Resource co-specialization in outsourcing of enterprise systems software

Abstract

Purpose Enterprise systems are commonly implemented by firms through outsourcing arrangements with software vendors. However, deriving benefits from these implementations has proved to be a challenge, and a great deal of variation has been observed in the extent of value generated for client and vendor firms. This research examines the role of co-specialization as a strategy to make the most out of outsourced enterprise systems. The authors develop hypotheses relating resource co-specialization with two indicators of success for implementation of enterprise software: (1) exchange success and (2) firm growth. Design/methodology/approach The hypotheses are tested using a unique panel data set of 175 firms adopting Advanced Planning and Scheduling (APS) software, a type of enterprise system used for managing manufacturing and logistics. The authors identify organizational factors that support co-specialization and then examine how co-specialization is associated with enterprise software implementation success, controlling for the endogenous choice to co-specialize. Findings The empirical results suggest that resource co-specialization is positively associated with implementation success and that the two resource co-specialization pathways that are examined complement each other in providing performance benefits. Originality/value This paper contributes to the research literature on outsourcing. The study also provides a new empirical test using a unique data set of 175 firms adopting APS Software.