Success factors of selective information technology outsourcing in enterprise resource planning projects in Israel

IT Outsourcing (contracting-out of Information Technology services) has become a pivotal economic trend in recent decades. This study traces the interlacing of IT Outsourcing with Enterprise Resource Planning (ERP) software systems. Little research has considered the reciprocal relations between these two phenomena. This was the gap in knowledge addressed by the research. More specifically, the research investigated: why organisations turn to IT Outsourcing providers to implement and maintain ERP systems and what are the success factors for selective IT Outsourcing within ERP projects in Israel. Field research was conducted in organisations during 2006-2008, employing IT Outsourcing for ERP systems in two stages: Stage One used qualitative data-collection tools: five semi-structured interviews and fifteen open-ended questionnaires. Inductive content and thematic analysis conducted on data from these tools produced themes that formed the basis for a closed-ended questionnaire used in the next stage. Stage Two employed seventy two closed-ended questionnaires. Quantitative data from this questionnaire underwent deductive statistical analysis to test and confirm findings from Stage One. Results indicated that significant differences between ERP package-based centralised cross-organisational systems and the out-dated self-developed legacy IT systems produced different organisational requirements for IT Outsourcing services. Respondents thought it essential to employ IT Outsourcing for ERP projects, noting different motivations for this strategy. Respondents identified four success factor groups for IT Outsourcing in ERP projects, grading the factors according to relative importance. Management commitment and support was the most important success factor group. The research showed that organisations that implement ERP systems regard it as essential to employ the IT Outsourcing services since they provide experienced updated experts. Organisations stress that they need these services to ensure effective, operable systems, understanding that initially there is little cost reduction. Management commitment, wise choice of vendors and intelligent contracting can establish successful vendor-organisation collaboration. Contribution to knowledge is made by offering a better understanding of the unique phenomenon of IT Outsourcing within ERP projects in Israel, motivations to use and success factors.