Reducing information systems costs through insourcing: experiences from the field

Information systems (IS) sourcing continues to be a topic of great concern to both IS professionals and senior management. While a number of articles and books discuss the pros and cons of outsourcing, little has been written about companies that evaluate outsourcing but choose insourcing. Do companies actually achieve the cost savings proposed in the insourcing bid? This question prompted the study reported on in this paper. 14 in-depth case studies of companies choosing insourcing over outsourcing were studied to assess the implications of this choice. The results paint an interesting pattern of cost reductions but mixed reactions to these savings. Insourcing 'success' turns out to be a more complex notion than the literature suggests. Two conclusions emerge: the first is that the perception of success is related not solely to financial outcomes, but rather to the values and beliefs of different stakeholder groups, including senior management, business unit managers and users, and IS managers. The second is that senior management's perception of success is primarily based on IS cost-competitiveness relative to the market, rather than service excellence. We suggest future avenues of research pertaining to the identification of meaningful practices for shaping senior management's perception of IS.