Cloud computing : how does it differ from IT outsourcing and what are the implications for practice and research?

The purpose of this paper is to provide an evolutionary perspective of cloud computing (CC) by integrating two previously disparate literatures: CC and information technology outsourcing (ITO). We review the literature and develop a framework that highlights the demand for the CC service, benefits, risks, as well as risk mitigation strategies that are likely to influence the success of the service. CC success in organisations and as a technology overall is a function of (i) the outsourcing decision and supplier selection, (ii) contractual and relational governance, and (iii) industry standards and legal framework. Whereas CC clients have little control over standards and/or the legal framework, they are able to influence other factors to maximize the benefits while limiting the risks. This paper provides guidelines for (potential) cloud computing users with respect to the outsourcing decision, vendor selection, service-level-agreements, and other issues that need to be addressed when opting for CC services. We contribute to the literature by providing an evolutionary and holistic view of CC that draws on the extensive literature and theory of ITO. We conclude the paper with a number of research paths that future researchers can follow to advance the knowledge in this field.

The IT outsourcing market-place: vendors and their selection

This paper focuses on outsourcing vendors, their characteristics and the vendor selection process. It draws on current research and two research studies, one specifi- cally examining outsourcing vendors and the other examining vendor-client issues. We first outline the development of the market for the outsourcing of information technology/information systems services and activities, then detail the characteristics of different types of vendor companies and their competitive positions, before providing a client perspective to the issue of vendor selection.

Analysis of a large-scale IT outsourcing "failure": what lessons can we learn?

Much of the research that has been carried out into outsourcing is based on relatively successful case studies. Yet drawing inferences from case studies when those with largely negative outcomes rarely see the light of day represents a significant problem. When negative cases are systematically unrepresented, there is less opportunity to subject theory to scrutiny. This chapter goes some way towards redressing this trend, by reporting on a large scale “selective” outsourcing arrangement that has been publicly described as a failure — the Australian Federal Government’s “whole of government” IT infrastructure outsourcing initiative. This initiative, originally promoted as likely to lead to a billion dollar saving, was abandoned early in 2001, after a damning public report by the Australian Auditor General. However, a detailed study of the initiative suggests that the “failure” occurred despite the project adhering to many of the recommended guidelines for successful outsourcing that had been derived from earlier case analysis. The findings have important implications for decision makers confronted with outsourcing choices. The study suggests that the risks of outsourcing are often downplayed, or ignored in the rush to reap the expected benefits. The study also suggests that expectations of savings from outsourcing IT are often substantially higher than those that have been empirically confirmed in the field. Decision makers are advised that key assumptions about costs, savings, managerial effort, and the effects of outsourcing on operational performance might be incorrect, and to plan for their outsourcing activity accordingly. They should pay particular attention to coordination and transaction costs, as these tend to be overlooked in the business case. These costs will be magnified if “best in breed” multiple-vendor outsourcing is chosen, and if contracts are kept short. Decision-makers are also warned of the difficulties they are likely to have at the end of an outsourcing contract if there is not a large and robust pool of alternative vendors willing to bid against the incumbent.

IT outsourcing issues in Singapore : the vendor's perspective

Most studies undertaken in the area of IT outsourcing seem to focus only on the customer’s perspective leaving a gap in knowledge about the vendor’s perspective. This study aims to correct this deficiency by investigating the views of four organisations providing IT services in Singapore, and comparing this to the current literature base of customer views. The findings showed that the vendor’s views about security, contract management and flexibility differed from the customer’s point of view. However, two issues, partnerships and vendor inexperience, seem to match the vendor issues found in this study. Additionally, two approaches were found to be used by vendors in the IT outsourcing activities, multiple-team approach and single-team approach. A multiple–team approach is likely to be used by vendors having a contract-based relationship and single-team approach is likely to be used by vendors having a partnership-based relationship.

The role of benchmarking and service level agreement (SLA) practices in IT outsourcing success

Despite claims in the trade literature that a number of recommended practices have been proved to lead to IT outsourcing success, few of these practices have been subject to disconfirmatory research. Even fewer have been tested statistically to determine whether they generalize to wider populations, or to determine the magnitude of their effect. In this paper, several recommended outsourcing practices associated with service level agreements (SLAs) and benchmarking are investigated. These practices are recommended extensively on the basis of case study research, yet they do have downsides, and they add substantially to the transaction costs of outsourcing. Based on a large survey of organizations engaged in IT outsourcing, this paper established that developing detailed SLAs did improve cost and service outcome, and that clients who met with vendors more frequently to renegotiate service levels reported greater outsourcing success. The research also established that benchmarking both before outsourcing commences, and once the outsourcing contract is in place, led to improvements in cost and service outcomes. Benchmarking during the outsourcing contract had the greatest effect, accounting for 10% of the variance in a success vector that included strategic, technical, cost-related and service outcomes plus an overall evaluation of satisfaction and value.

Minimising risks in IT outsourcing: choosing target services

This paper provides a risk-based framework for deciding on which IT services to outsource and which to keep in-house. This framework considers the probabilities both of negative outcomes, and of failing to achieve positive outcomes. The authors examine the major components of outsourcing risk and their drivers, and from this derive a series of questions decision-makers can ask when deciding what sourcing options to adopt for different services. The framework was developed on the basis of five years of qualitative and quantitative research into the experiences of organizations involved in outsourcing IT.

An overview of IT outsourcing in public secto agenices

For the past 15 years, governments in the developed, Western world have been contracting out, or outsourcing, services as a key part of public sector reforms. Outsourcing has been argued to lead to cost savings, improved discipline, better services, access to scarce skills, and the capacity for managers to focus more time on the core business of their organizations (Domberger, 1998). Government outsourcing initiatives have encompassed a range of services, but given the large sums of money invested in IT assets, the outsourcing of IT services (IT outsourcing, or ITO) has been a major initiative for many agencies. Lacity and Willcocks (1998, p. 3) defined ITO as "handing over to a third party [the] management of IS/IT assets, resources and/or activities for required results." For public-sector outsourcing, this handover is usually made by way of a competitive tender. Case studies have reported ITO successes and failures (e.g., Currie & Willcocks, 1998; Rouse & Corbitt, 2003; Willcocks & Currie, 1997; Willcocks & Lacity, 2001; Willcocks & Kern, 1998), but much of the evidence presented to public-sector decision makers to justify this reform is anecdotal and unsystematic, and when investigated in depth, does not necessarily support widespread conclusions.

The quality-of-relationship construct in IT outsourcing

This paper reports on the conceptualization and measurement of an important management controllable factor affecting the success of an information technology outsourcing (ITO) arrangement, namely Quality of Relationship (QoR). Attributes of the construct were identified from an analysis of the literature, and key attributes selected based on interviews with 29 managers in four pairs of client and supplier organizations. Construct validity of the resultant measure is assessed through comparison with qualitative interview data, and through tests of association between our measure and perceived overall ITO success. The results suggest that the ten indicators identified in the paper provide a valid measure of the quality of relationship that can be used by both client and supplier managers, and researchers, in assessing the health of an ITO relationship.

Impact of configuration on IT outsourcing relationships

This paper tests the extent to which four main factors that help define an organization’s information technology (IT) outsourcing configuration contribute to the quality of IT outsourcing relationships between clients and suppliers. It presents a research model that is tested using an analysis of substantive in-depth interviews with a total of 28 client and supplier managers in four pairs of client and supplier organizations. The findings suggest that a sound outsourcing configuration is important for the successful development of a quality relationship between parties. Thus, organizations seeking to increase their operational excellence and decrease the operational cost of IT outsourcing, and ultimately to improving the success of their IT outsourcing arrangements, must put more emphasis on, and take a more planned approach to, configuring their IT outsourcing arrangements.

A model for studying IT outsourcing relationships

The trend towards using information technology (IT) outsourcing to exploit core competencies and attain competitive advantage is increasing in organizations. In this regard, researchers are studying organizations to understand the variety of factors that influence IT outsourcing relationships. This paper presents a model of factors influencing IT outsourcing relationship efficacy. The model is a synthesis of the work of ten groups of authors on IT outsourcing relationships, and is intended as a guide to question formulation for future research.

The impact of ITIL (information technology infrastructure library) recommended practices on the IT outsourcing relationship

Over the last two decades, the outsourcing of IT services has become a popular topic for many IS researchers. Furthermore, managing IT services (both internally and externally provided) has become an emerging area for academic research, given the criticality of IT services in modern organizations. One of the better known IT service management frameworks is the Information Technology Infrastructure Library (ITIL) framework. While there are many claims made about the relationship between ITIL and IT outsourcing, these claims still need further empirical research. Using data gathered from a preliminary focus group, this study investigates how ITIL impacts recommended practices on the success of IT outsourcing arrangement.

The impact of switching costs on the decision to retain or replace IT outsourcing vendors

While the IT outsourcing market is growing, outsourcing vendors are being replaced more frequently by firms. Since replacing vendors can affect the stability and quality of the IT services a firm receives, it is important to understand the drivers behind the decision to replace/retain vendors. This paper examines the impact of switching costs on this decision. We classify the various examples of switching costs into three categories (relational, financial and procedural) and develop a model to explain their role in the decision to replace or retain a vendor. The model also includes possible moderators of the relationship between switching costs and the vendor replacement decision. This model will be evaluated through a series of case studies of firms who have made this decision, and the refined model will be tested with a survey of IT outsourcing managers.