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they can focus on their core competences (Vara-
jão, 2002).
The increase in organizations' Outsourcing-
related expenditure in recent years shows that
Outsourcing has grown - not only in Europe but
also in Portugal. IDC (2005) reveals a growth
rate of 10% in Portugal, slightly lower than the
11% average in Europe. In addition it predicts a
growth of 40% of Outsourcing in Portugal for the
period between 2005 and 2009.
According to Gartner, quoted by Ramos
(2006), 50% of Outsourcing contracts fail, being
renegotiated and in 25% of the cases the contract
cancellation eventually occurs. Dun & Bradstreet,
also mentioned by Ramos (2006), refers that 20%
to 25% of Outsourcing contracts do not succeed
during their two initial years and this rate increases
to 50% after five years of contract. Also, in 70% of
the cases “the Service Provider did not understand
adequately what was supposed to do”.
There are advantages to Outsourcing but also
significant risks associated to it and the assess-
ment of both is therefore of great relevance for
informed decision-making.
The objective of this chapter is to contribute
to the understanding of the risks and the benefits
associated to IS Outsourcing and also to determine
to what extent a common view about them is
shared by the Portuguese market players - Service
Providers, Clients and Opinion Makers.
tasks that usually are internally executed. Griffiths
(1999) enhance this concept defining Outsourc-
ing as “the strategic use of outside resources to
perform activities traditionally handled by internal
staff and resources”. Outsourcing could engage a
significant restructuring of certain activities, often
including human resources transfer from a main
corporation to a specialized one, usually smaller
but with the necessary skills to do those activities.
Outsourcing is the act of delegating or transferring
some or all of the IT related decision, business
processes, internal activities and services to an
external provider who develop and manage those
activities according to predetermined deliverables,
conditions and results as established on contract
(Dhar & Balakrishnan, 2006).
Outsourcing covers a wide range of options,
from the strategic option of delegating total IT
management to the execution of a simple function,
as an answer to specific organization's needs (IDC,
2005). Rocha (2006) states that “the Outsourcing
market confers different names to different kind
of deals, but the boundary between them it is
difficult to define”. The Outsourcing degree and
the way this type of arrangements are established
contribute to the multiplicity of existent relation-
ships. The IS function can be handled internally, by
a subsidiary or shared with the Service Provider;
or developed externally either totally or for a
selection of its components. On the other hand
different Provider-Client sourcing arrangements
are possible from single Provider - single Client to
complex relations as multiple Providers - multiple
Clients (Dibbern et al., 2004).
theoreticAL bAckground
information systems outsourcing
the historical evolution
of is outsourcing
Several authors present numerous definitions for
Outsourcing, which seem to converge to the per-
ception that is the act of contracting out services,
which the organization can perform inside, to an
external Service Provider by option and to focus
on their core business.
Faulhaber (2005) describes Outsourcing as
“the strategic use of external resources to carry out
The IS Outsourcing concept has been changing
since its genesis. In different published papers,
such as Loh & Venkatraman (1992), Lacity &
Willcocks (1998), Lee et al.(2003), Dibbern et
al. (2004), Sargent (2006) and Gonzalez et al.
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