The Concept of Modularity in the Context of IS/IT Project Outsourcing: Analyzing the Role of Interface From the Findings of Empirical Studies

Introduction

Digital technologies have advanced more rapidly than any innovation in the history of mankind (UN report, 2019) prompting redesigning of every aspects people interact with, be it connectivity, healthcare, business processes, financial services, economic policies, trade and public services, etc. Digitalization has a profound impact on organizational strategies which revolutionized connectivity and as a result, the prevalence of IS/IT project outsourcing has become a norm in contemporary organizations. Findings from many empirical studies suggest that despite prevalence of IS/IT project outsourcing the failure rate is high. Premature contract terminations and frequent dissatisfaction with IS/IT outsourcing results are commonly encountered. Literature also suggests that many IS/IT outsourcing projects are being re-negotiated and/or prematurely terminated.

Empirical data found in literature from 2000 until 2016 clearly illustrates that the failure rates in IS/IT outsourcing projects remain persistently high (table 1). Empirical research has attempted to quantify the high probability of IS/IT outsourcing project failures. For instance, table 1 illustrates the findings of a joint longitudinal study conducted in 2000 by Oxford University's Institute of Information Management and the University of Missouri. This study tracked 29 major IS/IT project outsourcing over eight years and reported that more than 35 percent of the projects failed (Gay & Essinger, 2000). Similarly, a Dutch field study, representing a sample of 30 outsourcing deals concludes that out of the 30 deals 18 were successful (Delens, Peters, Verhoef, &, van Vlijmen, 2016). Another study suggests that 60% of customer organizations involved in IS/IT project outsourcing were not able to meet their pre-defined targets (Schmidt, Zoller, & Rosenkranz, 2016). Wojewoda and Hastie (2015) suggest in their findings that 71% of IS/IT outsourcing projects were considered failures or challenged.

A pertinent question this paper deals with how IS/IT project outsourcing failure may be addressed. So far, the literature includes many suggestions offered by both scholars and practitioners. Peterson and Carco (1998) suggested to streamline operations and ‘fix the problem’ before outsourcing IS/IT services. Various suggestions were introduced: the interested reader is referred to (1) Lambert, Emmelhainz, and Gardner (1999) who introduced their ‘Partnership Model’; (2) Greaver (1999) who formulated ‘seven steps to successful outsourcing’; (3) Logan (2000) who proposed two solutions in order to avoid failure in IS/IT project outsourcing. She suggests firstly, diagnosing the relationship from both sides of the contract and secondly, engaging agency theory to help design the types of contracts and relationships necessary to provide and support an environment of trust; (4) Lee (2001) who suggested knowledge sharing; (5) Rottman (2008) who elaborates on the importance of ‘knowledge transfer’; (6) Harris, Herron and Iwanicki (2008) who stressed the importance of a high quality ‘service level agreement’ (SLA); (7) Karimi-Alaghehband and Rivard (2012) who proposed a model of IS/IT outsourcing success grounded in dynamic capabilities perspective; (8) Ishizaka & Blakiston, (2012) who proposed the “18 C’s model” for a successful long-term outsourcing arrangement; and (9) Zheng and Abbott (2013) who argued that reconfiguration of organizational resources is vital to be successful in outsourcing. Despite the introduction of such remedies, the empirical research referred to above (table 1) continue to attest to the high failure rate of IS/IT project outsourcing. It seems that these remedies, if used, turned out to be partially successful at best.