The focus of this book is the governance of information technology (IT) outsourcing arrangements. In the next section we look at how modern IT outsourcing and its discourse have developed across the 1989–2019 period. The normative outsourcing discourse that has evolved with outsourcing’s rise to prominence and globalism has generated a range of normative concepts, accepted ‘best practices’, and perennial and changing concerns, for which we provide an introduction here.

We then highlight how this book primarily focuses on governance as part of that discourse. In particular, we investigate formal and relational elements of IT outsourcing governance and how these relate to the conduct of outsourcing and consequent performance. The rationale for this concern relates to the identification in the research literature of governance as a key issue for the outcome of IT outsourcing arrangements—something we look at in the next section. This interest in governance is important because, while the combined IT outsourcing and (IT-enabled) business process outsourcing (BPO) market has grown rapidly from 1989 to reach a potential global market revenue of over US $1.5 trillion, outsourcing as a practice has always experienced mixed outcomes.

We then look in more depth at the notion of discourse. A Foucauldian-informed working definition is set out by Lessa (2006). Discourses are “systems of thoughts composed of ideas, attitudes, courses of action, beliefs and practices that systematically construct the subjects and the worlds of which they speak”. Here we introduce the theoretical spine of our research, in terms of applying two forms of discourse—transaction cost economics (TCE) and Foucauldian governmentality—to the same case material, the objective being to compare and contrast the insights gained against each other and to the wider global outsourcing discourse. Finally, we introduce the book’s rationale, research questions, chapters, and their subject matter.

Outsourcing is “The handing over to a third party of the management of activities, assets and/or people to achieve required outcomes” (Cullen et al. 2014). There are other ways of using external service suppliers, for example, buying in resources and placing them under internal management control; the purchase of software packages; and the rental of applications, infrastructure, people, or automation software through cloud services. In this book we focus entirely on IT services and limit ourselves to outsourcing as the key practice under study.

The last 30 years have seen organizations increasingly move to information technology outsourcing (ITO), that is, choosing to rely on external service providers for IT hardware, software, telecommunications, cloud computing resources, and automation tools. Since 1999 we have also seen outsourcing spread as BPO, to fundamental back office functions like finance and accounting, procurement, legal, real estate, human resources, insurance claims, and general administration. But ITO has remained the dominant outsourced service, though it should be pointed out that BPO has become increasingly IT-enabled and IT-dependent.

These developments are reflected in the market revenue figures. Thus in 1989 ITO was a US $10 billion market. By early 2014, global outsourcing contracts for ITO and BPO services were exceeding US $648 billion (ITO $344 billion; BPO $304 billion). By the end of 2016, according to Snowden and Fersht (2016), the global ITO and BPO services market was estimated to be US $1007 billion (ITO $657 billion; BPO $322 billion). Snowden and Fersht (2016) also suggest a compound annual growth rate of 2.2% ITO and a 4.0% BPO from 2016 to the end of 2020, reflecting more activities being outsourced and new service lines and delivery locations added. Several of our case studies involve offshore outsourcing. Here, 2013 revenues exceeded US $100 billion in revenues, and the market grew by around 12% a year in the 2013–2018 period (Willcocks et al. 2017).

The case studies in this book reflect a period when the use of ITO and of offshoring was accelerating much more than we have seen in the 2016–2018 period or are likely to see over the 2018–2022 period. More recently, we have also seen the development of cloud computing and service automation as more self-serviced-based sourcing options, and these have eaten into the traditional outsourcing markets for both ITO and BPO. In ITO we have seen applications development and managed services increasingly transitioning to digital platforms—not a strong feature of the period we cover in the book case studies. Meanwhile, if the IT infrastructure market was strong and figures highly in our case studies, by 2016–2018 demand was in free fall, with a decline in these traditional services across all regions. Professional services have been seeing a rise, however, especially in the areas of digital transformation, governance, security, and automation. The fundamental moves are caught in the fact that by 2016 traditional ITO was predicted to see a negative 2.4% compound loss over the 2016–2022 period, while digital, cloud, and automated As-A-Service IT services were at some US $100 billion in 2016 and projected to see 21.7% compound annual growth for the same period. Traditional BPO has a similar though less extreme pattern, scheduled to see 2.6% compound annual growth in traditional BPO services and 8.6% compound annual growth in As-A-Service BPO from 2016 to 2022 (Willcocks et al. 2017).

Clearly, our case studies catch organizations, suppliers, and outsourcing as a phenomenon in a specific period of time, in particular from the mid-2000s to around 2012. However, the modern outsourcing discourse we wish to investigate, as it relates to IT decisions and practices, began considerably before that. Our own judgement is that the work of Ronald Coase and Oliver Williamson on why firms exist and on TCE did suffuse into the way in which practitioners talked and acted when it came to outsourcing, even if those practitioners may not have read about TCE or even knew the terms (Willcocks and Lacity 2014). Moreover, TCE did touch directly on the main concerns, with its vocabulary of transactions, types of asset, vendor opportunism, types of uncertainty, modes of governance and contracting, and its focus on cost economizing. Incidentally, cost economizing was always a major objective in outsourcing IT in the early years, and cost savings remain perennially central up to this day. At the same time, as a number of researchers have pointed out over the years, TCE was never developed to predict or explain specifically IT outsourcing decisions and outcomes. This has led to quite a lot of interesting discrepancies between TCE prescriptions—how TCE talks about outsourcing—and actual ITO outcomes and practices, as we shall see in our case studies in this book.

The 1989 Eastman Kodak large-scale outsourcing arrangement with three suppliers probably sees the major start point for the modern IT outsourcing discourse. Then, and thereafter, ITO gained a high profile in the media and in business magazines and newspapers. ITO accelerated, reaching US $50 billion revenues in 1994, US $152 billion in 2000, and over US $344 billion by 2014. An important part of that discourse was the notion of single-supplier ‘strategic partnering’. Another was the strong link of outsourcing with the early 1990s debate about the core competence of the corporation. The normative discourse ran that organizations should focus on the relatively few things that they could be world class at and which differentiated them in the marketplace. Important parts of IT, sometimes the whole of IT, could be identified as ‘commodity’, best outsourced to specialist suppliers, the main objectives being to reduce costs, access expertise, and, if possible, catalyse performance.

If the discourse ran this way from 1989 to 1997, this was not actually a period characterized by large-scale, long-term, single-supplier, IT outsourcing deals. In fact most deals were not like this and few were single supplier. Around 2000 there were, at our count, just over 120 such deals, representing less than 5% of IT outsourcing. However, the notion of ‘strategic relationships’ with ITO suppliers became popular, and the notion of ‘partnering’ and the emphasis on the importance of ‘relationships’, as opposed to just contracts, grew out of this 1989–2000 period. The evidence is, however, that the dominant practice (as it has continued to be) was multiple-supplier selective outsourcing, using midterm length (3–7 years) contracts and focusing on outsourcing stable, discrete activities that were well understood and for which detailed contracts could be written. And indeed a strong discourse developed around these practices (to which the present authors and a range of colleagues contributed over the years). This aspect of the discourse tended to emphasize the importance of detailed contracting, measurement through service level agreements (SLAs) and key performance indicators (KPIs), and monitoring, as well as the importance of retained management capabilities and knowledge. However, while this discourse also became normative over time, and was designed to mitigate risks, there has been a lot of evidence to suggest that clients and suppliers continued to struggle to learn how to manage outsourcing arrangements effectively.

As our case studies in this book reveal, managing outsourcing has remained a problem for many, and this continues to this day, with the difficulties heightened by increasingly volatile business contexts and fast-changing technologies and services. On our own figures, probably only 20% of outsourcing arrangements can be called ‘best-in-class’ providing cost savings and improved services and delivering business benefits and innovation and high client satisfaction. According to Lacity and Willcocks (2015), up to 15% are poor, and some 40% are probably ‘doing OK’ (marginal cost savings delivered, acceptable service performance, marginal client satisfaction), while 25% experience ‘good’ performance (cost savings delivered, SLAs met, good client satisfaction). The case studies in this book fit quite well into these findings on performance. If some of the clients’ organizations in this book were doing better than others, one could see that they were all working very hard to find the right recipe for effectiveness while all subscribing, more or less to the prevailing multi-sourcing discourse.

The IT outsourcing market grew apace in the 2000s. As suppliers matured their ability to deliver IT services, more global locations became viable. At the same time clients built their confidence and competence. From around 2005 a more strategic interest in multi-sourcing also developed. Here ABN AMRO set a new landmark. After cancelling prematurely a single-supplier deal with EDS, the bank’s deal with four suppliers in 2005 was portrayed as the dominant future pattern for strategic sources to follow. The language thereafter pointed to ‘strategic multi-sourcing’ as another viable option. At the same time the period 2005–2018 saw more, smaller, shorter-term contracts driving market growth. With the economic downturn from 2008, an interest in consolidating supplier numbers took place. As a result of this, another notion entered the outsourcing discourse, as the touted management and economic advantages of ‘bundled’ outsourcing—going with one supplier for several different IT and also BPO—gained profile. Another reason for this interest lay in the administrative and management costs of multi-sourcing models and the pressure to develop integrated technology platforms more closely aligned with business needs (Cullen et al. 2014).

From around the mid-2000s, in the face of mixed experiences and often limited outcomes, a much greater focus fell upon governance. Advisory firms and consultants, in particular, suggested that selecting the right mode of ‘governance’ could lead to significantly better performances. This concern for governance has remained central to the outsourcing discourse ever since, and the case studies in this book reveal five client organizations at various levels of maturity in being able to establish and leverage modes of governance.

One emerging issue in this period was that while outsourcing often produced cost savings, and improved performance, it rarely seemed to create IT, process, or business innovation. A concern for innovation entered the discourse, along with how innovation could be achieved. This does not figure highly in our five case studies, and the years which they cover, but the innovation discourse has subsequently become a significant one (Willcocks et al. 2018). It has led to a renewed emphasis on the need for collaboration, between client and supplier(s), with the notion of coopetition between suppliers also introduced from after 2010 to suggest how multiple suppliers might be induced/managed/governed to collaborate to compete, in the cause of producing superior business value and innovation for a client. Once again, this part of the discourse does not figure highly in our five case studies, though the notions of client-supplier partnering and relationships—precursors to the notion of collaboration—receive a great ...