Information Technology Outsourcing in Australia

Abstract

In Australia, popular discussion of the growing market in outsourcing information technology (IT) has been spurred by decisions of several large companies and the Australian government to outsource IT operations, but there has been little academic research into outsourcing in Australia. This chapter reports research into Australian IT outsourcing based on data collected in 1999. The research objectives were to measure the incidence of outsourcing among Australian firms, identify the functions outsourced, the reasons why managers considered outsourcing, the costs and benefits of outsourcing, possible changes in modes of and motivations for outsourcing and factors that are associated with successful outsourcing arrangements. The nature of and motivations for outsourcing have evolved; for example, cost saving is not (if it ever was) the prime motivator. The three most important factors driving outsourcing in Australia are access to skills, improved service quality and increasing managers’ ability to focus on core business activities. Decisions to outsource are weakly correlated with company size, but are not related to industry sectors. The factors most associated with successful IT outsourcing were the cultural match between the vendor and client, and the nature of the contractual arrangements—partnerships are more fruitful than rigidly interpreted black letter contracts. Outsourcing (not just of IT) is becoming increasingly popular; we suggest reasons for this and propose further research. The research used quantitative and qualitative data. A survey was used to collect data from 277 informants, and six interviews were used to explore managers’ reasons for outsourcing and relate these to the success of outsourcing arrangements. Outsourcing of many business processes (not just IT) is becoming increasingly frequent in Australia. Where appropriate, themes are illustrated by outsourcing activities other than IT.