Outsourced Strategic IT Systems Development Risk

Organizations are increasingly outsourcing the development of strategic IT systems to external vendors. Because of the importance of such systems to a client organization, unaddressed risks that develop into serious problems may have a huge negative impact on the organization. There is much reported research on IT development and IT outsourcing risk, and risk management. However, research on risk in outsourced strategic IT system development, from the client perspective, have largely been ignored. We developed a risk framework for outsourced strategic IT development based on the literature. In this paper we review three reported cases of unsuccessful strategic IT system development that provide an initial validation of our outsourced risk framework. A number of risks critical to a client are identified. These risks fall into several categories associated with organizational environment, team, user, complexity, contract, requirements, planning and control, and execution. If critical outsourcing risks are clearly understood by a client organization then strategies for managing such risks can be implemented.