in the past decade, While the global market offers unprecedented opportunities for businesses to grow rapidly, it also presents more challenges to business managers. One of the challenges is "IT/IS outsourcing," which can be broadly defined as the practice of turning over part or all of an organization's IT/IS functions to external service providers. While "IT/IS outsourcing" has been widely addressed, the issue of "global IT/IS outsourcing" has not received the same research attention due to its unique quality of involving foreign vendors at remote geographic locations under largely different cultural settings. IT/IS development is extremely high-cost, labor-intensive, and skill-intensive. It also faces rapid changes of technology. This makes it even more difficult to find a truly competent and reliable foreign contractor. Global outsourcing firms must establish realistic expectations and recognize all constraints and risks so as to make wise decisions. On the other hand, in order to capture the outsourcing opportunities and maintain long-term relationships, foreign vendors also need to understand the global outsourcing expectations and the decision processes. The purpose of this paper is to provide a comprehensive framework for both the global outsourcing firms and outsourcing providers to fully understand and evaluate the expectations, considerations, and implications of global IT/IS outsourcing, so that they can form a successful long-term strategic alliance. Ives and Jarvenpaa (1991) proposed that global IT management has four primary dimensions, including (1) forming an appropriate global IT strategy, (2) using proper global IT platforms, (3) managing international data sharing, and (4) surviving the cultural environment. These four dimensions will become the frame of reference for our discussions in this paper. GLOBAL IT/IS OUTSOURCING STRATEGY Expectations. In the past, firms have mostly adopted a global strategy that gives foreign subsidiaries considerable autonomy. These autonomous units are easy to set up and maintain, but lack control of operational costs. There is also a severe problem of system compatibility and data redundancy. Recently, with the increasing power and speed of information technology, firms have started to pursue a globally integrative strategy that seeks to maximize global interconnectivity and data sharing global information systems (GIS) (Venkatraman, 1998). However, the implementation of GIS requires a very high degree of technical expertise and cultural awareness, thus many firms have decided to outsource part or all of its IT/IS function to foreign vendors. One of the benefits of developing collaborations with foreign partners is the potential for the emergence of innovative opportunities. Dealing with a specialized vendor may create market opportunities or partnered join-- ventures. Some outsourced products or service can be tailored and marketed locally (Lacity, Hirschheim and Willcocks, 1997). But to maintain a high level of system integration and to fully realize the GIS benefits, proper global outsourcing strategy and outsourcing partners have to be carefully considered. Considerations. Case studies showed that firms most disappointed with outsourcing usually followed a total outsourcing strategy (e.g., outsource entire IT/IS functions at one shot), whereas firms most pleased with outsourcing generally pursued a more controllable selective or progressive outsourcing strategy (Wysocki and DeMichiell, 2001). …