Title:
Understanding Drivers
of IT Backsourcing Decision
Abstract: This
paper
examines the decision to backsource IT functions. Even though
outsourcing
is a popular means of meeting internal IT needs, press reports and
statistics
suggest that backsourcing is becoming increasingly common. When
organizations
implement a backsourcing strategy, they incur high rebuilding fees and
expensive
contract termination fees. Not only that, reverting back to the once
abandoned strategy of having internal provisioning of IT services
reflects
negatively on the organizations’ previous strategic decision and
judgment.
Still, many organizations choose to undertake the challenge of
internalizing
the once-outsourced functions. An interesting question, therefore, is
what
factors drive organizations towards backsourcing. Based on press
reports
of actual backsourcing cases, factors that lead to backsourcing
decision
were identified. Just as outsourcing decision, organizations choose
backsourcing
to capitalize on strategic opportunities. Organizations also backsource
due
to internal power and politics interplay and the failure of outsourcing
contract
in meeting expectation. Changes in vendor organization and vendor
strategy
may also trigger backsourcing decision.
Author: Wong Siew Fan