Rise and Fall of an Information Technology Outsourcing Program: a qualitative Analysis of a Troubled Corporate Initiative


The Twenty-First Century Retail Field as Experienced by Icarus’ Information Technology


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Rise and Fall of an Information Technology Outsourcing Program A

The Twenty-First Century Retail Field as Experienced by Icarus’ Information Technology 
Executives and Employees 
As I introduced previously, the retailing field in the early twenty-first century 
experienced significant digital disruption. The increasingly frictionless ecosystem of high-speed 
Internet access, smart devices, information transparency, personalization, and flexible delivery 
options placed more power in consumers’ hands than ever before. Icarus executives were 
fighting a war on two fronts. On one, they scrambled to maintain differentiation from their brick-
and-mortar contemporaries. On the other, they struggled to catch up, stay current, or retain 
relevance within a field of new digital competitors whose business models assume no brick-and-
mortar infrastructure. 
Just as Icarus’s identity with its customers was becoming muddled, so was the confidence 
of the departments across the entire corporation in the Information Technology (IT) department’s 
abilities. The new landscape of retailing was forcing Icarus to integrate its once disparate 
systems into seamless costumer experiences in stores, online, and with mobile devices. IT 
executives wrestled with the competing priorities of managing the costs and skills needed to 
maintain legacy, home-grown systems and the need to invest in new technology packages. The 
compounding demands for speed led to increased contractor usage under Project Phoenix and the 
eventual IT reorganization. The IT department’s culture tipped toward one of technology 
“buyers” and “managers” versus their historical role as “builders.” 


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Executives’ view of the Icarus information technology department. 
In addition to the 
cultural norms that shaped how work was performed at Icarus, the views of both executives and 
employees revealed deeper insights into the Icarus habitus and digital retail field. The IT 
department was subservient to Icarus’s other departments. IT executives historically did what 
they were told versus having an equal voice among the C-Suite executives across the 
corporation, whose view of the IT department was that it was a bottleneck. At the time of this 
research, the CIO was actually a former business operations leader, not a technologist, who 
understandably focused the division’s attention on speed and throughput over emerging priorities 
such as security in the brave new digital economy world. 
IT executives did not view Icarus as a technology company. Rather, Icarus used 
technology to effectively market and sell goods and services as a top-flight retail goods provider. 
Whereas a firm in the technology field like Google, Apple, Microsoft, or even Amazon looked to 
develop new technology as a direct revenue channel, Icarus used technology within its large IT 
departments as an enabler for its core business. This had become the normative practice among 
other Fortune 1000 firms in the mass-merchandising field: 
You have a couple camps [for a vision of IT at Icarus]. I won’t use the middle camp. I’ll 
use extremes. You have a camp where people grew up in garages developing software, 
kind of a Bill Gates, Steve Jobs group. They would tell you, “Never hire one contractor,” 
and in fact when I go to Google and Apple and Adobe, and then any of these major 
software firms...I’ve been to them all, mostly the [big name ones]...they don’t have one 
contractor. They don’t even know [about outsourcing as a staffing option]...That’s how 
they grew up. Even though they’re big companies now, they grew up [in somebody’s 
garage]. They’re a technology company, so why would you bring in [IT contractors to do 


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engineering work]? …They’re sitting next to all the big [technology universities], 
Berkley, Cal Tech, Stanford, you name it. All the talent is coming out of those schools, 
and they’re all going to tech companies. Even though they’re big, they operate like a 
startup. That’s how they grew up. 
The other extreme is large Fortune 50 companies, Fortune 100 companies. 
They’re not tech companies. They struggle to attract and retain [talent]… when I say 
talent, I mean the best talent. The people who grew up in [Google, Apple, etc.] would 
shudder at the thought of [SSP]. [If] they come into a big company, and they start looking 
around [they would ask,] “Where’s the technologists?” We’re all a bunch of [technology 
generalists]. “Where [are] the deep technologists? Why do you have contractors? Team 
members should be doing that.” Guess what, we’re not Google or Apple. Do you want to 
really focus on being the technology organization? We can [say we want to] be the best in 
retail, but let’s call bullshit on who we are and who we aren’t. We’re not a high-tech 
technology organization. (Executive, personal communication, July 23, 2013) 
Given their self-distinction between being the IT department for a mass-merchandising firm 
versus a company in the technology field (i.e. Apple) that would “never” outsource its product 
development, it seemed rational for Icarus executives to view outsourcing as a legitimate staffing 
option. As with other firms outside the technology field, Icarus executives were focused on 
optimizing the efficiency and speed of their large IT department. Speed and efficiency were 
especially important to IT executives given the impatience of Icarus’s business teams and the 
looming need to overhaul legacy systems to support the new realities of digital retailing. 
Recall from Chapter One that firms like Icarus often optimized its IT departments by 
hiring employees and utilizing contractor labor to perform non-core work. Many of Icarus’s 


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older, legacy applications were developed in-house, and a number of technology firms offered 
out-of-the-box solutions to these standard (or non-core) business practices (e.g. payroll 
processing and human resources). Despite the general edict to outsource non-core work, IT 
executives were prone to argue against outsourcing their particular function. Counter to the 
previous executive’s assessment of the Icarus IT department as “not a high-tech organization,” 
some in the IT group remained reluctant to outsource their work (beyond the de facto “staff aug” 
approach) and went to great lengths to justify their argument: 
I think really it’s an Icarus issue, not just an IT issue, that there’s so much transactional 
noncompetitive work that we don’t outsource. My business partners haven’t got [sic
onboard with [outsourcing] payroll. What Fortune [1000] company runs its own payroll 
department? [Furthermore] how many teams run so much of their own infrastructure and 
don’t outsource more of that? Every business partner including ourselves pulls out all of 
their Gartner and their other data [explained below] to show that we’re running it more 
cost effectively than any [vendor] could run for us, and running with higher level of 
service than they [vendors] can do for us. They don’t get into, “Well, do you have a fully 
loaded cost with the real estate it takes and [the] amount of mindshare it takes to run 
those functions and the lack of ability to take those thousands of heads across Icarus and 
redeploy them?” (Executive, personal communication, September 10, 2013) 
The Gartner data this executive referenced was from a cost study that organization had 
performed on Icarus’s IT operations during this research. The study showed that Icarus’s cost to 
run some functions (such as infrastructure) was less than other firms of a similar size. While 
executives would have preferred to free up capital assets and employees to work on new 
initiatives by outsourcing, they also argued it would be unwise to outsource functions Icarus was 


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able to run more cost effectively than others. The paradox only hinted at in this account of the 
proper approach to outsourcing is that while all executives agreed on the need to fully outsource 
non-core functions, they each tried to position their functions as either core to the organization or 
more efficiently run than a vendor could match. 
Despite the debate and the obvious risks, an executive who successfully outsourced a 
reporting function stood to gain considerable organizational capital. This stretch assignment 
would be visible at all levels of the company and, if successful, would advance the moral career 
of those at the helm. While there appeared to be no one right outsourcing answer, IT executives 
did have a clear exemplar of what not to do. As previously mentioned, an Icarus competitor had 
outsourced significant portions of its IT operations only to bring much of that work back in-
house after years of costly sub-par results. Icarus executives vowed not to repeat this folly. 
To break the stalemate over which function(s) to outsource, IT executives would go on to 
develop a Global Staffing Model (GSM) for guiding outsourcing decisions (discussed fully in the 
next chapter). The GSM was an infocentric tool that largely ignored or discounted most other 
factors outside of the relative number of employees with certain IT skillsets. Particular quadrants 
of the two-by-two GSM grid represented work considered more or less outsourcable. In practice, 
the GSM was more of a ouija board. The GSM was heavily influenced by executives’ decision-
making behaviors of “looking up and looking around” (Jackall, 2010) within the Icarus habitus. 
It allowed executives with the biggest egos, or most aversion to risk, to influence movement of 
the GSM’s Ouija planchette in directions most favorable to their personal agendas. 
As noted earlier, Icarus experienced a period of high growth in the decades leading up to 
SSP. As such, the culture had been one of delivering projects fast—cost was often a secondary 


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factor. This pace of growth and past success contributed to a shared confidence in the Icarus 
habitus that “we can do it better than anybody else:” 
In the seventeen years [I have been at Icarus] we went from about three-hundred fifty 
people up to about ten thousand people [in the IT department]. We went from a small 
shop mentality to a very large shop with some of the same idiosyncrasies of a small shop. 
What I mean by that is, it still relies a lot on who do you know, and what you think or 
feel, versus process and procedures. We are slowly morphing out of our mentality of, 
“We can do it better than anyone else,” to, “Wait a second, there’s certain things that who 
cares if we can do it better, we shouldn’t be doing it better.” . . . [There is also] a strong 
loyalty to the area and items that you worked on versus loyalty to Icarus as a whole. 
(Executive, personal communication, March 20, 2013) 
This “we can do it better than anybody else” belief contributed to the generally dismissive view 
many executives and employees held of vendors. Naturally, the Icarus habitus rendered much 
more cultural capital to employees than it did to vendors. This power imbalance would manifest 
itself throughout SSP and had significant impacts on it during its later phases. Although IT 
executives had not yet figured out a response to the digital disruption they faced, they had also 
not yet experienced a major crisis. Given their past accomplishments, and despite doubts from 
the business teams, the IT executives were confident in their ability to address the digital 
disruptions in retail, in part, with their outsourcing strategy. 

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