The effects of organizational characteristics on Information Technology (IT) outsourcing decisions in Nairobi, Kenya
It is important to understand the factors that influence the success of IT outsourcing, since IT outsourcing touches the core of organization. This paper presents contemporary evidence of factors influencing outsourcing of IT services in organization in Nairobi, Kenya. The study focuses specifically on organizational characteristics and how they affect organizations as they outsource these services. It provides new insights on how organization's structure, culture, technology and its strategies affects IT outsourcing; how its surrounding environment influence the organization's decision to outsource and also takes into consideration how individuals' experience, knowledge, propensity to take risk, affects their decision to outsource and the kind of services to outsource. It seeks to answer the question 'why some organizations outsource IT services more aggressively than others'. IT outsourcing has changed fundamentally since its start in the 1960's. Since IT outsourcing services evolve and expand continuously, ways to evaluate IT outsourcing success in organization need to be modified to meet these changes. For these reason, the study develops and conceptually validates a coherent and meaningful framework to measure how organizational characteristics affect the success of IT outsourcing. The conventional benefits (i.e. cost reduction, the ability to focus on core competence, improve efficiency and effectiveness, technological benefits) and risk (contractual difficulties, cultural and social problems, technical constraints) of IT outsourcing are also extensively documented in the literature. A sample of 50 companies was randomly drawn and questionnaires administered in the various sector; manufacturing/production, financial, communication, healthcare, insurance, educational, hospitality, and NGOs Sector. Presentation and discussion of findings is based on 38 questionnaire received from the respondents. The researcher applied descriptive statistics to the data that provided an equal opportunity of selection for each element of the population and provided a powerful summary that may enable comparisons across the selected sample. The results suggested the financial sector out sourced the most followed by hospitality sector and the less active outsourcing organizations still outsource at a lower rate and the more IT intensive like the financial sector still outsource at a high rate. The highest percentage of the respondents spends over Ksh. 500, 000 showing that majority of organization have dedicated quite a large parentage of the budget to outsourcing IT services. The findings shows outsourcing can be used to cut cost by the 50% responded agreeing a reduction on the organization's budget. The respondents are benefiting more from outsourcing than acquiring in-house. .there is a positive effect on organizational performance an indication that IT outsourcing has been successful in penetrating through organizations as it positively transform organization's business functions. Although Kenya currently has infrastructure hurdles that stand between it and IT outsourcing activities, the study indicate that the industry in Kenya proves we have serious intentions that call for the development of training programmes that will facilitate knowledge to support IT outsourcing and formulating a guideline to regulate proliferation of IT outsourcings practices in organization in Kenya. This will ensure that organizations gain the right momentum to successfully stay in course and ensure Kenya gets a sizeable share of the go. This study serves as a fresh vantage point from which to explore new opportunities and challenges of IT outsourcing, beyond the past studies that focuses mainly on financial sectors, and on risks and benefits involved in IT outsourcing, not considering that the organizations its characteristics can be a hindrances to the success of IT outsourcing.