On the Relevance of the Modularity Concept for Understanding Outsourcing Risk Factors

Contemporary organizations frequently seek external and specialized partners to outsource some of their non-core, though highly complex tasks, including their information systems. In literature, a variety of outsourcing risk factors which lead to unsuccessful project outcomes have been identified. Despite many remedies suggested by practitioners and scholars to mitigate these risk factors, empirical studies continue to report frequent failures in outsourcing projects. This paper suggests an alternative perspective to analyze risks related to outsourcing projects, based on the concept of modularity. Such a new perspective can help in complementing existing outsourcing risk analyses with new or deeper insights as a basis to define a more exhaustive list of required mitigating actions, which in turn could lead to more succesful outsourcing projects. To illustrate this alternative perspective, a reanalysis of a failed outsourcing case is discussed. The paper shows in a detailed way how poorly designed modular structures at the technical and project 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' and 'communication problems'.