Backsourcing Case Study

6979 Words 28 Pages
Register to read the introduction… After a merger with Bank One, the management decided to handle the technology infrastructure themselves in order to ensure long-term growth and success (Overby, 2005). Many of the affected JP Morgan employees had been taken over by IBM when IT services first were outsourced, but they returned to JP Morgan once the services were backsourced. This back-and-forth transition and lack of management continuity created an uncertain and unstable environment for the affected employees, who lost faith in and commitment to their employer. In this case, the low level of employee motivation was affected further by the announcement that the company would lay off 12,000 staff following the merger with Bank One (Overby, 2005). For JP Morgan Chase, the entire backsourcing endeavor resulted in substantial costs, including the initial outsourcing costs, premature contract termination, and restructuring and reinvesting in staff and hard- and software for the IT department. Similarly, Halifax Building Society cancelled a 10-year outsourcing contract with IBM, worth over 700,000 British pounds, for providing IT operational services (McLaughlin and Peppard, 2006). Again, the company cites structural change as the official reason for backsourcing, which resulted when Bank of Scotland merged with the Halifax Building Society (Veltri et al., 2008). From the day of contract formation, the outsourcing agreement had been viewed as one of Europe’s largest ever, yet it failed. The backsourcing process has not been described further in this case. Sainsburys cancelled a 10-year, almost two billion British pound contract with Accenture in 2005, after just 2 years, and decided to backsource its IT operations. …show more content…
ITServCorp was presented with a sizable pool of skilled and experienced external specialists suddenly available in the labor market. Thus, project management decided to add freelancers to their resource pool and located the entire team at their corporate headquarters for the ensuing 3 months. IndianITCorp was also involved in the backsourcing process. After cancellation of the original contract, a backsourcing agreement had been established, outlining the time span and scope of returning and supporting the development work. Onsite employees from IndianITCorp, who were considered the bridgehead of the former project, were suddenly stuck in a truly peculiar situation. They were trying to transfer their knowledge and development documentation back to ITServCorp as part of the backsourcing contract, but also trying to save face, as one IT manager recalls. However, in the course of the lawsuits, the quality of their work was repeatedly shown to be substandard, and IndianITCorp employees at the ITServCorp backsourcing site were no longer respected in their own country or company. They did not know whether they would have a job once they returned home. This resulted in severe communication problems within the backsourcing project. To make matters worse, IndianITCorp hit the headlines by being involved in a severe fraud scandal. However, they were still legally obliged to ‘hand back’ all development work performed and standby for further inquiries for two additional months. The collaboration between both companies ended abruptly following this period. As one ITServCorp team lead remarks, this did not turn out to be much of a problem since ‘there was not much knowledge to be transferred anyways.’ Kastner, the backsourcing project manager, speaking about the quality of work by IndianITCorp, stated, ‘We got a patchwork back, which we had to renovate painfully, piece after piece.’ Not much of

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