Understanding Outsourcing Risk Factors Based on Modularity: The BSKYB Case

The outsourcing of Information Systems development and maintenance to external and specialized partners is a frequent practice among contemporary organizations. However, outsourcing projects have been proven to be prone for failure. As a result, practitioners and scholars have suggested a variety of outsourcing risk factors which may lead to unsuccessful project outcomes, as well as possible remedies to mitigate them. Empirical studies nevertheless continue to report frequent failures in outsourcing projects. In this paper, the concept of modularity is used as an alternative perspective to analyze risks related to outsourcing projects. Such approach might help in supplementing existing outsourcing risk analyses with new, additional or more profound insights on this topic. It might also serve as an additional basis to list a more exhaustive enumeration of required mitigating actions, which in turn could lead to more succesful outsourcing projects. This alternative perspective is illustrated by a reanalysis of a failed outsourcing case which is documented in literature and available court proceedings: the BSkyB case. It is shown in a specific way how poorly designed modular structures at the technical and project communication and project management level could have been identified ex-ante. This identification may explain the manifestation of ex-post outsourcing risk factors such as ‘lack of required skills', ‘managing user expectation', ‘communication problems', ‘project management' and ‘significant integration requirements'.