Abstract

IT outsourcing is a common means of meeting internal organizational IT needs today. Gartner Dataquest estimated that worldwide IT outsourcing will grow to $255 billion in 2008. Perhaps surprisingly, given its popularity, IT outsourcing has a high failure rate. When outsourcing relationships fail, organizations are forced to make costly changes to their sourcing strategy. One strategy is to bring the outsourced IT components back into the organizations and rebuild the entire IT department. The challenge is, how should organizations reabsorb these outsourced IT components to build the internal IT department? What types of capabilities do organizations need to develop or acquire to ensure a successful backsourcing process? This paper focuses on addressing the issue of IT backsourcing following a failed outsourcing relationship. It aims at explaining how organizations develop and acquire ‘capacity for change’ to facilitate the backsourcing process. The value of the study lies in the identification of useful strategies that facilitate the development of ‘capacity for change’. These strategies serve as best practices for future backsourcing efforts.

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