Risks in offshore IT outsourcing: A service provider perspective

Offshore outsourcing of Information Technology (IT) services is the prevalent practice in global businesses today. Despite the strategic advantages and cost benefits that offshore outsourcing offers, outsourcing relationships also involve risks, for both the client, as well as the service provider – a fact that is evidenced by the reported failures of such engagements. Some of the prior researches in this area have focused on identifying various types of client risks and their sources. However, the study of risks from a service provider’s perspective has not received due treatment in literature. This study analyses offshore IT outsourcing risks from the perspective of service providers. A case based approach using the principles of grounded theory was used for studying the risks. Theoretical sampling was used to collect data from 5 mid-tier offshore third party service providers based in Bangalore, India. From our coding and analysis three broad categories of service provider risks emerged, namely, macroeconomic, relationship specific and project specific. Relationship maturity, nature of contract, nature of service or project and nature of client were identified as contextual factors which influence the degree of risk.