Will Negative Experiences Impact Future it Outsourcing?

Abstract

Though Information Systems (IS) outsourcing is growing at a rapid pace, there are several risk factors and potential negative outcomes. The objectives of this study are i) to conceptualize the relationships among the IS outsourcing risk factors, the negative outcomes of these risk factors, and their impact on future re-outsourcing decisions, and ii) to test these relationships empirically using survey data and structural equation modeling. Based on data from 148 firms, we have found that future re-outsourcing decisions are strongly influenced by the negative outcomes of loss of control and the degradation of IS services. While all the risk factors influence future re-outsourcing decisions, either directly or indirectly, vendor competence problems (related to infrastructure) and vendor coordination problems have a direct effect on re-outsourcing decisions. Such variables as vendor attitude problems, vendor competence problems (related to staff quality), and in-house competence problems have an indirect effect on re-outsourcing decisions.