Etapa de postlectura, grupo experimental

According to Lacity & Willcocks (2000), the top reason for rejecting outsourcing is that the outsourcing option was deemed to be more expensive than insourcing. This finding makes sense because respondents cite cost savings as the number one expected IT outsourcing benefit. Thus, if cost savings cannot be expected, then outsourcing is likely to be rejected. The next most common reason for rejecting outsourcing is that a supplier appears to provide no additional benefits over insourcing — presumably such benefits would not be limited to costs, but would apply to service as well. Authors Hirschheim & Lacity (2000) contended that outsourcing evaluations are triggered from the frustrations caused by different expectations and perceptions of IT performance by each

stakeholder. They offered a sobering thought: ‘Even if insourcing is chosen over outsourcing and the expected cost savings are realised, there is no guarantee that it will be perceived as successful due to the very different expectations held by the various stakeholders. Success is related to who is doing the evaluating’ Hirschheim & Lacity, p.107 (2000).

Harry Glasspiegal18 stated that ‘When the contract no longer fits the user’s needs, both sides will need to sit down and renegotiate the contract. Very few users exercise the termination clause of the contract because they’re too dependent on the outsourcer’ — reported in Menagh (1995) and widely quoted, for example by Lacity & Willcocks (2000). Futurists such as Cullen Murphy, the Vanity Fair US editor, point to a loss of faith in government organisations regarding the adoption of outsourcing and dangers of privatisation. He predicts that lines of responsibility will become blurred or non-existent, resulting in a gradual decline of responsibility (Murphy, 2008). This reasoning can be applied equally to large organisations.

An important ingredient in business is the human resources within an

organisation and the culture of the organisation. Outsourcing and lay-offs can seriously affect employee morale. Articles in the popular press often berate the damage

companies do to the companies themselves, by undermining the productivity and teamwork of survivors of the lay-offs caused by outsourcing (Uchitelle, 2006). Some authors such as Bendoly & Schultz (2003) talk of factors in behavioural theory as a key element in empirical models of operational dynamics and performance. Authors such as Baines (2004) point to the eroded competitive edge that can undermine a business. However, these human factors or ‘soft’ key performance indicators are normally not part of outsourcing business cases due to difficulties in quantification. Personnel within an organisation typically belong to different organisational units with different

objectives and values (Gefen & Ridings, 2003).

Some organisations struggle to demonstrate business gains from information technology investments because their IT portfolio management is inadequate (Gupta, 2007). Moving IT functions to third parties does not remove the need to manage IT. Some companies such as BAE Systems19 are implementing moves to reverse outsourcing back to in-sourcing as this serves their strategic business direction to further business capability and business direction with the British Government (Farber, 2008).

Laplante et al (2004) noted that outsourcing is not cheap and that in most cases offshore outsourcing is less accessible to smaller organisations, due to the costs involved in setting up offshore locations, management of the relationship and ongoing overhead costs. The major consideration is the loss of control over data or ‘intellectual property at risk’ (Butcher, 2007). Laws and the judiciary in different countries have differing practices, and the levels of remedy and vindication when problems arise vary from nation to nation.

Verbal communication and data communications are considered to be major disadvantages for offshore outsourcing (Apte et al., 1997). Geographical obstacles can be overcome with modern tools such as email, video conferencing and collaboration software, yet offshore firms typically station some members onshore. The physical proximity in IT development allows for rapid interaction, better communication and serendipitous work from casual meetings — a factor seldom evaluated which should not

be underestimated. However, outsourcers claim that quality certification, rigidity in process and procedures with quality standards negate this requirement for physical proximity (Mitra, 2007).

As organisations lose expertise to outsourcing partners, the situation often leads to compounded dependence. A key ingredient for sustaining industry initiative is a continual learning and development of new sources of the knowledge and skills needed to develop next-generation products and technologies (Lei, 2006; Dibbern, et al. 2004; Lacity & Willcocks, 2000). A major concern is discussed by Apte et al. (1997) with regard to the monitoring of performance and the explanation of the business specifications to the outsourcing partner. The effect of limited outsourcing can lead to additional costs. Organisations outsource more functions and services which compounds the situation, increasing reliance on the outsourcing partner and the loss of internal expertise (Olson, 2006; Goles, 2001; Lonsdale & Cox, 2000). An example of this is when IBM helped to create a ‘virtual organisation’ in the 1980s by outsourcing PC development. A happy ending failed to materialise when suppliers such as Intel and Microsoft started selling their products to a number of IBM’s competitors (Lonsdale & Cox, 2000). As a result, IBM no longer possessed the internal skills needed to bring new PCs to the market. By 1995 IBM accounted for only 7% of the PC market share and finally in 2004 they sold the PC group to former rivals Lenovo (Spooner & Kanellos, 2004).

Questions arise about ethics and unique foreign laws, as has been highlighted in India with the disclosure that in 2008 Satyam, the fourth-largest Indian outsourcing company, had been inflating its balance sheet by more than US$1 billion. Satyam included one-third of the Fortune 500 companies among its clients including Australian clients such as Qantas, NAB and Telstra. Satyam’s auditing firm, PricewaterhouseCoopers (PwC) was not affected due to laws in India whereby individual auditors are held liable and face disciplinary action, rather than Pricewaterhouse as an organisation. The fact that two auditors signed off the accounts means that compensation is claimed against the individuals, requiring Courts to apportion blame (Satyam April, 2009; CNN Money, 2009; Lekakis & Easdown, 2009). With Satyam’s situation comes uncertainty as to the cost of changing service, the loss of business knowledge and business intelligence.

Authors such as Brigham (2005), Konana (2004) and Waheed & Molla (2004) have proposed that moving jobs away from advanced countries is unsustainable, because

these jobs can and will leave outsourcing countries such as India for the same reasons they came to the country in the first place (lower cost and wages). Consultancies such as Frost & Sullivan (2004) consulting company estimate that in 2004 a ‘total of 826,540 IT jobs were expected to be exported by France, Germany, Hong Kong, Japan, the United Kingdom and the United States to lower-cost countries, amounting to a combined value of US$51.6 billion’. In a newspaper article from 2008 Giridharadas (2008) points out that IT outsourcing makes up a paltry 3.2% of India’s overall Gross Domestic Product (GDP). Day by day, most of the organisations that perform outsourcing work are further outsourcing this work to ever lower-cost countries.

India remains in China’s shadow. Because of relatively weak infrastructure, a fractious political climate and other factors, India’s foreign trade and investment figures are dwarfed by those of China. In China direct foreign investment amounted to nearly US$70 billion in 2006 (Timmons, 2008). Because of increasing business travel demand to India, American Express predicts that hotel room rates in India will increase more than anywhere else in the world next year, with predicted increases of 34−38% for mid-range hotels and 38−41% for the best hotels (Timmons, 2008). This demonstrates the rising cost of doing business offshore.