8. The IT Outsourcing Life Cycle and the Transition Phase

Although the multibillion dollar outsourcing industry continues to grow in the 2020s, not all outsourcing arrangements are doing well. Lioliou and Willcocks (Global outsourcing discourse: Exploring modes of IT governance. Palgrave Macmillan, 2019) noted in their case studies that managing outsourcing has remained a problem for many, and this continues to the present day, with the difficulties heightened by increasingly volatile business contexts and fast-changing technologies and services. Events in 2020–2022 have only served to increase uncertainty around global supply chains. According to the findings of a study of outsourcing arrangements by Lacity and Willcocks (Nine keys to world class business process outsourcing. Bloomsbury, 2015), up to 15% were poor, some 40% were probably ‘doing OK’ (marginal cost savings delivered, acceptable service performance, marginal client satisfaction), while 25% experienced ‘good’ performance (cost savings delivered, service level agreements (SLAs) met, good client satisfaction). Looking at more recent research by Willcocks (Global business: Management. SB Publishing, 2021a; Journal of Information Technology, 36(2), 188–194, 2021b), probably only 20% of outsourcing arrangements can be called ‘best-in-class’, providing cost savings, improved services, delivering business benefits and innovation, and high client satisfaction.

Poor management and governance of the outsourcing relationship have often been cited as primary reasons for less successful outsourcing contracts. But before we investigate the management and governance of outsourcing relationships, which will be further discussed in Chap. 9, it is important to understand the key stages of the outsourcing process, as well as the key practices that can be applied at each stage.

This chapter discusses the outsourcing life cycle. In doing so it provides a checklist of key activities a client organisation needs to fulfil to prepare and properly execute an outsourcing relationship, whether this be domestic, offshore, nearshore, or cloud sourcing. Fortunately, the outsourcing life cycle, and the requirements for managing it effectively, remains constant across settings and relatively stable in its stages. This chapter also elaborates on the key requirements for designing and executing the transition phase. We therefore focus on the following aspects: