Governance of complex IT outsourcing partnerships

Deciding whether to outsource information technology (IT) or to keep providing these services oneself is a key management responsibility. Once a decision to outsource has been made, relations with external providers have to be established and managed. IT outsourcing governance therefore encompasses those structures and processes that should ensure the delivery and utilization of IT services complying with the objectives of the participating organizations. The authors have carried out a study on governance practices in the management of complex IT outsourcing partnership relations. For this research, fourteen international case studies on European-based companies with pan-European or global operations were used. Working on the basis of the relevant socioorganizational, economic, and competition-based reference disciplines the practices found in these case studies were analyzed, and a framework was developed comprising ten governance factors. The major building blocks of this framework are the outsourcing company, the IT service suppliers, and the relations between them. The case studies used here all concern successfully managed complex IT outsourcing relations. Their yearly contract values varied from $0.4 million to $550 million. At the end of the contract period all contracts were renewed except for two, which were discontinued because of external market reasons. The very success of these outsourcing relationships provides an opportunity to analyze the problems and challenges met in such partnerships. As it turned out, any trouble that was experienced was always caused by a lack of attention paid to the governance factors of the framework.