A Study on Contributing Factors of IT Outsourcing Satisfaction Financial Service Industry in Hong Kong

This paper aims to identify the critical success factors in Hong Kong Financial Service Industry IT outsourcing satisfaction and propose possible satisfaction rate boosts. A hybrid methodology (qualitative and quantitative) was adopted to analyze the variables and their relationship thoroughly. The six members focus group was formed to discuss IT outsourcing, and the survey was conducted to collect 447 valid responses for data analysis. The six critical success factors were Perceived Information Security Risk, Quality of Service Provider, Contract Management, Internal Contract Experience, Communication and Regulatory Policy, identified to support satisfaction of Hong Kong FSI IT outsourcing after conducting the analysis. Three recommendations are proposed to improve IT outsourcing satisfaction based on the findings of critical success factors: (1) A Build-up of Vendor Evaluation Framework, (2) Enhancement for Knowledge Management, and (3) Enhance Performance Monitoring. The snowball sampling method might have introduced biased information. In future research, a more extensive research scale would be required to understand the whole population, which would be more appropriate for the industry to understand the need and construct any policy. This paper is a holistic approach to identifying factors that affect Hong Kong FSI IT outsourcing satisfaction. In addition, practical recommendations were proposed to improve those factors, thereby increasing the satisfaction rate of IT outsourcing.

Introduction

Outsourcing was one of the crucial strategic ways in the intricate, competitive, and dynamic global supply chains. Companies consider it an important strategy to reduce costs and increase competitiveness, productivity, and profitability (Taponen & Kauppi, 2020). It was seen as a typical competitive strategy in local and foreign markets (Adamset al., 2018; Pereiraet al., 2019). Outsourcing is a widespread decision and one of the most strategic for companies, which helps meet financial objectives without high expertise maintenance costs (Taponen & Kauppi, 2020).

Information Technology (IT) is widely used, not just to help management but also to stand out from the competition. However, the strategic and operational importance of IT has raised a firm’s expenses, now accounting for a significant share of indirect costs for businesses (Altin, 2021). IT Outsourcing (ITO) has been the alternative for the company and focused their resources on core business. Companies benefit from ITO in several ways, including increased flexibility and adaptability, lowered operational expenses, and secured the freedom to concentrate on core skills. According to the International Monetary Fund (IMF) survey in 2021, 95% of the responding banks in Hong Kong were developing to outsource technology-related processes to service providers; over 100 Authorized Institutions—institutions that provide banking, asset and wealth management, private equity business, and securities services (HKMA, 2021)—have outsourced their business processes to service providers (IMF, 2021). Statista (2022) also projected the Hong Kong ITO market which an annual growth rate (CAGR 2023-2028) of 12.62%, resulting in a market volume of US$4.58 billion by 2028. IT outsourcing is becoming essential in Hong Kong organizations.

Unfortunately, despite ITO becoming a common arrangement in the companies and demand growing in the future, IT outsourcing satisfaction (ITOS) is not good enough in the market. Delenet al. (2019) found that around 40% of ITO projects failed at the end, and Luu (2022) also indicated that 25%–50% of ITO failed. It is a high failure rate from a project perspective. This challenge to satisfaction and success has been a significant problem in ITO, and there is a need to determine the factors that can raise the satisfaction rate.

This study aims to determine the critical success factors in Hong Kong FSI ITO satisfaction and to find the deficit in critical success factors that impacted ITO satisfaction. After the critical success factors are determined, recommendations are proposed to improve these factors for increasing ITO satisfaction. Organizations can gain insight from this study to make their ITO success easier and benefit from ITO.

Literature Review

ITO involved different disciplines in the whole outsourcing process. Therefore, multiple theories covered different ITO processes, such as ITO strategy, resource, contract, relationship, and monitoring. Systematic review and empirical study summarized the major theories of ITO in 2020 (Hanafizadeh & Zareravasan, 2020). The common frameworks used for ITO research included Technology, Organization, and Environment (TOE), Transaction Cost Economics (TCE), Core Competency Theory (CCT), Partnership and Alliance Theory, Contractual Theory, and Expectation-Confirmation Theory (ECT).

Technology, Organization, and Environment (TOE) Framework

The TOE paradigm, developed by Tornatzky and Fleischer, has been used to define the creative process within a company (Tornatzky & Fleischer, 1990). It considered three dimensions (technology, organization, and environment) that affected the adoption of innovation. Technologies here refer to all business-related technology. The organization was related to the firm’s descriptors, including its management structure, organizational structure, size, resources, and method of employee communication. Finally, the environment comprised the market components, the competitors, and the regulatory framework (Hanafizadeh & Zare Ravasan, 2018). The TOE Framework is a general theory that cites these three dimensions determining adoption compared to several theories and models in information systems research. Since researchers may choose the components of each dimension base on the features of innovation and the organization itself, the TOE framework is broadly relevant to many disciplines and circumstances (Dewiet al., 2018). It was extensively applicable to a variety of situations, including decision-making, success criteria, and information security risk (Hanafizadeh & Zare Ravasan, 2018; Hanafizadeh & Zareravasan, 2020; Bhattiet al., 2021). Even though the TOE framework is usually used to prove the relationship between ITO adoption, continuous ITO adoptions indicate ITO satisfaction. Therefore, Technology, Organization, and Environment (TOE) theory is suitable for analyzing internal and external factors in ITO satisfaction and was adopted in this study as the base theoretical framework. Fig. 1 shows a model illustrating attributes of the TOE theoretical framework.

Fig. 1. Research theoretical framework (Hanafizadeh & Zare Ravasan, 2018).

Technological Context

The technological context relates to all the company’s technologies, including those presently in use there and others that are marketed but not yet used. In addition, the company’s existing technologies influence the adaptation process because they limit the quantity and rate of technological change they can implement (Bhattiet al., 2021). Additionally, the technological context included Perceived Information Security Risk and Quality of Service Provider factors.

1. Perceived Information Security Risk (ISR): Technology, such as smartphones, mobile applications, and cloud computing, has rapidly developed in recent years. These did facilitate business operations efficiency, but they introduced IT security risks at the same time. Businesses that chose ITO for its significant benefits must also understand the risks involved (Delenet al., 2019; Al Hadweret al., 2021). A risk is a potential for an event that might negatively affect the company. For example, each ITO service provider has their area of expertise, such as helpdesk service, systems, infrastructure, software development, and cybersecurity. If the service provider lacks the exact expertise required, performance issues or extra cost may arise, causing ITO project failure. The other most serious hazard to ITO is information security issue. Since perceived IT security risk is considered highly important for ITO in FSI, there is a need to identify whether it affects the success of ITO (Hanafizadeh & Zare Ravasan, 2018; Ahmed, 2020). Therefore, it is necessary to determine the relationship between the risk and ITO satisfaction. Thus, the below hypothesis is made: H1(a): Perceived information security risk significantly affects ITO satisfaction in FSI.
2. Quality of Service Provider (QSP): The service provider’s quality was defined as the level to which the results met the service buyers’ expectations (Wibisonoet al., 2019). Goles and Chin (2002) have defined service providers’ quality as innate qualities that support the efficiency of relational interaction. Wibisonoet al. (2019) has determined the service provider’s quality significantly impact in ITO and found the similar research result of Lee (2001). However, other researchers failed to prove the service provider’s quality impact ITO success (Rhodeset al., 2016; Cha & Kim, 2018; Blijlevenet al., 2019; Hodosi & Rusu, 2019). Therefore, this inconsistent result should be identified in the Hong Kong environment. The service provider’s capabilities affected their credibility from the service buyer’s point of view. Credibility came from work history, ability, benevolence, and integrity (Alwahdani, 2019). A service buyer’s confidence in a service provider was reflected in that service’s ITO satisfaction. Thus, another hypothesis is made: H1(b): The quality of service provider significantly affects ITO satisfaction in FSI.

Organizational Context

The organizational context describes the structure, culture, goals, size, resource quality, communication, decision-making processes, features, and company assets. This setting affects ITO satisfaction and implementation choices (Bhattiet al., 2021). The organizational context relates to internal processes or capabilities, including Contract Management, Internal Contract Experience, and Communication factors.

1. Contract Management (CM): Written contracts serve several purposes in managing an ITO relationship since they are the most crucial component (Erdoğan, 2020). In the setting of ITO, a contract specifies the provision of services and costs that must be finished within a contractual period between the two signing partners. After a contract has been signed and is in force, contract management takes place (Erdoğan, 2020). The quality of contract management is to ensure that the contract’s terms and conditions are followed and that each party satisfactorily fulfills its contractual duties. Qi and Chau (2015) identified that the quality of contract management was essential at the contract and post-contract stages and significantly affected ITO. Since the contract is a binding agreement between two organizations, if the organization manages the activities and content of the contract poorly, opportunism may arise and generate extra cost during the service duration, potentially affect the result of IT. Thus, the following hypothesis is made: H2(a): The quality of contract management significantly affects ITO satisfaction in FSI.
2. Internal Contract Experience (ICE): Apart from post-signing contract management, pre-signing contract administration is also important. Creating a comprehensive contract might reduce the uncertainty, risk of opportunistic conduct, and misunderstanding between two contractual parties (Jain Palvia & Palvia, 2017). Pre-signing contract administration is content preparation that includes price, the scope of work (SOW), service level, information exchange and security, handover, clauses, terms & conditions, liabilities, penalty, payment arrangements, and exit policy (Gunduz & Elsherbeny, 2020). If participants with no outsourcing experience prepare the contract, the quality and coverage of the contract may not protect the service buyer enough (Godino & Molina, 2019). Thus, an employee’s contract experience is also essential in an ITO contract. For example, if an employee lacks contracting expertise, drafted SOW might miss tasks. Such incomplete SOW might allow for opportunistic behavior and ambiguity, requiring extra resources to fill the gap, potentially result in extra service costs. Thus, the following hypothesis is made: H2(b): The contract administration experience significantly affects ITO satisfaction in FSI.
3. Communication (COM): Communication includes understanding, sharing, and meaning (University of Minnesota, 2015). It includes open talks about expectations, future directions, skills, strengths, shortcomings, and daily interchange of project-related information (Schmidt & Menth, 2016; Zhong & Myers, 2016; Hodosiet al., 2020). Communication is an effective way to share information and a key for a healthy partnership. Communication quality, information sharing between service providers and service buyers, and participation were three dimensions of communication behavior (Aliet al., 2022; Jatobáet al., 2022; Sutthiparinyanon & Villegas Puyod, 2022). The correctness, timeliness, sufficiency, and reliability of the information conveyed were all examples of quality (Mardatillahet al., 2019; Riedet al., 2022). Any potential cooperation success depends on how well it was communicated. Higher-performing partners communicate information more often and with more relevance due to deeper relationships (Pai & Yeh, 2015). More effective partnerships were anticipated to have a better quality of communication, more information exchange between both parties and greater partner involvement in planning and goal formulation. Thus, the hypothesis is made: H2(c): The quality of communication significantly affects ITO satisfaction in FSI.

Environmental Context—Regulatory Policy (RP)

The environmental context involves external pressure, the structure of the industry, the regulatory landscape, and the availability of technical service providers (Hanafizadeh & Zareravasan, 2020). There are three ways to approach the topic of external pressure: pressure from trading partners, pressure from competitors, and pressure from rules and government directives. The Regulatory Policy factor is one of the environmental contexts as explained below.

The external pressure and regulatory environment are highly relevant to ITO. Trading partners, market, rules, and government policies all exert pressure on FSI and could impose restrictions or support ITO (Hanafizadeh & Zare Ravasan, 2018). FSI must abide by the bulk of these regulations set by regulatory organizations. The impact of government regulation on ITO could be positive or negative. A supplementary treatment plan is required when governments place new restrictions on FSI, such as mandating third-party risk management. Thus, the below hypothesis is made:

H3: Strengthening regulatory outsourcing policy significantly affects ITO satisfaction in FSI.

Summary of Independent Variables

The six independent variables were identified to build a base for this research, and the participant demographics also be considered when analyzing the driving forces behind independent variables. The summary of research’s hypotheses is listed in Table I.

Table I. Summary of Research’s Hypotheses

Hypotheses
H1(a)	Perceived information security risk significantly affects ITO satisfaction in FSI.
H1(b)	The quality of service provider significantly affects ITO satisfaction in FSI.
H2(a)	The quality of contract management significantly affects ITO satisfaction in FSI.
H2(b)	The contract administration experience significantly affects ITO satisfaction in FSI.
H2(c)	The quality of communication significantly affects ITO satisfaction in FSI.
H3	Strengthening regulatory outsourcing policy significantly affects ITO satisfaction in FSI.

Four independent variables from the TOE model were inconsistent, and consistent findings in the environmental context in the literature review were not found. Two independent variables: Perceived Information Security Risk and Regulatory policy, were proposed to add to the technological and environmental context of the model for this research. It is because information security and regulatory policy are essential areas in the financial service industry (IMF, 2021). Especially, regulatory policy is mandatory for FSI. Therefore, six independent variables: Perceived Information Security Risk, Quality of Server Provider, Contract Management, Internal Contract Experience, Communication, and Regulatory Policy, were adopted to investigate further. Besides the above independent variables, the participant demographics also be considered when analyzing the driving forces behind independent variables.

Research Methodology

Six independent variables were formulated in the research model in Fig. 2. It was based on the theoretical framework of the TOE and modified to match the actual FSI situation for this research purpose. For research method, this study adopted the hybrid method utilizing both qualitative and quantitative approaches. The hybrid method aids in validating research results utilizing quantitative and qualitative sources, investigating quantitative results with qualitative data, and creating survey questions (Santoset al., 2017).

Fig. 2. Research model.

Qualitative Research Method

The qualitative research method seeks participants’ opinions, views, and preferences about the research topic (Hammarberget al., 2016). For better data collection interactions between participants and the author, a focus group discussion was conducted for an in-depth discussion. The data were collected from the focus group formed by six participants working for IT in FSI or providing IT service for FSI. The group members had 5 to 25 years of IT experience, including experiences as management, IT professionals, and service providers.

Quantitative Research Method

The quantitative research method objectively gathers and evaluates numerical data to characterize, forecast, or regulate factors of interest (Rutberg & Bouikidis, 2018). Therefore, the survey was conducted to collect data, which targeted employees in the IT field as participants, especially those working or working for Hong Kong FSI.

Questionnaire Design

The questionnaire was further organized into two sections: the first section aimed to understand the respondents’ background with questions about their demographics; in the second section, the statements were formulated based on six independent variables and had statements for each independent variable. Respondents rated their level of agreement or disagreement on each statement listed using 6-Point Likert Scales. The statements of each independent variable were trimmed down based on the reliability test result of the pilot test in Table II.

Table II. Reliability Test Result of Polit Test

			Pilot test	Final test
Variable	Label	Keywords	Cronbach’s alpha	No. of statement	Cronbach’s alpha
Perceived information security risk	ISR1	Specialized functions and services	0.819	4 (ISR 1–4, delete ISR 5)	0.825
	ISR2	Reduce IT operations’ impact due to staff turnover
	ISR3	Expertise and tools to response incidents
	ISR4	Protect the company’s data
	ISR5	Transfer the operational risks
Quality of service provider	QSP1	Professional certificates	0.846	4 (QSP 1–4, delete QSP 5)	0.823
	QSP2	Selection criteria and relevant experience in the industry
	QSP3	Capabilities of implementation a new computer system
	QSP4	Share the knowledge of systems and the potential risks
	QSP5	Transfer the financial liabilities
Contract management	CM1	Define the number of subject matter experts	0.917	4 (CM 1–4, delete CM 5)	0.804
	CM2	The arrangement of out-of-scope work
	CM3	Bear the responsibility and liabilities
	CM4	The service level agreement aligns with the SLA of company
	CM5	Comply company’s security policies
Internal contract experience	ICE1	Determine the scope of work in detail	0.921	5 (ICE 1–4, delete ICE 5)	0.824
	ICE2	Write service level agreements (SLAs)
	ICE3	Consider the nursing period in IT outsourcing
	ICE4	Capability of negotiation
	ICE5	Write a statement of work
Communication	COM1	Service provider’s time zone	0.734	4 (COM 1–4, delete COM 5)	0.801
	COM2	Service provider’s first language
	COM3	The communication is timely
	COM4	The communication is accurate
	COM5	Language barrier
Regulation policy	RP1	Regulatory compliance requirements	0.900	4 (RP 1–4)	0.809
	RP2	Knowledge of regulation
	RP3	Fulfillment of the regulatory requirements
	RP4	Third-party risk in regulation policy
IT outsourcing satisfaction	ITOS1	Completes tasks that exceed our expectations	0.831	4 (ITOS 1–4, delete ITOS 5–6)	0.839
	ITOS2	Acquired expert services from service providers
	ITOS3	Benefit in IT outsourcing
	ITOS4	Overall satisfaction of IT outsourcing service
	ITOS5	Likelihood to recommend others for IT outsourcing
	ITOS6	Refocus on core businesses or processes

Sample Population

The target populations in this study were IT workers in Hong Kong. According to the information from the Census and Statistics Department of Hong Kong Special Administrative Region, approximately 108,500 IT workers in 2021 (Census & Statistics Department, 2022).

Sampling Size

• Margin of error: A 5% margin of error is adopted (Taherdoost, 2017; Kosaret al., 2018).
• Confidence level: A confidence level set at 95% and considered it created fair representative data. The z value for a 95% confidence level is 1.96 (Hazra, 2017).
• Population proportion: 50% is adopted, which is used to determine a more cautious sample size (Frey & Zhang, 2021).

Using the above criteria, the appropriate values had been selected to calculate the sample size using the formula below:

(1)N=z2×p(1−p)e21+(z2×p(1−p)e2N)where N = population size; z = z value; e = margin of error; p = population proportion (Kallio, 2022).

The value adopted for calculating the sample size in this research were N = 108,500; z = 1.96; e = 0.05; p = 0.5. Using the formula (1), the sample size was 382.8046. Thus, 383 questionnaires were required to be completed for this study.

Sampling Method

This research is specific to Hong Kong ITO, so snowball sampling is adopted to collect data from respondents who are working in IT.

Results

In total, 447 surveys were completed and returned during the planned data collection period. The response rate was 97%. The relationships had been determined in the different analyses, which included reliability, correlation, and regression analysis. The outcome demonstrated that six independent variables in this study were important factors to ITO satisfaction in FSI.

Descriptive Statistics and Reliability Analysis

The most used dependability metric is Cronbach’s Alpha. It serves as a gauge for the accuracy of the measurement tools and ranges from 0 to 1. Cronbach’s Alpha, a measure of acceptable internal consistency, should be higher than 0.7. (Olaniyi, 2019). The data of survey were gathered to conduct a reliability test for validation. Six independent variables passed the reliability test with over 0.8. Table III shows the descriptive statistics and reliability results. The highest and lowest attribute’s mean with standard deviation (SD) of each factor was shown in the table and the Cronbach’s Alpha value in this research and previous research.

Table III. Result of Descriptives Statistics and Reliability Analysis

Attribute	Mean (SD)	Cronbach’s alpha in this research	Cronbach’s alpha in previous research	Reference
ISR1	4.48 (1.05)	0.825	0.870	Hanafizadeh and Zare Ravasan (2018a)
ISR2	4.22 (1.11)
QSP1	4.33 (1.08)	0.823	0.925	Han et al . (2013)
QSP2	4.55 (0.99)
CM1	4.47 (1.05)	0.804	0.832	Karimi-Alaghehband and Rivard (2020)
CM2	4.55 (1.06)
ICE1	4.41 (1.05)	0.809	0.829	Karimi-Alaghehband and Rivard (2020)
ICE4	4.49 (1.08)
COM1	4.53 (1.07)	0.801	0.899	Han et al . (2008)
COM4	4.46 (1.06)
RP1	4.36 (1.12)	0.824	0.780	Hanafizadeh and Zare Ravasan (2018a)
RP4	4.48 (1.04)
ITOS2	4.37 (1.10)	0.839	0.928	Han et al . (2008)
ITOS4	4.56 (1.00)

Factor Analysis

Factor analysis is a statistical technique to extract common variance from all variables and group them into logical groups. There are several methods to conduct it, but principal component analysis (PCA) is used most commonly. Principal component analysis with varimax rotation was adopted in this research. The factor is extracted based on eigenvalues greater than 1 (Beaverset al., 2013), and the items retained in the factor if the loaded above 0.5 (Shrestha, 2021). Two components have been determined in the analysis; component one is CM, ICE, COM, RP and ITOS, and component two is ISR and QSP. Component one explains 50.76% of the amount of the variance, and component two explains 4.21%. Those components explain 54.97% of the variance and show in Table IV.

Table IV. Result of Factor Analysis

Label	Attribute	Factor loading	Communality	Component	Eigen-value	% of variance	Cumulative variance %
ISR1	Specialized functions and services	0.716	0.609	2	1.177	50.763%	50.763%
ISR2	Reduce IT operations’ impact due to staff turnover	0.710	0.588	2
ISR3	Expertise and tools to response incidents	0.754	0.647	2
ISR4	Protect the company’s data	0.656	0.538	2
QSP1	Professional certificates	0.717	0.607	2
QSP2	Selection criteria and relevant experience in the industry	0.550	0.546	2
QSP3	Capabilities of implementation a new computer system	0.659	0.581	2
QSP4	Share the knowledge of systems and the potential risks	0.698	0.610	2
CM2	Define the number of subject matter experts	0.526	0.512	1	14.214	4.205%	54.968%
CM3	The arrangement of out-of-scope work	0.553	0.517	1
CM4	Bear the responsibility and liabilities	0.577	0.542	1
ICE1	Determine the scope of work in detail	0.719	0.498	1
ICE2	Write service level agreements (SLAs)	0.592	0.487	1
ICE3	Consider the nursing period in IT outsourcing	0.682	0.531	1
ICE4	Capability of negotiation	0.700	0.526	1
COM1	Service provider’s time zone	0.650	0.511	1
COM2	Service provider’s first language	0.647	0.439	1
COM3	The communication is timely	0.646	0.547	1
COM4	The communication is accurate	0.687	0.619	1
RP1	Regulatory compliance requirements	0.568	0.495	1
RP2	Knowledge of regulation	0.563	0.598	1
RP3	Fulfillment of the regulatory requirements	0.622	0.567
RP4	Third-party risk in regulation policy	0.652	0.588	1
ITOS1	Completes tasks that exceed our expectations	0.599	0.555	1
ITOS2	Acquired expert services from service providers	0.562	0.474	1
ITOS3	Benefit in IT outsourcing	0.564	0.551	1
ITOS4	Overall satisfaction of IT outsourcing service	0.572	0.589	1

Correlation and Regression Analysis

The Pearson Correlation Coefficient determines the strength and direction of the relationship between two variables that are at least assessed on an interval scale (Komaroff, 2020). The Pearson Correlation value (r) indicates the connection between the two variables; a value between −1 and +1 is used to quantify it (Akoglu, 2018). There is a strong positive association if the value is close to 1. The correlation and linear regression between the independent and dependent variables in this study were contrasted separately to determine whether there was a significant relationship between them. The result in Table V demonstrated that the six factors are significant relationship between each independent variable and ITOS.

Table V. Result of Correlation Analysis

Correlation analysis
	r		Reference
	This research	Other research
ISR -> ITOS	0.533**	0.686	Hsu et al . (2014)
QSP -> ITOS	0.566**	0.602	Lee (2001)
CM -> ITOS	0.539**	0.773	Karimi-Alaghehband and Rivard (2020)
ICE -> ITOS	0.549**	0.798	Karimi-Alaghehband and Rivard (2020)
COM -> ITOS	0.623**	0.630	Han et al . (2008)
RP -> ITOS	0.562**	0.692	Hsu et al . (2014)

Summary of Findings

Several relationships have been determined in this research. The outcome demonstrated that H1–H3 are supported and is shown in Fig. 3.

Fig. 3. Result of hypotheses.

Conclusion and Recommendations

Conclusion

The result showed that part of the independent variables significantly affected ITO satisfaction in this research model. The FSI ITO satisfaction was affected by the Perceived Information Security Risk (ISR), Quality of Service Provider (QSP), Contract Management (CM), Internal Contract Experience (ICE), Communication (COM), and Regulatory Policy (RP).

Recommendations

The recommendations are proposed below based on the findings in this research.

A Build-Up of Vendor Evaluation Framework

The service buyers may assess certain criteria to identify which service providers can most effectively assist in achieving the business objectives, since the service providers will manage the outsourced IT activities for the service buyers. The evaluation criteria should include competency, reputation and position in the industry, performance history, professionalism, attitude, risk factors, price, and geographical location. Each criterion has a ratio and mark based on criticality to ITO. This is a framework to assist service buyers in objectively selecting their service providers. The vendor evaluation mitigates the uncertainty and risk associated with service provider performance. The service providers’ capabilities can be determined directly or indirectly in the evaluation. For example, as part of the evaluation service buyers can directly determine the service providers’ competency and attitude through face-to-face interviews, as well as indirectly assess their reputation and position in the industry.

Moreover, the information in the evaluation and the final evaluation result can be used as references to formulate the corresponding clauses, terms, and conditions of the IT outsourcing contracts. This ensures that the evaluated aspects will be realized as part of the contract, safeguarding the expected service provider’s performance during the contract period. The evaluation also addresses the due diligence regulatory requirements on third-party risk management from the Hong Kong FSI regulators.

Enhancement for Knowledge Management

IT outsourcing experience can be accumulated from different outsourcing projects, regardless of if they were successful. Issues or aspects that were not catered to in previous outsourcing projects can be experienced for the next. These valuable experiences can help service buyers to improve their next project and can be transformed into knowledge that should be formally recorded and filed for successor training or as used as reference by other staff, to enhance knowledge management and facilitate knowledge sharing and exchange among the staff. These assets will be kept in the company even after the staff leave the company. For example, the non-FSI respondents needed higher awareness of regulatory policy, as determined in the previous statistical test. In this case when new staff without FSI experience get involved in FSI ITO project, the knowledge pool can be referred to. This new staff can take note of the knowledge on what needs attention relating to IT outsourcing regulations, as well as using this knowledge pool as reference for proper contract preparation.

Enhance Performance Monitoring

If vendor evaluation is used as a preventive action against IT outsourcing failure, performance monitoring is a detective action to reduce the failure rate. While service providers may have passed the vendor evaluation and was awarded the outsourcing contract, the outsourced project may still fail due to lack of sustainability in service performance–a continuous delivery of high-quality services over time (Pluggeet al., 2013). Therefore, performance monitoring is necessary for measuring the performance of service providers regularly. It will also positively affect the service quality in outsourcing (Matet al., 2011). If the performance over time trended to breach a pre-defined SLA alert threshold, the service buyers can be made aware of the performance issue. Service buyers can then discuss with the service providers for remediation actions. Key areas should be monitored during the service period, such as response and reporting time, problem-solving lead-time, staff turnover, and on-time delivery rate on-time. Performance review sessions can also offer opportunities for both parties to share information and solve the issues in daily operations.

Limitation and Future Research

This research methodology had some limitations that might have affected the results.

Limitations

1. 1.The snowball sampling method might have introduced biased information due to the characteristics of this sampling method. For instance, respondents in the snowball structure might be current or former coworkers. The respondents most likely had similar ITO experiences or results. Thus, the representation of these samples might be biased toward a particular population group and could not reflect the whole demographic population of the industry. The stratified sampling would be a more representable method, dividing FSI companies into subgroups, and selecting a sample from each subgroup.

In future research, a more extensive research scale would be required to understand the whole population, which would be more appropriate for the industry to understand the need and construct any policy.

1. 2.The critical success factors had been identified for future research, but the reasons for ITO failure were not identified in this study. It would be exciting to research the relationship between critical success factors and the reasons for failure in ITO.

Future Research

The future research will focus on the service buyers and whether they are aware of the critical success factors. The research can investigate if the service buyers are unaware of the failure causes, or if they were aware but failed to take remediation action in the ITO. It can be explored to improve the satisfaction rate in ITO.