Even though outsourcing is a popular means of meeting internal IT needs, press reports and statistics suggest that the decision to backsource is becoming increasingly common. Some organizations backsource upon expiration of contracts; others terminate existing contracts to implement backsourcing. In both cases, organizations incur high rebuilding fees and expensive contract termination fees. Still, many choose to incur these expenses and undergo the trouble of internalizing the once-outsourced functions. This makes backsourcing decision an interesting strategic turnaround. A review of existing literature shows that backsourcing decision has received little attention. This paper examines factors that motivate the decision to backsource. Based on four case studies, contributing factors to backsourcing decision are compared and contrasted. The findings suggest that organizations backsource to correct existing problems and to harvest new business opportunities. Specifically, when outsourcing contracts fail to meet expectations, organizations backsource to rebuild internal IT capabilities. Organizations also backsource when changes occur to their strategic goals, organizational structure, and IT role. Changes from external business environment such as mergers and alliance formation also contribute to backsourcing decision.
Wong, Siew Fan, "Understanding IT Backsourcing Decision" (2008). PACIS 2008 Proceedings. 226.