How Outsourcing Can Fail

Steve Hales
13 February 2018

Many organisations are choosing the outsourcing model for the provision and support of their Information and Communications Technology (ICT) services. It is widely believed that this offers the best solution to getting value for money as well as access to the latest technology and approaches. When it works, this is indeed the case, and the large businesses that provide outsource services certainly have the capacity and capability to provide this.

However, outsourcing is not always successful – it depends on the size and nature of the ICT services being outsourced. Outsourcing can also be successful or unsuccessful based on the precise nature of the services and on the identity of the client and outsourced service provider. Underlying this are a number of issues that can occur in any situation – although perhaps more prevalent in some – and this paper attempts to address them so that they may be avoided or, at least, mitigated.

Why ICT outsourcing can fail is a big subject. Of course, not all ICT outsources do fail, but many have inherent problems that take a long time to fix. In this paper, the focus is on medium/large ICT outsources, and on structural and process issues. Many of these will exhibit at least some of these points of failure.

Failure means different things to different parties: for the client organisation it usually means that the delivery of ICT services is not up to the standard expected; for the outsource supplier it usually means that the account is not (sufficiently) profitable, and may even be loss-making.

Underlying these outcomes is a wide range of organisational and process failures. It is rare for these to be the ‘fault’ of individuals – indeed, many individuals in both organisations can spend their whole working days struggling to mitigate and compensate for these failures. An investigation of the underlying systems and processes can help to identify remedies and preventative actions where such are possible.

It should be stressed that although many of the fixes can be described in a single sentence, implementing them can require a considerable commitment of time, resource and expertise.

Finally, this paper does not address the issues that arise in multi-supplier outsourcing environments. Generally speaking, as well as new possibilities for failure, the failures discussed below can all still occur but the consequences are frequently worse, the failures more severe in their impact on the client, and the fixes harder to achieve.