Information Technology Outsourcing in Australia

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 IT outsourcing in Australia. This paper reports on research into Australian IT outsourcing based on data collected in 1999. The primary research objectives were to identify the IT functions that were outsourced and the reasons for outsourcing. Secondary research objectives were ascertaining the incidence of IT outsourcing amongst Australian organisations, the costs and benefits of IT outsourcing, possible changes in modes of and motivations for IT outsourcing and factors that are associated with successful IT outsourcing arrangements. The research used quantitative and qualitative methods. A survey was used to collect data from 277 informants. Six interviews were used to explore managers’ reasons for outsourcing and relate these to the success of 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 were weakly associated with company size but not with industry sectors. The factors most associated with successful IT outsourcing were the cultural match between the service provider 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.