Continuous Transition in Outsourcing: A Case Study

Outsourcing is typically considered to occur in three phases: decision, transition and operation. As outsourcing is now well established the switching of vendors and transitioning from one system to another is common. However, most of the research to date on outsourcing has focused on the decision and operation phases, leaving a gap between theory and practice concerning the transition phase. Transition in outsourcing entails the changing of systems, business processes and/or vendors. If a suitable transition approach is not applied pressures for another transition can immediately build. We present results from a case study carried out on the Novopay Project in which the Ministry of Education in New Zealand changed their vendor from an onshore to a near-shore provider. This project resulted in a sequence of three transitions, with each following a different approach as a direct result of the experiences encountered in the previous transition. In this research we made use of the rich 'data dump' of evidence provided by the Ministry of Education. Our analysis describes how a client organization can become trapped in a continuous transition cycle if a suitable approach is not applied. Transition1 involved the client moving from complete outsourcing to selective insourcing. After realizing that they did not have the capabilities to manage insourcing, Transition2 was initiated. In Transition2 the sourcing approach reverted back to complete outsourcing. When it was realized that the new vendor in Transition2 could not in fact deliver a new service model or support end-users in following new business processes, Transition3 was initiated. In Transition3, the client established an internal company to insource service operations to support end-users. Transition can be a sound business strategy, however, if a flawed sourcing approach is chosen it can result in 'continuous transition'. (Abridged)