A Research Framework of Information Systems Outsourcing

A Research Framework of Information Systems Outsourcing

Hwang-Yeh Chen Ph.D. Candidate Department of Business Administration National Dong Hwa University No. 1, Sec. 2, Da Hsueh Road, Shoufeng, Hualien 97401, Taiwan Email: [email protected]; [email protected] Track: Strategic Management

A Research Framework of Information Systems Outsourcing

Abstract Outsourcing becomes a basic strategy of the information systems (IS) field and is essential for firms to stay competitive in the global environment. From firms’ perspective, outsourcing offers several advantages, such as reducing or stabilizing overhead costs, gaining cost advantage over the competition, concentrating on core activities and organizational specializations, providing flexibility in response to changing market conditions, and reducing investment in high technology. However, prior research fails to provide a comprehensive framework to accumulate knowledge in the area of IS outsourcing research in a systematic way. The purposes of this study are to build a classification framework for literature analysis and to develop an integrative research framework which is used as the basis to further identify the research gaps in IS outsourcing. The recommendations for the future research directions in IS outsourcing are provided and the contributions are discussed in this paper.

1

1. Introduction The information technology (IT) outsourcing has been expanding and experienced a considerable growth during the past decade and this phenomenon is expected to continue (Aubert, 2004). Outsourcing now becomes a basic strategy of the information systems (IS) field and is essential for firms to stay competitive in the global environment (Gonzalez, Gasco, & Llopis, 2006; Rottman & Lacity, 2006). According to Gartner’s report, it is estimated that the worldwide IT outsourcing market will grow from US$ 180.5 billion in 2003 to US$ 253.1 billion in 2008 at an annual growth rate of 7.2% (Gonzalez et al., 2006). IBM, EDS, HP, Oracle, and General Electric are some of the largest IT/IS outsourcing service providers in the global market. Outsourcing has been viewed as a form of predetermined external provision with another enterprise for the delivery of goods and/or services that would previously has been offered in-house (Finlay & King, 1999). IS outsourcing is defined as “ the practice of turning over part or all of an organization’s IS functions to external service provider(s)” (Grover, Cheon, & Teng, 1996). From the firm’s perspective, IS outsourcing offers several advantages, such as reducing or stabilizing overhead costs, gaining cost advantage over the competition, concentrating on core activities and organizational specializations, providing flexibility in response to changing market conditions, and reducing investment in high technology (Kliem, 1999; Lacity & Hirschheim, 1993; Quinn, 1999). The evolution of outsourcing activities has shifted from components, helpdesks, call centers to the business process management (BPM). Moreover, IT advance and commodification play an important role to influence firms’ strategy in outsourcing and facilitate this phenomenon (Kakabadse, 2000). Prior research into IS outsourcing phenomenon focused on: (1) determinants, costs/benefits, and advantages/ disadvantages of outsourcing (why) (Lacity et al., 1995; Mayer & Salomon, 2006; Quinn & Hilmer, 1994); (2) outsourced functions/activities (what) (Aubert et al., 2004; Grover et al., 1996; Lacity & Willcocks, 1998); (3) sourcing arrangements (which) (Currie & Willcocks, 1998; Lichtenstein, 2004; Quinn & Hilmer, 1994; Stremersch et al., 2003); (4) vendor evaluation and relationship building (how) (Grover et al., 1996; Lee & Kim, 1999), and; (5) outsourcing success (outcome) (Gottschalk & Solli-Sæther, 2005; Grover et al., 1996; Lacity & Willcocks, 1998; Willcocks et al., 2006). We realize it will be beneficial to accumulate knowledge in the area of IS outsourcing research in a systematic way. The purposes of this study are to build a classification framework as the basis for literature review and to develop an integrative research framework for IS outsourcing research. The suggestions to future research direction in IS outsourcing is discussed in the final section.

2

2. Literature review 2.1 Research Approach The research approach used in this study included three primary phases: selection, analysis, and outcome. The selection phase focuses on defining research scopes and identifying literature publications based on pre-defined criteria. The analysis phase concentrates on recognizing research areas and topics based on extensive literature review and build the classification framework for IS outsourcing research. The outcome phase aims at developing an integrative research framework based on the results of literature analysis and finally providing with the suggestions for future research in this field. Figure 1 illustrates three phases and their associated activities in research approach.

Figure 1. Research approach 2.2 Review Procedure 2.2.1 Selection phase The selection phase starts with defining the research scopes for IS outsourcing. The research reviews IT/IS outsourcing literature published in journals with high prestige in the IS field. The list of selected IS journals are MIS Quarterly (MISQ), Information Systems Research (ISR), Journal of Management Information Systems (JMIS), Information & Management (I&M), and Communication of ACM (CACM) based on the study by Im & Grover (2004). In addition, several highly recognized journals in management, strategy, marketing and e-commerce research are included in the initial selection criteria, such as Management Science (MS), Decision Science (DS), Strategic Management Journal (SMJ), Academy Management Journal (AMJ), Academy Management Review (AMR), Journal of Marketing (JMR), Journal of Marketing Research (JMR), Internal Journal of Electronic Commerce (IJEC), and Electronic Market (EM). The practical-oriented journals are also included, such as Harvard Business Review (HBR), Sloan Management Review (SMR), and California

3

Management (CMR). Other publication sources such as books, conference proceedings, and press release are not included in this study. The research database sources are ABI/Inform, EBCOHost, and ProQuest with keywords such as “IS outsourcing”, “IT outsourcing”, and “outsourcing or IT or IS”. Appendix 1 summarizes these studies with major research contexts, methodology, and findings. 2.2.2 Analysis phase The analysis phase first identifies research areas in selected IS outsourcing literature and classifies into associated categories. Lee & Huynh (2000) classify outsourcing research into five major areas: organization, performance, decision, contract, and relationship. In addition, Dibbern et al. (2004) conduct an comprehensive and complete review on IS outsourcing literature from 1992-2000 and identify five sourcing issues of why to outsource, what to outsource, which decision process to take, how to implement the sourcing decision, and what is the outcome, based on Simon’s stage model of decision making. Prior research indicates that major research streams in IS outsourcing include: (1) the business impact of IS outsourcing by highlighting costs and benefits; (2) the drivers, determinants and antecedents; (3) the management of various outsourcing arrangement between clients and IT vendor firms; (4) the analysis of IS outsourcing decision from political or social lens; (5) the risks of IS outsourcing (Aubert et al., 2004). Moreover, Gonzalez et al. (2006) review the IS outsourcing literature from 1992 to 2005 and classify into five topics of IS outsourcing research from the perspective of client, supplier, relationship, and economic theories. The research classification in IS outsourcing is summarized in Table 1. This research adopts a combined view from previous research (Dibbern et al., 2004; Lee & Huynh, 2000) and develops a systematic classification framework for literature analysis described in the following sections. Prior research has identified five major research streams in IS outsourcing, including the business impact, the determinants, the management of various outsourcing arrangement, the political and social view on outsourcing decision, and the risks factors (Aubert et al., 2004). However, this broad classification only represents fragmented sections comparing to an overall phenomenon of IS outsourcing. A more systematic way of analyzing outsourcing research should be beneficial for both academics and practitioners to accumulate the knowledge of IS outsourcing phenomenon, which can be seen in the work by Dibbern et al. (2004) and Lee & Huynh (2000). We realize it is necessary to develop a conceptual framework at higher level to include the existing and potential scopes in IS outsourcing research. The development of this holistic framework is not limited to only IS outsourcing research, but can also be applied in outsourcing and even other fields of research with slight modification. Figure 2 presents the classification framework of literature analysis for IS outsourcing research.

4

Table 1. Research areas in IT/IS outsourcing Author

Classification in IT/IS outsourcing research

Lee & Huynh (2000)

1) Organization – change/impact, benefit/risk, strategy 2) Decision – process, criteria, scope 3) Contract – management, vendor evaluation, length 4) Performance – success/failure, efficiency, satisfaction, cost 5) Relationship – determinants, continuity, stage model 1) Why to outsource – determinants, advantages/disadvantages 2) What to outsource - outsourcing alternatives 3) Which to outsource - guidelines, procedures, & stakeholders of decision initiation, evaluation & making 4) How to outsource - vendor selection, relationship building, relationship management 5) What is the outcome - experience/learning, type of success, determinants of success 1) Business impact - costs and benefits 2) Determinants 3) Management for outsourcing arrangements 4) Outsourcing decision from political or social views 5) Risks 1) Outsourcing from the perspective of the client - success factors, reasons, risks, decision-making, general 2) Outsourcing from the perspective of the provider - ASP, global outsourcing, providers 3) Outsourcing from the perspective of the relationship - contract, assessment-price, client-provider relationship 4) Outsourcing from the perspective of economic theories - agency theory, TCE, other 5) Others - nationality, IT staff, industry

Dibbern et al. (2004)A

Aubert et al. (2004)

Gonzalez et al. (2006)

Figure 2. A classification framework of literature analysis for IS outsourcing research The five categories in the classification framework of IS outsourcing research are briefly discussed in the following sections and summarized in Table 2.

5

Theory. Several theories may help to understand IS outsourcing practices in different settings, such as transaction cost economics (Aubert et al., 2004; Mayer & Salomon, 2006), resource theories (Espino-Rodríguez & Padrón-Robaina, 2006; Mayer & Salomon, 2006; Oh et al., 2006), institution theory (Miranda & Kim, 2006), agency theory (Logan, 2000), social exchange (Lee & Kim, 1999), relationship exchange (Grover et al., 1996) and contractual theory (Gottschalk & Solli-Sæther, 2005; Shi et al., 2005). Methodology. The general perspective on research methodology is adopted to categorize different methods into three approaches, i.e. quantitative, qualitative and conceptual, by combining from prior research (Dibbern et al., 2004; Gonzalez et al., 2006). The quantitative method includes field study with survey, experiment and modeling. The qualitative approach consists of case study and document analysis. The conceptual approach includes the development of framework and the provision of guidelines for outsourcing management. Internal environment. the majority of IS outsourcing research focuses on the discussion of business impact, determinants, outsourcing decisions and activities, outsourcing stages, and consequences. For example, the business impacts of IS outsourcing are discussed in terms of costs/benefits or advantages/disadvantages (Bahli & Rivard, 2005; Lacity et al., 1995; Quinn, 1999; Quinn & Hilmer, 1994) and risks (Aron et al., 2005; Bahli & Rivard, 2003, 2005; Willcocks et al., 1999). Outsourcing offers several advantages or benefits, such as reducing or stabilizing overhead costs, gaining cost advantage over the competition, concentrating on core activities and organizational specializations, providing flexibility in response to changing market conditions, and reducing investment in high technology (Lacity & Hirschheim, 1993; Quinn, 1999). However, there are disadvantages or risks associated with IS outsourcing in terms of vendors’ opportunism, business and technological uncertainty and

the loss of in-house capabilities and skills, etc. The determinants

influencing outsourcing decisions and arrangements are associated with transaction costs (asset specificity, uncertainty, opportunism) and resources (core competencies). Internal outsourcing activities also include outsourcing decisions in different stages and core competencies development. Prior research also provides guidelines and best practices to manage a successful IS outsourcing (Quinn et al., 1990; Rottman & Lacity, 2006). External environment. the technological advance and the maturity of outsourcing market have great impact on IS outsourcing. The factors affecting outsourcing

6

decisions such as technological volatility and service supplier market are found in previous research (Lacity et al., 1995, 1996; Stremersch et al., 2003). Previous research finds the institutional environment (i.e. government) may constrain the application of decision-making rules in outsourcing the IS function (Miranda & Kim, 2006). In addition, the outsourcing activities influenced by country, regional and global economy as well as governmental regulations are relatively under-explored in IS outsourcing research. Organizational boundary. outsourcing arrangements are the primary research focus. There are different types of outsourcing options such as total outsourcing, selective outsourcing or insourcing, and outsourcing relationships such as strategic alliance and joint venture (Currie & Willcocks, 1998; Lacity et al., 2004; Quinn & Hilmer, 1994; Willcocks & Choi, 1995). Although prior research points out that the client-vendor relationship is relatively under-explored in the past and mostly studied under contract-based relationship, it is now evolving from contractual to partnership- based relationship. The partnership-based relationship is considered as a key predictor of outsourcing success (Grover et al., 1996; Lee & Kim, 1999).

2.2.3 Outcome phase The outcome phase aims at developing an integrative research framework for IS outsourcing based on the classification categories and providing with the suggestions for future research in the IS outsourcing field. First, the selected literature is analyzed and organized based on the developed classification framework (see Table 3). Next, an integrative research framework is developed by identifying the relationship between various variables (see Figure 3). Finally, three research gaps are identified for future research potential in IS outsourcing. Prior research along with the result of his research indicates that three areas of IS outsourcing research deserves particular attentions (Dibbern et al., 2004; Lee & Huynh, 2000). First, outsourcing research to date primarily studied under the customer's perspective. The measurement of outsourcing success is mostly based on customer benefits instead of vendor benefits. Since the outsourcing activities involve both parties, expanding the level of analysis to service providers, even to stakeholders, should enrich IS outsourcing research with more holistic view (Dibbern et al., 2004). Second, there is the absence of research on the relationship between the outsourcer and the customer. Actually, the change of outsourcing relationship is the most important trend in outsourcing (Lee & Huynh, 2000). Accordingly, prior research suggests that partnership quality is considered as a key predictor of outsourcing success (Grover et al., 1996; Lee

7

& Kim, 1999). Third, the lack of longitudinal and comparative research has limited the generalizibility of theories on IS outsourcing (Dibbern et al., 2004). Future research should address these issues in IS outsourcing. Table 2. Categories in the classification framework Categories

Sub-categories

Theory

Transaction cost economics, resource theories, agency theory, institutional theory, social exchange, relationship view, etc. Quantitative: field study with survey, experiment, modeling Qualitative: case study, document analysis Conceptual Business impacts - Strategy/management - Benefits/costs or advantages/disadvantages - Risks Determinants - Antecedents, drivers, critical success factors Outsourcing contents - Outsourcing decision/guidelines/what to do - Skill/ability/competence - Type of outsourcing activities: from components to BPM - Stages or phases of IS outsourcing - Impact on workforce management, organization structure change, IS development - Evaluation Consequences - Performance – cost saving, customer satisfaction, quality - Successes/failures - Lesson learned/best practices - Stakeholders’ benefits Technological advance - IT commodification Outsourcing market – supplier and technology availability Industry Economy Regulations/government Configuration/outsourcing arrangements - strategic alliance, join venture, shared service Sourcing options - supplier selection Supplier interface and relationship

Methodology

Internal environment

External environment

Organizational boundary

3. Conclusion In present day, the increasingly competitive markets where business cycles are demanding short, outsourcing has become the important affecting in formulating business strategies and enhancing the firms’ position in the value chain (Kakabadse & Kakabadse, 2000). Understanding the factors and relationships associated with

8

outsourcing will contribute to the success of IS outsourcing. This study starts with the development of an classification framework for literature analysis by identifying the major research areas and to build up the knowledge in outsourcing research. Following a thorough literature review, an integrative research framework is developed to identify the relationship among various variables. This study contributes to the research in IS outsourcing relationship in three folds. First, the development of a classification framework for literature review is not limited to only IS outsourcing research, but can also be applied in outsourcing and even other fields of research with slight modification. Second, the integrative research framework based on prior research in IS outsourcing is developed and used as the basis to identify the research gap. Third, three major areas are identified as research potentials requiring more attention in IS outsourcing. Table 3. Summary in IS outsourcing research Research areas Studies

Internal environment Business Impact

Determinants

Outsourcing decision

Organizational boundary

Competence

Outcome

Outsourcing arrangements

Relationship

Quantitative Research

Goo et al. (2007)

Miranda & Kim (2006) Oh et al. (2006)

Mayor & Salomon (2006)

Gole & Chin (2005)

Shi et al. (2005)

Bahli & Rivard (2005) Lichtenstein (2004)

Aubert et al. (2004)

Koh et al. (2004)

Stremersch et al. (2003)

van der Heijden (2001) Lee & Kim (1999)

Grover et al. (1996)

Qualitative Research Rottaman & Lacity (2006)

Willcocks & Feeny (2006) Gottschalk et al. (2005)

Watjatrakul e al. (2005)

Levina & Ross (2002)

Kern & Willcocks (2000) Willcocks & Lacity (1999) Lacity & Willcocks (1998)

Currie & Willcocks (1998) Lacity et al. (1996)

Feeny & Willcocks (1998)

McFarlan & Nolan (1995)

9

Figure 3. An integrative research framework for IS outsourcing research

References Aron, R., Clemons, E. K., & Reddi, S. (2005). Just right outsourcing: Understanding and managing risk. Journal of Management Information Systems, 22(2), 37-55. Aubert, B. A., Rivard, S., & Patry, M. (2004). A transaction cost model of it outsourcing. Information & Management, 41(7), 921-932. Bahli, B., & Rivard, S. (2003). The information technology outsourcing risk: A transaction cost and agency theory-based perspective. Journal of Information Technology, 18(3), 211. Bahli, B., & Rivard, S. (2005). Validating measures of information technology outsourcing risk factors. Omega, 33(2), 175-187. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99. Currie, W. L., & Willcocks, L. P. (1998). Analysing four types of it sourcing decisions in the context of scale, client/supplier interdependency and risk mitigation. Information Systems Journal, 8(2), 119-143.

10

Dibbern, T., Goles, R., Hirschheim, B., & Jayatilaka, B. (2004). Information systems outsourcing: A survey and analysis of the literature. The DATA BASE for Advances in Information Systems, 35(4), 6-102. Espino-Rodríguez, T. F., & Padrón-Robaina, V. (2006). A review of outsourcing from the resource-based view of the firm. International Journal of Management Reviews, 8(1), 49. Feeny, D. F., & Willcocks, L. P. (1998). Core iS capabilities for exploiting information technology. MIT Sloan Management Review, 39(3), 9-21. Finlay, P. N., & King, R. M. (1999). IS sourcing: A research framework. International Journal of Information Management, 17(1/2), 109-128. Goles, T., & Chin, W. W. (2005). Information systems outsourcing relationship factors: Detailed conceptualization and initial evidence. The DATA BASE for Advances in Information Systems, 36(4), 47-67. Gonzalez, R., Gasco, J., & Llopis, J. (2006). Information systems outsourcing: A literature analysis. Information & Management, 43(7), 821-834. Goo, J., Kishore, R., Nam, K., Rao, H. R., & Song, Y. (2007). An investigation of factors that influence the duration of it outsourcing relationships. Decision Support Systems, 42(4), 2107. Gottschalk, P., & Solli-Sæther, H. (2005). Critical success factors from it outsourcing theories: An empirical study. Industrial Management & Data Systems, 105(6), 685-702. Grover, V., Cheon, M. J., & Teng, J. T. C. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12(4), 89-116. Im, K. S., & Grover, V. (2004). Using critical realism in is research. In M. E. Witman & A. B. Woszczynski (Eds.), The handbook of information systems research. Hershey, PA: Idea Group. Kakabadse, N., & Kakabadse, A. (2000). Critical review - outsourcing: A paradigm shift. The Journal of Management Development, 19(8), 670-728. Kern, T., & Willcocks, L. (2000). Exploring information technology outsourcing relationships: Theory and practice. The Journal of Strategic Information Systems, 9(4), 321. Kliem, R. L. (1999). Managing the risks of outsourcing agreements. Information Systems Management, 16(3), 91-93. Koh, C., Soon, A., & Straub, D. W. (2004). It outsourcing success: A psychological contract perspective. Information Systems Research, 15(4), 356. Lacity, M. C., & Hirschheim, R. (1993). Information systems outsourcing: Myths, metaphors and realities B2 - Information systems outsourcing: Myths, metaphors and realities. Chichester, U.K.: Wiley.

11

Lacity, M. C., & Willcocks, L. P. (1998). An empirical investigation of information technology sourcing practices: Lessons from experience. MIS Quarterly, 22(3), 363-408. Lacity, M. C., Willcocks, L. P., & Feeny, D. F. (1995). It outsourcing: Maximize flexibility and control. Harvard Business Review, 73(3), 84-93. Lacity, M. C., Willcocks, L. P., & Feeny, D. F. (1996). The value of selective it sourcing. Sloan Management Review, 37(3), 13-25. Lee, J.-N., & Huynh, M. Q. (2000). The evolution of outsourcing research: What is the next issue? Paper presented at the the 33rd Hawaii International Conference on System Sciences. Lee, J.-N., & Kim, Y.-G. (1999). Effect of partnership quality on is outsourcing success: Conceptual framework and empirical validation. Journal of Management Information Systems, 15(4), 29. Lee, J.-N., & Kim, Y.-G. (2005). Understanding outsourcing partnership: A comparison of three theoretical perspectives. IEEE Transactions on Engineering Management, 52(1), 43. Levina, N., & Ross, J. W. (2003). From the vendor's perspective: Exploring the value proposition in information technology outsourcing. MIS Quarterly, 27(3), 331. Lichtenstein, Y. (2004). Puzzles in software development contracting. Communications of the ACM, 47(2), 61-65. Logan, M. S. (2000). Using agency theory to design successful outsourcing relationships. International Journal of Logistics Management, 11(2), 21. Mayer, K. J., & Salomon, R. M. (2006). Capabilities, contractual hazards, and governance: Integrating resource-based and transaction cost perspectives. Academy of Management Journal, 49(5), 942-959. McFarlan, F. W., & Nolan, R. L. (1995). How to manage an it outsourcing alliance. Sloan Management Review, 36(2), 9. Miranda, S. M., & Kim, Y.-M. (2006). Professional versus political contexts: Institutional mitigation and the transaction cost heuristic in information systems outsourcing. MIS Quarterly, 30(3), 725-753. Oh, W., Gallivan, M. J., & Kim, J. W. (2006). The market's perception of the transactional risks of information technology outsourcing announcements. Journal of Management Information Systems, 22(4), 271-303. Quinn, J. B. (1999). Strategic outsourcing: Leveraging knowledge capabilities. MIT Sloan Management Review, 40(4), 9-21. Quinn, J. B., & Hilmer, F. G. (1994). Strategic outsourcing. Sloan Management Review, 35(4), 43-55. Rottman, J. W., & Lacity, M. C. (2006). Proven practices for effectively offshoring it work. MIT Sloan Management Review, 47(3), 56-63.

12

Shi, Z., Kunnathur, A. S., & Ragu-Nathan, T. S. (2005). Is outsourcing management competence dimensions: Instrument development and relationship exploration. Information & Management, 42(6), 901-919. Stremersch, S., Weiss, A. M., Dellaert, B. G. C., & Frambach, R. T. (2003). Buying modular systems in technology-intensive markets. Journal of Marketing Research (JMR), 40(3), 335-350. Van Der Heijden, H. (2001). Measuring it core capabilities for electronic commerce. Journal of Information Technology, 16(1), 13-22. Willcocks, L., & Choi, C. J. (1995). Co-operative partnership and 'total' IT outsourcing: From contractual obligation to strategic alliance? European Management Journal, 13(1), 67-78. Willcocks, L., Feeny, D., & Olson, N. (2006). Implementing core IS capabilities: Feeny-willcocks it governance and management framework revisited. European Management Journal, 24(1), 28-37. Willcocks, L. P., Lacity, M. C., & Kern, T. (1999). Risk mitigation in it outsourcing strategy revisited: Longitudinal case research at LISA. Journal of Strategic Information Systems, 8(3), 285-314.

13

Methods/Theory

1) Survey 2) TCE/resource theories/social exchange

1) Determinant transactional risks 2) Consequence performance

Explore factors determining the duration of IS outsourcing relationships between vendor and client firms.

Purpose

192 IT outsourcing announcements during 1995-2003 using LEXISNEXTS

In professional contexts, opportunism reduces outsourcing and frequency increases outsourcing. In political contexts, bounded rationality fosters outsourcing and frequency dissuades outsourcing.

The results show that factors such as knowledge acquisition, relationship-specific investment, requirement uncertainty and extent of substitution are significant with the relationship duration.

Major Findings

14

Identify the individual constructs The properties of IS outsourcing relationship comprising a relationship and associte to attributes and processes were identified develop measuring items to test these and validated. constructs Three measurement scales for the IS outsourcing Investigate IS outsourcing management competence receive empirical management competences, their validation, including informed buying, contract relationships and measurement. management and relationship management

Investigate the effects of contractual Strong technological capabilities improve a firm's ability to govern transactions, making outsourcing hazards and technological capabilities on outsourcing decision feasible despite certain contractual hazards.

The results show the transactional risks associated Examine stock market data to assess with contract size, asset specificity, monitoring investors' responses to various difficulty and vendor size significantly influence transactional risks associated with IT investors' perceptions of the risks involved in IT outsourcing. outsourcing.

214 IS manager who is IS outsourcing decision based on responsible for IS function TCE logic is shaped by institutional and outsourcing decision in context US city governments

405 service contracts (~ 1) Determinants Mayor & 1) Contract analysis 25%) randomly drawn 2) Contentfrom a single IT firm Salomon (2006) 2) TCE, RBV outsourcing decision between 1986-1998 175 participants from firms 1) Scale development cross several industries Org boundary Gole & Chin relationship 2) Relational who have experiences with (2005) exchange theory outsourcing 1) Scale development Content – 205 IS executives in US Shi et al. (2005) 2) TCE, agency competence theory, KM

1) Event study Oh et al. (2006) 2) TCE, RBV, agency theory

Sample

Summary of IS Outsourcing Literature

1) Determinants 2) Outcome – 154 IS managers (US) relationship duration

Category

1) Determinant – 1) Survey Miranda & Kim transaction costs 2) TCE/ institutional (2006) 2) Content – theory outsourcing decision

Goo, Kishore, Nam, Rao, & Song (2007)

Quantitative Research in IS outsourcing

Author

APPENDIX 1

Methods/Theory

1) Survey + case study 2) Psychological contract

Koh, Ang & Straub (2004)

Sample

Purpose

Major Findings

The results show that leakage and the buyer's know-how, together with the technological volatility the buyer faces, drive the preference for outsourcing system integration and the purchase concentration of system components. Three measurement scales receive empirical validation and the core capabilities of IT departments are useful constructs for incorporating into future research.

Empirically validate of a measurement instrument for three IT core capabilities: ‘IS/IT governance’, ‘business system thinking’ and ‘relationship building’.

This study identifies six client-supplier obligations using in-depth interviews and confirms fulfilled obligations predict IT outsourcing success over and above the effect of contract type, duration, and size using survey instrument.

Develop a comprehensive production- and transaction-cost framework to explain companies' positions on two decision dimensions.

Apply the concept of psychological contract to investigate perceived mutual obligations from clients and suppliers, and how these obligations predict outsourcing success

The results indicate that uncertainty and technical Propose and test an explanatory skills influence outsourcing decision (level of model of information technology (IT) outsourcing). Business skills are not significant. outsourcing behavior. Asset specificity shows mixed effect on the level of outsourcing.

15

55 telecom account managers from 19 countries

1) Determinant 2) Org boundary sourcing decision (single or multiple suppliers)

179 IT managers

1) 15 interviews to identify client’s and supplier’s outsourcing obligations 2) 179 and 191 project managers from client and supplier firms

1) Determinant 2) Outcome – IT outsourcing success 3) Org boundary relationship

1) Determinant 2) Content – decision 335 IS executives (level of outsourcing)

1) Scale van der Heijden development Content (2001) 2) Resource theories competence (core competence)

Stremersch, 1) Survey Weiss, Dellaert, 2) TCE & Frambach (2003)

1) Survey 2) TCE/contract theories

Aubert, Rivard, & Patry (2004)

Lichtenstein (2004)

Bahli & Rivard (2005)

Category

The measures of risk factors associated with IT Validate measures of the risk factors outsourcing operation are developed and 1) Survey Determinant 132 IT executives from associated with outsourcing IT empirically tested, including asset specificity, 2) TCE - risks, expertise Canadian organizations number of supplier, uncertainty, relatedness, operations. measurement problems, and expertise. 1) Content – Analyze the effect of contract pricing Although considerable variety existed in terms of 1) Contract analysis outsourcing arrangements with external software the risk and specificity of the projects, all 17 + survey 17 contracts in three Israel arrangement contracts were fixed price. This study suggests the developer on the outcome of IS 2) TCE/agency corporations 2) Outcome – client’s use of mixed pricing techniques to lower associated outsourcing in terms of cost and theory costs and risks. benefit. benefit


Author


Methods/Theory

Category

Levina & Ross (2002)

1) Determinant 2) Content – 3 case studies (Australia) outsourcing decision

1) Content – 1) Case study competence (vendor) One vendor firm and one 2) Resource theories 2) Org boundary – client firm client-vendor (core competence) relationship

Watjatrakul & 1) Case study Drennan (2005) 2) TCE

16

Gottschalk & Solli-Sather (2005)

Core competence management and stakeholder management were found to be the most critical success factors. The results show that specific skills and tacit knowledge used to manage functions are major factors for sourcing decisions, and overpower the effect of uncertainty. The results indicate that vendor’s efficiency is Explore vendors’ core derived from the ability to develop a set of core competencies to deliver value to its competencies associated with client relationship clients in applications management management, methodology development and IT outsourcing relationship personnel management.

Address this gap in the literature by using TCE to test its predictive capabilities in relation to e-mail marketing sourcing decisions.

Identify and rank critical success factor in IT outsourcing relationship

1) Case study 2) a variety of theories

Willcocks & Feeny (2006) 3 cases (ABB-IBM, SAS-CSC, Roll-Royce-EDS)

Dupont case (1997-2004)

1) Content – core capabilities 2) Org boundary – outsourcing arrang.

1) Case study 2) RBV (core competence)

Fifteen emerging best practices are suggested. When using these best practice methods, most companies have found that the results are very much worth the additional effort. Explore what core IS capabilities The case research suggests that a long-term strategic do firms need to ensure a strong IS core capability is required and must involve with capability with different organization re-organization with right sourcing outsourcing arrangement arrangement.

Identify the best, worst and 59 participants from 40 companies (21 client firms, emerging practices for offshore 10 e suppliers, 9 advisers) outsourcing of IT work.

Outcome– best practices

1) Determinant 2) Outcome outsourcing success

Major Findings

The results indicate that partnership quality may serve as a key predictor of outsourcing success and is affected by participation, communication, information sharing, and top management support, age of relationship and mutual dependency. The results show that two IS functions (system Examine the outsourcing level of five operations and telecommunications) are highly IS functions for their relationship to related to outsourcing success. Other factors such as asset specificity, system quality and partnership are outsourcing success. also important for outsourcing success.

Examine client-vendor partnership quality as a key predictor of outsourcing success

Purpose

1) Case study 2) N/A

188 IS executives

36 Korean organizations with 74 relationship

Sample

Rottaman & Lacity (2006)

Qualitative and Conceptual Research in IS outsourcing

1) Survey 2) Social exchange theory

1) Determinant 2) Outcome – IS Lee & Kim outsourcing success (1999) 3) Org boundary relationship 1) Determinants 1) Survey 2) Outcome – IS Grover, Cheon & 2) TCE & Resource outsourcing success Teng (1996) 2) Org boundary – dependence relationship


Author


Methods/Theory

Category


1) Conceptual 2) N/A

McFarlan & Nolan (1995)

Currie & 1) Case study Willcocks (1998) 2) N/A

1) Determinants 2) Content – sourcing 40 organizations with 62 decision outsourcing decisions 3) Org boundary – sourcing options Org boundary – outsourcing N/A arrangements & relationship

Content - outsourcing 4 case studies decision

Feeny & Conceptual Willcocks (1998)

Lacity, Willcocks & Feeny (1996)

1) Content - core competence N/A 2) Content – type of outsourced activities

Several case studies comprise 61 sourcing decisions in 40 organizations from 145 participants

1) Determinants 2) Outcome – IS outsourcing success

1) Case study Lacity & (interview & Willcocks (1998) document analysis) 2) N/A

Business impactstrategy, risks

17

The risk of IT sourcing can be reduced through outsourcing arrangements, vendor selection, staged contracts, supplier’s active management and retained capabilities/skills

This study identifies key core dimensions of the relationship as context, contract, structure, interactions and behavior.

Major Findings

A set of framework is developed to clarify sourcing options and which IT functions/activities should be outsourced based on business, technical and economic considerations. The study provides suggestions for determining when Develop a framework to focus on to outsource and how to structure and manage the how to manage the alliance to resulting alliance as well as for viewing outsourcing ensure its success agreement as a strategic alliance.

Identify sourcing decision scope, sourcing options and their determinants

A framework was developed to determine which IT outsourcing activity is core or non-core. This study Identify core IS capabilities for IT suggests system development, IT platform outsourcing. construction and operational services are IT functions to be outsourced. Distinguish four types of IT Disappointing results from in-house IT provision, outsourcing decisions: total short-term and current uncertainties over market, outsourcing, multi-supplier business and political conditions pose problems for sourcing, joint venture & many organizations in deciding future outsourcing insourcing arrangements.

The results show that selective outsourcing decisions, Investigate the factors contributing joint management, comparative bidding, short-term to IT outsourcing success based on contract and detailed fee-for-service contract have sourcing decisions higher success rate in IT outsourcing projects.

Willcocks & Lacity (1999)


A single case study (Polaris) conducted longitudinally Investigate the impact of risk on (1993-1998) with 45 outsourcing success interviews

Develop a conceptual framework for outsourcing relationship

Purpose

12 organizations (client-vendor) with 14 interviews

Sample

1) Case study Kern & Org boundary 2) Social exchange & Willcocks (2000) relationship social contract

Qualitative and Conceptual Research in IS outsourcing

Author


18