IT Outsourcing Dissertation

This dissertation investigates the impact of IT outsourcing on technology-based SMEs in the UK. It employs a mixed-methods approach, combining a quantitative survey (100 respondents) with qualitative semi-structured interviews. The research explores the drivers of IT outsourcing (cost reduction, strategic focus, faster technological adaptation), challenges (lack of cost-benefit analysis, contract management, cross-cultural issues), and the effects on both financial and non-financial performance (employee specialization, customer satisfaction, operational efficiency). The study reveals that help desk support and application management are frequently outsourced, driven by cost savings and a focus on core competencies. However, challenges related to contract management and cost-benefit analysis are highlighted. The dissertation concludes by offering recommendations for successful IT outsourcing strategies for UK SMEs, emphasizing the importance of strategic planning, clear objectives, and effective relationship management with vendors.

Running head: IT OUTSOURCING
dissertation
To investigate the impact of IT outsourcing on Technology based SMEs in UK

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Abstract
Small business in United Kingdom (UK) are highly engaged in the Information Technology (IT)
outsourcing due to its huge advantages. However, very less number of academic research and
studies are done in this phenomenon and aspect. One of the main uncertain build of IT
outsourcing involves the cultural variation. A system of proposals was mainly tested through
case studies and analysis of three Small scale enterprises that were based in England to get to
know about the depth of particular changes and challenges for all micro firms and small
companies who were engaged in the IT outsourcing. The cultural differences played a significant
part in result of these projects (Agarwal, et al., 2006). Outsourcing the Information technology is
considered as a well formed and executed part of the UK based small scale enterprises.
Outsourcing of the information technology development and support is a widespread and critical
part of globalized United Kingdom as well as other countries’ economies. In United Kingdom,
many national small scale enterprises such as Southern Business Technologies consistently
outsource their IT services to their outsourcing vendors which is getting services and goods from
the outside suppliers. It is thought and considered that Information technology outsourcing is
encouraged through cost cutting in the Information Technology department (Al-Qarim, 2003).
However, the latest drifts suggest that the concept of outsourcing involves improving the usage
of all internal service and resource satisfaction. According to authors Loh & Venkatraman
(1992), outsourcing the functions of IT to the providers of external services is one through
acquiring strategic, technological and economic advantages. In this paper, it has been proposed
that main and core drivers and reasons for outsourcing the IT is being matured and developed
from being completely cost driven to strategic business practices. The main reasons and cause to
outsource include: technological, economic and strategic benefits, core business activities and

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competitive pressures (Agarwal, et al., 2006). The thesis considers reasons to outsource from
perspective of UK and relationship between service quality and satisfaction from the perspective
of outsourcer. According to Dahlberg & Nyrhinen (2006), service quality and satisfaction are the
significant factors to outsource and each of it have proposed various factors which contribute
towards decision to change vendor, continue with an outsourcing contract and to back source
(Ang, 1998). The main thrust behind this paper involves to develop over the existing research
through identification of the problems and issues that are specific to the UK outsourcer by giving
an evaluation of present academic literature and review on outsourcing of Information
technology relating to the major frameworks and also investigating the preset attitude in UK
corporate culture for outsourcing which includes offshoring portion of the business of company
(Applegate, et al., 1991). This thesis makes use of the exploratory research for determining the
suitable design of research, methods of data collection and selecting the subjects for this research
paper. The study which is collected from the data using various sources such as questionnaires,
surveys, interviews, exploratory research and literature are combined for the analysis (Apte, et
al., 1997). Many hypothesis are formulated and then tested and checked as opposed to the
collected data by making use of quantitative methods like causal method which was employed
for investigation of relationship between satisfaction and productivity of Small Scale and
Medium scale enterprises in UK and outsourcing variables. The hypothesis of the research are on
the basis of various personnel in the company having varying criteria in the outsourcing context
for success and aggregate satisfaction through outsourcing is associated with successful
perception (Applegate, 1991). Outsourcing satisfaction is related and associated to the
outsourcing which is seen as fruitful and also working well. However various parties of the
organization may be disgruntled with arrangement. Few of the components and elements that

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may affect the intensity of satisfaction with the outsourcing are quality of services, the
association developed and formed between vendor and outsourcing company, and cost to switch
the vendors. The thesis also proposes that core reason behind outsourcing the IT services is
shifted to various factors like managing the resources to cost considerations (Ang, 1998).

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Table of Contents
Abstract............................................................................................................................................1
Introduction......................................................................................................................................5
Research Aim...............................................................................................................................8
Research Question........................................................................................................................8
Objectives of Research.................................................................................................................8
Achieving above objectives.........................................................................................................9
The Organization or Structure of the Dissertation...........................................................................9
Review of literature.......................................................................................................................10
Methodology..................................................................................................................................23
Research Philosophy..................................................................................................................23
Research Approach....................................................................................................................24
Research Design/Strategy..........................................................................................................24
Data Collection Method.................................................................................................................25
Sampling method...........................................................................................................................26
Accessibility Issues....................................................................................................................27
Data Analysis and Results.............................................................................................................28
Questionnaire.............................................................................................................................28
Discussion......................................................................................................................................46
Conclusions....................................................................................................................................49
Cost and Benefit Analysis of One Company.............................................................................50
Objective Achievement..............................................................................................................53
Recommendations..........................................................................................................................53
Future Work...................................................................................................................................55
References......................................................................................................................................57
Appendix........................................................................................................................................62
Appendix B................................................................................................................................72

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Introduction
The current paper is focused on investigating the impact of information technology outsourcing
on the technology small medium enterprises. Outsourcing of IT projects are growing and
enhancing since late nineties and thus it is relatively a new area of the academic research. After
the reserve of big multinational companies, the latest entry into the IT outsourcing involves small
and medium enterprises. Chang and de Burca (2015) on the basis of revised model of Leavitt’s
diamond by Davis and Olson’s developed a concept based framework and system which outlines
main elements and components of small business who are undertaking IT outsourcing.
In this research paper three firms were selected who outsourced their IT infrastructure their in-
depth interview was conducted with their senior managers and employees. The current paper is
concerned with investigating the IT outsourcing for small businesses (SMEs) in UK. The small
to medium-sized enterprises are the integral part of the economy of a country (Aron, et al.,
2005). These SMEs help the country in generating employment for most of the population and

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also contributes to the gross domestic product (Premkumar and Roberts, 1999). It has become
important that the issues associated with the SMEs are handled effectively to ensure that they
keep contributing to the growth of the economy (Scase, 1997). However, the latest drifts suggest
that the concept of outsourcing involves improving the usage of all internal service and resource
satisfaction (Aubert, et al., 1999). The emergence of information technology can be considered
as one of the enablers that has supported the SMEs to a greater extent. Technologies have helped
these businesses in automating most of their operational activities and also look forward to
upcoming opportunities in the market. A study conducted in 1997 led to the understanding that
the 95 percent of the SMEs active in the OECD economies were generating around 60 percent of
the employment (OECD, 1997). The SMEs are found to be more flexible and ready to adopt new
changes in the environment or the market. They have also countered global competition in many
situations (Aubert, et al., 2008). The use of the information technology to outsource the
monotonous activities is expected to bring more opportunities for the SMEs to grow further. This
aspect will be investigated in the current paper. The emergence of the technologies has made it
easier for the organization to outsource their activities (Quinn and Hilmer, 1994). The SMEs that
are working in the remote locations or the one functioning in the industrial areas, now both of
them have access to similar market opportunities. A preliminary assessment of the literatures
related to the small businesses has led to the understanding that they face challenges at multiple
levels. The SMEs regularly face scarcity of resources at various levels such as expertise in
information technology, availability of time, presence of adequate finance, and others (Blili and
Raymond, 1993; Paraskevas and Buhalis, 2002). Now the technologies around the world have
significantly developed and are also being adopted by the small businesses in handling various
activities. However, despite the presence of the myriad technologies, it has become challenging

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to select the right technology for them that can facilitate in their business improvement (Bahli
and Rivard, 2005). Only the presence of the technologies in the market is not going to suffice in
fulfilling the business needs, the small businesses are required to enough expertise to handle
those technologies to facilitate in the business activities (Baxendale, 2004). It has been found that
due to limited access to human resources, the small businesses cannot afford to divert its
resources to the other functional or support activities other than their core activities that are
bringing in direct revenue. This is the point where outsourcing of the technologies is witnessed
among SMEs. The main thrust behind this paper involves to develop over the existing research
through identification of the problems and issues that are specific to the UK outsourcer by giving
an evaluation of present academic literature and review on outsourcing of Information
technology relating to the major frameworks and also investigating the preset attitude in UK
corporate culture for outsourcing which includes offshoring portion of the business of company
(Bardhan et al., 2006). This thesis makes use of the exploratory research for determining the
suitable design of research, methods of data collection and selecting the subjects for this research
paper. In addition to the above, the small businesses find it challenging to identify and
implement right technologies for them or the suppliers. Moreover, there are various
environmental vulnerabilities that keep grappling these businesses (Quinn, 2000). The point
where the small businesses find it challenging to come up with the right technologies that can
assist them in handling their business effectively is where they look towards outsourcing. The
current paper will look into the same considering the primary and secondary research
methodology. A total of 100 candidates were selected as the respondents for this research paper.
The system and framework of methods that are taken to test and examine the propositions are

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described in this paper and the means are also discussed by which the research paper was
undertaken. The methods which were used in the research are also classified and outlined.
Research Aim
To investigate the impact of IT outsourcing on Technology based SMEs in UK
Research Question
The main research question framed for this research project is:
 What can be the strategic planning involved for small business manager/owner which leads to
the outsourcing decisions?
 What is the impact of company size over the decision of IT outsourcing and its outcome?
 How does the small company be able to manage and control the cultural differences and
variations in IT outsourcing?
Objectives of Research
Based on the brief provided above, there were certain project objectives that had been developed.
The objectives were based on SMART criteria and deliverables for each of the objectives and
they are discussed in the next section. These project objectives are given below:
- The first objective was to assess the literatures written by other researchers regarding the
theoretical aspects of the IT outsourcing.
- The second objective was to understand the features that were to be present in the technologies
that can be suitable adoption for SMEs.
- The third objective was to understand the factors that contributed to SMEs in outsourcing their
IT needs.
- The fourth objective was to understand the factors that were critical while outsourcing the IT
needs.

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- The fifth objective was to come up with the areas or functions that could be outsourced in the
small businesses.
- The sixth objective was to investigate the issues that were faced by the small businesses in UK in
outsourcing activities.
- The seventh objective was to conduct cost-benefit analysis of the research on the participating
stakeholders.
- The eighth objective was to conduct primary research and understand the orientation of small
business heads regarding IT outsourcing.
Achieving above objectives
The current subsection is concerned with understanding the activities that were covered to ensure
that each of the activities was complete. Along with that, the final deliverables for each of the
objectives were also stated. Each objective was detailed considering S (specific), M
(measurable), A (achievable), R (realistic), T (time bound) criteria.
The detailed explanation of the objectives based on the SMART criteria is shown in the
Appendix B
Key Success Criteria
The key success criteria for the study will be the detailed understanding of whether the IT
outsourcing assist tech companies in any manner. The second success criteria would be the
successful data collection for the study.
The Organization or Structure of the Dissertation
Chapter 1 gives an outline of research and methodology

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Chapter 2 gives the literature review or background of the Outsourcing on the basis of relevant
theses, journal articles and research literature. This chapter summarized many research theories
related to the relationship quality, satisfaction and service quality.
Chapter 3 gives the overall research theory, scale development ad methodologies for conducting
the research project.
Chapter 4 gives an overall qualitative and quantitative approach for analyzing the data and
background for the organization under study.
Chapter 5 gives statistical and data analysis associated with quantitative research and analysis of
survey data gathered and also present theoretical background for analyzing the data.
Chapter 6 consist of the summary of research, recommendation and conclusions of the authors,
its limitation and recommendations of future research.
Review of literature
According to the paper that was written by the Lee 1999 reveals that there is sustainable
evidence that is align to the information technology outsourcing and it is considered to be
significant in order to generate the information that is related to the practitioners.
The literature that is associated to the academics states that academic play a crucial role in
disseminates the learning process. Evidentially, this has been found that there are so many
researchers that have highlighted the experience of IT outsourcing experience in the outlets of
academics ((Cross, 1995). According to the Huber in 1993, there are so many researchers that
have conducted their research in order to abstract the information from the various practices.
However, research that is linked to the ITO is the epic indicator of how the information system
can be evaluated and how the practices are determined. The aim of the ITO research is to

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evaluate so far that how the studying and the practices can formulate the significant concept that
are related to the phenomena. That’s the basic need that why long-term organization decide to
outsource and this is from the point of view of the client and supplier.
The research paper that was edited and published nearly in the 1991 witness that the large
established organizations generally outsources their technologies. This has been evaluated from
the multiple case studies that the company must take meticulous care of their of their information
technology outsourcing. There is tremendous quantitative approach or research has been
generated in order to analysis that what the need of the organization to outsource their
technology and what benefits or advantages they can generate from it (Loh and Venkatraman,
1992a). If the organization is not able to generate the benefit from outsourcing technique or
practices then this act will defamed the company (Lacity and Hirschheim, 1993; Willcocks and
Fitzgerald, 1993). During the span of 1994 to 2000, at least 79 academic studies are conducted
that has given the aesthetic pleasure to practices that has been conducted so far(Dibbern et al.,
2004). During the beginning of the 2009, it has been evidently found that there are utmost 357
papers that are generally published on ITO. In-fact the 18 years of researches has provided the
good understanding of the continuous practice. By analyzing the research paper the individual is
able to enhance their knowledge that why the particular firm outsource their technology. The
basic reason for conducting the outsourcing is that the organization wants to gain the competitive
advantage in terms of technology advancement. The company attains the practices so as to
reduce the entire cost, make the goods more valuable in the eyes of the customers, focuses on the
strategic work and help us in accessing the various resources (Applegate and Montealegre, 1991;
Huber, 1993). The research paper has also answered the question that is related to what firm
accurately outscource. This has been eventually found that most of the companies outsource