Making Lemonade from Lemons: A Transaction Cost Economics Perspective on Third-Party Disruptions in a Multivendor Information Technology Service

Abstract

In modern enterprise computing environments, multiple information technology (IT) services from first and third parties are often integrated to form coherent solutions for enterprise customers. In this study, we seek to understand how uncertainties introduced by third-party services shape enterprise customers’ use of various IT services in these multivendor service settings. Specifically, we analyze a case of disruption caused by a third party that affects the multivendor service but does not directly affect the first-party services. We find a temporary increase in the use of first-party services that serve as similar-goal substitutes during the disruption; however, there is a net decline in the total use of services in the long run. To assess what actions the first party can take during such disruptions to turn the challenge into an opportunity, we analyze the first party’s technical support log using deep learning techniques. We find that if the first party offers high-quality technical support that addresses product-related issues, it may be able to make lemonade out of lemons. Such technical support effectively boosts customers’ use of first-party services in the long run. Curiously, however, similar efforts by the first party in the predisruption period are ineffective in achieving the same effect.