A comparative study of the domestic and offshore contexts of IT Outsourcing: a risk based perspective

Abstract: IT Outsourcing (ITO) nowadays is a common initiative among companies across different business branches. Technological advancements have made IT a broad field of application which requires extensive operation by IT departments of any company. The companies need to remain competitive in the marketplace and in order to do that they have to free up their resources from routine IT tasks. This can be achieved through ITO. Companies have the choice to engage either in domestic or offshore ITO operations. Those operations are associated with certain amounts of risk if the operation is not managed properly. The nature of ITO risks is comparable in both ITO contexts while at the same time some risks are specific for one of the ITO contexts. Usually the offshore ITO operations are seen as more dangerous and prone to failure. The purpose of this study is to identify decision parameters in choosing between different IT Outsourcing alternatives. The purpose is achieved through finding out whether there are differences between the offshore and domestic context of ITO based on risk comparisons. A framework of risk profiles for both ITO contexts was developed. Risk severities were assessed through qualitative interviews with experts within the ITO field. It was discovered that from the risk perspective there are differences between the two ITO contexts. The empirical findings suggest that ITO operations are prone to similar problems in both ITO contexts. Findings further imply that companies must exactly know what they have and what they want to outsource and create a viable relationship with the IT supplier disregarding the ITO context.