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School of Business | Department of Information and Service Economy | Information Systems Science | 2012
Thesis number: 12931
Managing risk in offshore outsourcing of information systems
Author: Ukkonen, Kari
Title: Managing risk in offshore outsourcing of information systems
Year: 2012  Language: eng
Department: Department of Information and Service Economy
Academic subject: Information Systems Science
Index terms: tietojärjestelmät; information systems; riskienhallinta; risk management; ulkoistaminen; outsourcing; offshore; offshore industry
Pages: 56
Key terms: offshore outsourcing; risk management; information systems
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.
Master's theses are stored at Learning Centre in Otaniemi.