IT outsourcing - advantages and risks: a study of ISPs in
Tehran

Abstract: Managers in developed countries are increasingly interested in outsourcing
as a potential source of competitiveness and value creation. Outsourcing
has also attracted more attention in the complex field of New Service
Development in order to simplify this process. One of the most useful
outsourcing activities in service sector is IT/IS outsourcing. Despite the
considerable growth of information system/technology outsourcing in recent
years, this trend is the object of strong criticism. In order to analyze
the customer – supplier relationship in IT/IS market, several subjects
should be clarified. This research is going to determine the customers
perceived risks of IT/IS outsourcing and also the rate of awareness about
potential of IT/IS outsourcing while the customers are Iranian Internet
service providers (ISPs) and the suppliers are third parties who provide
different IT/IS services for their customers. The research is performed
through a structured interview from 20% of ISPs managers in Tehran. The
results show that the concerns for any IT/IS outsourcing decision is mainly
due to “An excessive dependence on the provider”, “Security
issues”, “Strategic alliance failure”, “Hidden costs in the contract”
and “Not achieving to desired customization”. While 93.3% of respondents
are aware at least from one advantage of IT/IS outsourcing. The major
advantages of IT/IS outsourcing from ISP managers point of view
were “Reducing/Controlling the general cost”, “Overcoming lack of internal
resources” , “Shortened time to market”, “Focus on core
competence”, “General risk reduction”, “Improving service quality”
and “Strategic repositioning”. Nevertheless, there were some
characteristics of ISPs (mainly their size) which determine their perceived
risks and benefits