Academic journal article JITTA : Journal of Information Technology Theory and Application

How Do Critical Success Factors Contribute to a Successful IT Outsourcing: A Study of Large Multinational Companies

Academic journal article JITTA : Journal of Information Technology Theory and Application

How Do Critical Success Factors Contribute to a Successful IT Outsourcing: A Study of Large Multinational Companies

Article excerpt

Abstract:

The increasing competition on the market means that multinational companies (MNCs) as well as many other organizations must take advantage of business improvements. This research addresses the critical success factors (CSFs) for the service receiver of IT outsourcing (ITO). It delivers a limited number CSFs that, with a correct implementation, can deliver favorable results that are necessary for an efficient ITO. These 11 CSFs, are described in detail, and a critical study is performed to identify the value they could create. In addition, the way the implementation of the provided CSF could mitigate the ITO risk has been analyzed using transaction cost theory. A priority list describing the order in which the CSFs should be implemented has been developed and enhanced with a recommendation as to when in the ITO life cycle each CSF should be implemented. A case study research with two MNCs with more than 20 years' experience in ITO has been used to prove the results.

Keywords: Information Technology Outsourcing, Critical Success Factors, Key Success Factors, IT Decision Makers, Large Multinational Companies, Transaction Cost Theory.

INTRODUCTION

IT outsourcing (ITO) is defined as a "decision conducted by an organization to delegate various IT functions and activities such as operations, support, development or maintenance to suppliers, who in exchange provide those services for revenues within an agreed period of time" (Lacity and Hirscheim 1993). The ITO should support an efficient use of IT in all business areas for the service buyer organization, which is the focus of this study.

Within the European Union today, ITO is widely used-about 58% of the companies in Sweden have outsourced some of their IT, and about 76% have done so in Denmark (Ohnemus 2007). According to a report from Gartner presented by Râdmark (2010), in the next several years there will be an increase of ITO in European countries, and smaller companies are expected to increase their ITO at a rate three times higher than before. In addition, cloud computing, which is a form of ITO, is expected to increase quickly. This research looks at IT services and excludes large IT application development but includes smaller adaptations of IT applications and infrastructure.

Bullón and Rockart (1981) propose the following definition: "Critical Success Factors (CSFs) - CSFs are the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department or organization. CSFs are the few key areas where 'things must go right' for the business to flourish and for the manager's goals to be attained" (Bullón and Rockart 1981, p. 7). Additionally, "Like goals and objectives, CSFs appear at various levels in the management hierarchy," as explained by (Bullón and Rockart 1981, p. 6). This definition is used in this paper; however, some synonyms are presented. In strategic management, key success factors (KSFs) are used, which are closely related to CSFs (Amberg et al., 2005, p. 1). As noticed by Amberg et al. (2005), "the terms CSF and KSF are often alternately used" (p. 2). Sutherland et al. (2009) define best practices (BPs) as "a specific process or group of processes which have been recognized as the best method for conducting an action" which corresponds highly with the proposal by Wagner et al. (2006): "routine uses of knowledge that are judged to be superior to others" (p. 2). The selected CSFs in this paper are those that belong to things must go right for a successful ITO and for the manager's goals to be attained and will ensure both successful competitive performance and minimal risk exposure. Therefore, in this described context, the terms KSF and CSF could be used synonymously. This paper refers to researchers who used different terms for CSF, and we want to use their result in the terms they have presented. The focused areas of the CSFs in this paper are business success and risk mitigation for the ITO. …

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