Why do Outsourced IT Systems Fail?

This research case study examines the failure of outsourced IT systems and proposes a theory and framework to predict and avoid such failures.

 Why do information systems fail? There are two academic theories that have been proposed to understand this issue better: the concept of Expectation Failure and the concept of Termination Failure.

This paper argues that these two approaches are missing a dimension: Outsourced IS Failure (OISF)

The authors draw upon agency theory to explain OISF. Agency theory considers the failure in outsourced systems a result of three factors: goal differences, risk behavior differences and information asymmetry.

Although agency theory has already been used to understand IT failure, there is a lack of empirical evidence to put the issue to rest. This paper bridges that gap with a research case study in SME organizations - eight such organizations were picked because they engaged in litigation over IT failures, hence their litigation files provided easy to access data to analyze this issue thoroughly.

The authors conclude that agency theory can predict and explain OISF albeit with some modification.

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Posted on 06/04/2010 by

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