Why outsourcing (especially of IT) fails - and how to fix it

08 December 2014

Why does IT outsourcing always fail?

"HERE is Edward Bear, coming downstairs now, bump, bump, bump, on the back of his head, behind Christopher Robin. It is, as far as he knows, the only way of coming downstairs, but sometimes he feels that there really is another way, if only he could stop bumping for a moment and think of it.

"And then he feels that perhaps there isn't."

 

If we followed the systems thinking maxim 'the purpose of a system is what it does', we might conclude that outsourcing of information and communications technology purposefully and predictably increases costs and frustration and reduces satisfaction. The fact that the industry continues to survive is testament not to human stupidity, but to the underlying potential of this kind of relationship, and to the intelligence, hard work and bloody-minded determination to deliver despite the system of the many dedicated professionals involved in outsourcing, provision, and at the delivery level in our organisations.

In order to reduce spend and improve access to the latest technology and approaches, many organisations are outsourcing the provision of their information and communications technology. While these arrangements are sometimes successful, there are some underlying organisational and process reasons for failure from a systems thinking perspective. And there are some systemic ways these problems might be addressed.

 

Benjamin Taylor, Steve Hales, and Tony Korycki have written a white paper on IT outsoucing 'gone bad'. The overview and a handy 'top ten tips' guide is here, and the full white paper is here

 

The core elements of outsourcing failure identified are:

 

  • Different cultures not addressed.
  • The 'silent conspiracy' of those procuring and those bidding to 'turn a blind eye' to the mismatch of expectations on price and quality.
  • The incoherence of the new outsourced service as a business in its own right. 
  • These organisational failures can create vicious cycles:

 

    • lack of management supervision due to the outsourced management focusing on sales, new requirements, fire-fighting, or pacifying clients, which takes more time away from supervision and creates more crises;
    • lack of co-ordination within the outsourced service because the account is structured by reference to the outsourcing company's requirements without sufficient planning to make the outsourced service coherent in its own right.
  • Relationships created on treacherous foundations by the sales/procurement process which lead to a breakdown of trust and increase in relationship costs.
  • Failure of basic technology operations processes.