eThesis - School of Business electronic theses

Offshore outsourcing is a growing phenomenon in information systems development. There are, however, many risks associated with it. This thesis tries to, first, identify the advantages and challenges in offshore outsourcing, and second, find ways to manage and mitigate the related risks.

In the theoretical part of the thesis, a literature review is conducted to define different types of offshore outsourcing and to identify the related risks. Then, two risk management frameworks for offshore outsourcing from previous research are presented, and a new framework is developed which shows the main steps of risk management.

In the empirical part, a large-scale information systems project in the financial services industry is used as a case study. Based on three separate interviews of key project personnel, the related risks and critical success factors were identified, as well as the risk management process in the case project. The identified risks and processes are validated against the ones found in the theoretical part.

The thesis has three main implications to practice. First, the most typical risks in offshore outsourcing, such as the lack of business knowledge and language barriers, are identified in the case study. Second, a risk management framework for offshore outsourcing risks is developed. The framework consists of three basic steps: risk identification and classification, risk analysis and prioritization, and risk monitoring and mitigation. Third, seven critical success factors, such as extensive knowledge transfer and continuous monitor and control, are concluded in the case study.