Bringing it home: successful backsourcing of software development in the public sector

Abstract Reversing an outsourcing decision and retaking control of the development and operations of IT systems can be a viable option for organizations facing outsourcing-related challenges, such as problematic vendor relationships, high costs, or the recognition of software development as a core competence. Despite its increasing practical importance, backsourcing has received little attention in the software engineering literature. This paper presents an in-depth case study of a large public organization that successfully backsourced the development of the majority of its large portfolio of software systems. Based on interviews with 61 representatives of the backsourcing organization and its vendors and an analysis of corporate documentation, we present the rationale for backsourcing, the six main guiding principles shaping the approach, and the outcomes and lessons learned from the initiative. The primary reason for backsourcing in the case organization was cost reduction. The IT department led the effort, granting various application areas considerable autonomy in the practical implementation of backsourcing. The effort was characterized by close and constructive collaboration with the outsourcing vendors, who were being phased out, an incremental approach to assuming responsibility for the applications, and the concurrent implementation of agile development at scale. Over three years, the organization successfully backsourced over 100 systems and established an agile development organization with over 300 people. As a result of backsourcing, the organization reported an increased sense of system ownership, increased personnel motivation, faster deliveries, and better quality-in-use. We were unable to find clear evidence of significant cost savings. Key challenges included managing the change effort, building and retaining the necessary competencies, and addressing organizational tensions resulting from the IT department’s central role in the backsourcing effort.