Innovation in IT outsourcing relationships: Where is the best practice of IT outsourcing in the public sector?

In recent years IT outsourcing has evolved from a formal contractual-based practice to a relationship-based practice. This new practice is viewed as an innovation in IT outsourcing in the public sector. The main goal of this study is to conduct an empirical investigation on IT outsourcing projects in the public sector to examine the best IT outsourcing practices from the relationship perspective. A four outsourcing relationship types (FORT) framework is applied to 178 IT outsourcing projects initiated by 56 different government organizations in Korea. Data shows that the best practice of IT outsourcing in the public sector can be achieved when strategic impact of the outsourced IT is highest and the extent of substitution by the vendor is large but not fully substituted. This finding can be explained in terms of government organization’s fear of loss of control and conservative organizational culture.