Information Technology Outsourcing Decisions Research Articles

Industry Norms as Predictors of IT Outsourcing Behaviors

Abstract How do firm-specific factors impact strategic IT decisions such as IT outsourcing? Do non-financial factors influence these decisions? Whereas prior IT outsourcing research has focused primarily on normative, economic drivers of IT outsourcing, we find evidence of firm-specific non-financial factors influencing IT outsourcing decisions. We focus on the social influence perspective and use IT outsourcing decisions as exemplars of strategic IT decisions. Using a data sample of 77 outsourcing contracts from the automotive industry from 1995 to 2010, we find that even after controlling for financial factors, industry average levels of outsourcing can be used to distinguish strategic outsourcing behaviors of firms for IT enabled services. Firms with above-average levels of IT outsourcing tended to further increase outsourcing, a behavior consistent with perceived Red Queen competitive pressures. Firms with below-average levels of IT outsourcing showed no measurable trends of either increasing or decreasing outsourcing levels. This suggests that firm-specific factors influence IT outsourcing decisions and deviations from non-financial industry norms can indicate how firms make strategic IT decisions.

Integrating value-focused thinking and FITradeoff to support information technology outsourcing decisions

PurposeThe information technology (IT) outsourcing (ITO) decision is a key issue in strategic and operational management and is considered a main critical factor influencing successful organizational performance and technology assessment. The purpose of this paper is to propose a framework combining value-focused thinking (VFT) methodology and the FITradeoff method to support decisions regarding ITO.Design/methodology/approachThis study answers the following questions: How to identify, in a structured way, the objectives that should be considered in an ITO decision process in a changing environment? How to identify new IT services to be outsourced from the established objectives? The VFT method is recommended in this case to structure and model the problem. Moreover, the FITradeoff multicriteria method was considered in this study to support the evaluation and prioritization of IT services in an ITO decisionFindingsThe framework provides promising results for ITO decisions. This study revealed that a lack of strategic and fundamental objectives is a critical issue in making ITO decisions. Although the VFT methodology is subjective in nature, it promotes a better understanding of goals and values, and FITradeoff allows the decision-maker to make comparisons of consequences based on his/her preferences.Research limitations/implicationsThe recommendations of the study are restricted to the case study and cannot be generalized. In addition, applying the method requires attention in determining the criteria used for outsourcing IT.Practical implicationsThe strategic analysis of ITO provides a holistic view of the current situation since (i) the VFT methodology enables the IT manager to generate new alternatives to assist future decisions and (ii) FITradeoff has been demonstrated as a suitable option to evaluate ITO decisions.Originality/valueTo the best of our knowledge, this is the first paper to utilize a problem structuring method (VFT) to identify criteria and alternatives based on the organizational values and objectives. This is integrated with a multicriteria method that uses partial information and may consequently lead to fewer inconsistencies (FITradeoff) in the context of ITO.

A Systematic Literature Review on IT Outsourcing Decision and Future Research Directions

During the recent decades, some academic research on the subject of information technology outsourcing (ITO) decision has appeared in different outlets, which may impede the use of such resources and as a result, repetition of research by various researchers is very likely. The purpose of this paper is then to conduct a systematic literature review (SLR) pertaining to research on ITO decision. Then, this review intends to 1) classify ITO decision literature, 2) provide a list of factors affecting ITO decision, and 3) identify ITO strategies. To this end, 91 ITO articles published between 2000 and 2018 in 51 unique journals were reviewed. The results yielded three kinds of descriptive, relational, and comparative ITO decision studies. The determinants of ITO decisions are classified into technological, organizational, environmental and user adoption factors. Furthermore, the trend of studied ITO strategies in the reviewed literature is analyzed, and future sourcing varietals are proposed. Finally, some insights and future research directions are proposed based on the review results.

Decision Factors for Outsourcing On-premise Applications of Institutions for Higher Education

In Dutch higher education institutions, IT outsourcing (ITO) is becoming more common. New applications nowadays are executed from the ‘cloud’. But what to do with on premise applications? Can they also be outsourced? If so, what factors does a higher education institution have to consider when making the ITO decision of their on-premise applications? This research starts with finding the factors that are already known in existing ITO literature (in different contexts). Then, these decision factors are validated in four explorative interviews before surveying the factors within a higher education context. In total, fourteen factors are deemed to be important for Dutch higher education institutions. Based upon the survey responses by Dutch IT decision makers, a hierarchy exist in these fourteen factors. Also, this research suggest a relationship between outsourcing decision factors and the sourcing models. Additionally, outsourcing objectives seem to influence this relationship.

A Systematic Review of Recent Developments in IT Outsourcing Research

ABSTRACTIncomplete conceptualization of the information technology outsourcing (ITO) literature represents a challenge for navigating extant research and engaging into purposeful academic discourse. We extend the analysis of empirical findings on determinants of ITO decisions, outcomes, and governance. We identify increasing levels of research maturity, analyze effects of 38 new independent variables, highlight contradictory findings, and observe increasing interest in emerging topics such as innovation through ITO and multisourcing.Abbreviations: AIS: Association for Information Systems; ASP: Application Service Provision; EBIT: Earnings Before Interest and Taxes; CIO: Chief Information Officer; IS: Information Systems; IT: Information Technology; ITO: Information Technology Outsourcing; OTH: Ostbayerische Technische Hochschule/East Bavarian Technical University; PPE: Profit Per Employee; R&D: Research & Development; ROA: Return on Assets; TCO: Total Cost of Ownership; TU: Technische Universität/Technical University

An empirical analysis on outsourcing decision: the case of e-banking services

PurposeA multitude of factors influence the information technology outsourcing (ITO) decision. Organizations must systematically evaluate these factors prior to making the ITO decision. The purpose of this paper is to provide an in-depth analysis toward understanding the critical factors in affecting ITO decision in the context of e-banking services.Design/methodology/approachThe effect of technological, organizational, and environmental attributes on e-banking services outsourcing decision were investigated in this paper. The study was carried out using the quantitative research methodology based on a survey of 23 banks. The partial least squares technique was utilized as the method of data analysis.FindingsThe results of the data analysis illustrated that nine out of 11 assumed factors (i.e. perceived complexity, perceived cost, service observability to the client, cultural fit between client and supplier, perceived loss of organizational knowledge, prior outsourcing experience, external pressure, market volatility, and suppliers’ power) influence the outsourcing decision of e-banking services. The findings also confirmed that the nature of the service and client IT capabilities did not exert any influence on the outsourcing decision.Originality/valueThe study is among the first kind of ITO decision research which empirically investigates the effect of service observability, cultural fit, perceived loss of organizational knowledge, external pressure, market volatility, and suppliers’ power amongst other factors on the ITO decision. The findings from this study provide insights for the banks and service providers to better understand the factors affecting the outsourcing decisions of e-banking services in contexts of less developed countries. Implications based on a specific situation of the Iranian banking sector is also proposed.

A systematic literature review and critical assessment of model-driven decision support for IT outsourcing

Information technology outsourcing (ITO) is a widely-adopted strategy for IT governance. The decisions involved in IT outsourcing are complicated. Empirical research confirms that a rational and formalized decision-making process results in better decision outcomes. However, formal and systematic approaches for making ITO decisions appear to be scarce in practice. To support organizational decision-makers involved in IT outsourcing (including cloud sourcing), researchers have suggested several decision support methods. To date there is no comprehensive review and assessment of the research in this domain. In this study 133 model-driven decision support research articles for IT outsourcing and cloud sourcing were identified through a systematic literature review and assessed based on a highly-regarded research framework. An analysis of these 133 research articles suggested a range of Multiple Criteria Decision Making (MCDM), optimization and simulation methods to support different IT outsourcing decisions. Our findings raise concerns about the limited use of reference design theories, and the lack of validation and naturalistic evaluation of the decision support artifacts reported in ITO decision support literature. Based on the review, we provide future research directions, as well as a number of recommendations to enhance the rigor and relevance of ITO Decision Support Systems research.

Influenced Factors of Information Technology Outsourcing Decision for E-Business Adoption among Malaysian Small Medium Enterprises

Influenced Factors of Information Technology Outsourcing Decision for E-Business Adoption among Malaysian Small Medium Enterprises

A Fuzzy TOPSIS Method for Selecting An E-banking Outsourcing Strategy

Selecting the appropriate IT outsourcing (ITO) strategy is important for firms in general and banking institutions in particular to achieve expected benefits, but it remains complex, risky and lengthy process for clients to select the appropriate ITO strategy. Previous academic efforts to support ITO decision incorporated a limited number of factors, which is over-simplification of multi-faceted real world problems. In this paper, after doing in-depth literature review for identifying influencing factors on such ITO decisions, a model with an application of Fuzzy TOPSIS based approach is proposed to rank and prioritize the alternatives. Throughout this study, the authors use data from a real banking case to run the model for supporting outsourcing decision for five ATM, POS, tele-banking, mobile, and internet-banking services. The proposed model can help ITO decision makers advance their decision making process, especially where parameters involve uncertainties and hardly can be assessed by human judgment.

An investigation into the factors influencing the outsourcing decision of e-banking services

PurposeThis paper aims to provide an in-depth analysis toward understanding the critical factors in affecting information technology outsourcing (ITO) decision in the context of e-banking services in Iran. Within the recent decades, outsourcing IT processes and services as a strategic decision has been widely adopted throughout industries. In this regard, scholars have investigated a wide range of factors influencing ITO decision in various contexts.Design/methodology/approachThis research examines a conceptual model that shows impacts of different attributes including technological, organizational and environmental on the Iranian banks’ ITO decision. To validate the research hypotheses, the partial least squares (PLS) technique for data analysis, is utilized.FindingsThe results of this study derived from the theoretical discussion of hypotheses illustrated that 9 of 11 assumed factors (i.e. perceived tangible benefits, perceived intangible benefits, perceived risks, perceived information security/privacy, complete contract establishment capability, making strong trustworthy relationship capability, uncertainty in business requirements, external pressure and market maturity) influence ITO decision in the target industry. The findings also confirmed that the size of the bank and competitors’ absorptive capacity did not exert any influence on their service outsourcing decision.Research limitations/implicationsThe sampling was confined to experts in the banking industry. Also, the results of this study reflect Iranian perspective. Consequently, generalization based on this sample would be interpreted cautiously and a limitation of the context should be kept in mind.Originality/valueInsights into policymaking for suitable drivers to outsource e-banking services in the context of a less developed country are the main outcomes of the current research.

Does it Matter the Loss of Tacit Knowledge in IT Outsourcing? A study in a Swedish Governmental Agency

There is an extensive scientific research on the disadvantages of losing competencies in IT Outsourcing (ITO). In this study we have looked exclusively at “tacit” knowledge (knowledge that is hard to transfer to another person practically or in writing) and a analyzed the skill lose in ITO in a medium-sized, governmental agency in Sweden. The tacit knowledge of the primary processes and how the information systems are used in the organization, are considered to have significant value for ITO decisions. The research problem is the lack of knowledge about how loss of tacit knowledge influences ITO. To address the problem a case study research has been used as research method and the data was collected through interviews with decision makers in a Swedish governmental agency in the process of outsourcing their IT. The study has found a few justifications for keeping tacit knowledge of secondary processes in-house, only in organizations with a high uncertainty. In fact, for highly specified primary processes, it is of advantage to keep tacit knowledge in-house. Otherwise, the focus should be on standardization and the use of best practices. The results of this research could provide guidelines to IT managers of other governmental agencies in Sweden that are having a similar organization size.

Outsourcing decision-making: does the process matter?

There is a plethora of prescriptive Information Technology (IT) outsourcing decision-making models available in the academic literature; yet reported success rates of IT outsourcing transactions remain moderate. This paper investigates outsourcing decisions and asks: Does the process really matter? The paper first briefly reviews the IT outsourcing literature to find that there is a lack of empirical research on IT outsourcing decision processes and the effect they have on outsourcing outcomes. The paper fills this gap by applying constructs identified from the strategic decision-making literature investigating decision-making processes and their effect on outcomes at four large Australian-based companies. Two organisations studied had decided to offshore outsource application development and were outsourcing for the first time with the decision being triggered by a powerful stakeholder who pushed the idea from inception to implementation. The other two organisations studied had already outsourced and were looking to renew their contracts where a rigorous and highly formalised decision process was followed. We find that the decision-making context affects the adoption of a decision process type, and that the adoption of different process types leads to different results. Decision-makers should adhere to more rational and formalised decision-making processes resulting in better decision outcomes.

Determinant Factors of Cloud-Sourcing Decisions: Reflecting on the IT Outsourcing Literature in the Era of Cloud Computing

Cloud computing (CC) is an emerging form of IT outsourcing (ITO) that requires organizations to adjust their sourcing processes. Although ITO researchers have established an extensive knowledge base on the determinant factors that drive sourcing decisions from various theoretical perspectives, the majority of research on cloud-sourcing decisions focuses on technological aspects. We reviewed the CC and ITO literature and systematically coded the determinant factors that influence sourcing decisions. We show that most determinant factors of sourcing decisions in the ITO context remain valid for the CC context. However, the findings for some factors (i.e., asset specificity, client firm IT capabilities, client firm size, institutional influences, and uncertainty) are inconclusive for the CC and ITO contexts. We discuss how the peculiarities of CC can explain these inconclusive findings. Our results indicate that CC researchers should draw from research on ITO decision making but re-examine ITO concepts in the light of the peculiarities of CC, such as the differences between software and infrastructure services, the self-service procurement of cloud services, or the evolving role of IT departments. By summarizing determinant factors of cloud-sourcing decisions for consideration in future research, we contribute to the development of endogenous theories in the IS domain.

A Case Study Using the Analytic Hierarchy Process for IT Outsourcing Decision Making

Decisions related to managing IT resources - which resources to keep in-house and which resources to outsource - are critical to business success. The goal of this paper is to show the usefulness of the Analytic Hierarchy Process (AHP) as a decision-making tool for IT sourcing decisions, based on an analysis of factors that recent literature found to be associated with IT sourcing risk. Although the AHP previously has been suggested for IT outsourcing decision making, this study is the first to consider evaluating the risks of offshore outsourcing, rural outsourcing, and in-sourcing IT processes by using the AHP. From the perspective of the expert decision maker, three IT sourcing strategies were evaluated with respect to 58 criteria. The case study example presented in this paper shows the effectiveness of the AHP to support management for this business decision. The authors' results show that a systematic approach to analyzing outsourcing can reduce the uncertainty and risk that is common in such decisions.

Cognitive Negotiation Schemata in the IT Industries of Japan and Finland

ABSTRACT The existing literature emphasizes the importance of negotiation skills in the field of IT. However, negotiation and negotiation styles in the IT industry have received limited attention. This original empirical research compares the negotiation schemata of Finnish and Japanese IT business people. The study identifies negotiation schemata used in one or both culture groups. Negotiators with greater experience and power in the negotiation process command more schemata. However, neither population enjoys the full range of negotiation schemata. Business negotiators in or out of IT and these cultures may benefit from knowing the schemata and the results of matching and mismatching. Keywords: Negotiation; Finland; Japan; Information Technology; Schemata INTRODUCTION In the information technology (IT) industry, where collaboration among various professionals and customers is important, different kinds of negotiation skills are needed. Although the IT industry appears very international and deeply collaborative (Whitehead, 2007), we can assume that practices of negotiation participants vary in different cultures, as negotiation styles are culturally associated (Adair, Taylor, & Tinsley, 2009; Nishiyama, 1999; Tinsley, 2001). That is, if two cultures differ considerably, negotiation styles might also differ. Although the existing literature highlights the importance of negotiation skills in the field of IT; negotiation styles per se have received only scarce attention in the field of IT. This lack has developed despite the literature showing that negotiation skills directly impact for instance IT and software outsourcing decisions (Davis, Ein-dor, King, & Torkzadeh, 2006; Kuivanen & Nahar, 2009), price negotiation of IT services (Vykoukal, Wolf, & Beck, 2009), IT project management (Abraham, Beath, Bullen, Gallagher, & Goles, 2006), and service contracts (Kim, Agrawal, Jayaraman, & Rao, 2003; Raghu, Woo, Mohan, & Rao, 2008) as well as among individuals involved in organization-wide IT implementations (Matsuura, Fuller, Kaufman, Kim, & Baba, 2013). Based on the research gap discussed above, the research aim of this study is to increase our understanding of negotiation styles among negotiators in an era when technology outruns business management and business people must constantly refine skills for interacting. More specifically, the authors are interested in the negotiation schemata of business negotiators in the IT industry. Schemata refer here to the mental patterns that impact how people process information (Colman, 2009). Boehm, Bose, Horowitz, and Lee (1997) called for new models applicable to software development yet none have appeared beyond their Win-Win Spiral, a process level approach that does not address situational thinking, communication, nor selection and application of mental models. The knowledge targeted in this study helps us to better understand how IT negotiators apply various schemata in business negotiation and how different factors impact on availability and choice of schemata. The specific research questions are: i) Which schemata are in use among the current generation of Japanese and Finnish negotiators in the IT industry? ii) Do Finnish and Japanese IT negotiators change their schema based on situation? iii) Do age, level in company, position of the negotiator in the team or frequency of negotiation impact availability of schemata or choice of schemata? With this knowledge, IT negotiators may be able to develop better negotiation strategies and overcome some difficulties when interacting in a global business environment. From the theory point of view, this study expands the negotiation schemata literature with specific reference to technology business. In addition, this study contributes to the IT business literature by investigating to negotiation styles in international context. For this study, we selected negotiators working in the IT industry from Finland and Japan as these two countries are distant in almost every way, geographically, linguistically, and in the measures of widely used cultural comparison tools (Hofstede, Hofstede, & Minkov, 2005; Ojala, 2015; Peterson, Wood, & Smith, 2008; Trompenaars & Hampden-Turner, 2012). …

Using Accounting Metrics As Performance Measures To Assess The Impact Of Information Technology Outsourcing On Manufacturing And Service Firms

This study focuses on the information technology (IT) outsourcing decision and asks whether reported financial statement data can measure short-term financial effects of the IT outsourcing decision and thus add to the literature on the benefits of outsourcing. In this study we used accounting metrics derived from archival financial data to assess the impact of IT outsourcing on firms performance measures. In the sample of 79 firms from 1986 to 2009, there were 45 firms in the manufacturing sector and 34 firms in the service sector. The comparative study between manufacturing and service sectors will help identify where the higher potential of outsourcing impact lies. Firms performance is measured over a two-year period, one year before and one year after outsourcing decisions were made. For performance measures, we used cost efficiency, productivity, profitability, growth, cash management, and market ratio metrics. Using accounting metrics we show that IT outsourcing has a favorable short-term impact on manufacturing firms cost efficiency, productivity, and cash management. At the same time outsourcing the IT function has little favorable impact on service firms short-term performance measures.

Determinants of Information Technology Outsourcing

Abstract Financial reporting is a key outputs of Information Technology (IT). Thus to assure the reliability of financial reporting, the IT audit has to be evaluated. The evaluation of IT Audit is necessary also when the IT is outsourced. This paper aims to identify the determinants of the Information Technology Outsourcing (ITO) decision in Italy and to test empirically the ITO framework developed theoretically by Lacity et al. (2011), using the variable construction based on Lacity et al. (2010). We use a questionnaire addressed to Italian companies which are today obliged to comply with Law 262/2005. The aim is to test the reliability of financial reporting through the evaluation of internal control, such as IT audit. We control for the non-response bias. We build a panel data for our regression model. We find that client firm characteristics, Task Complexity and ITO outcomes are significant for Italian listed companies in the ITO decision. The findings are original in that they concern a country which has specific characteristics and where very little empirical research exists on the topic.

IT outsourcing and impacts in Thailand’s financial institutions

Information technology outsourcing (ITO) studies have been the focus of researchers for decades. One topic has been the factors and impact of ITO on organizations. Inconclusive findings about relationships between the levels of ITO and ITO success demands further exploration on this issue. In Thailand, the National Electronics and Computer Technology Center (NECTEC) reported that the financial and banking industry has the highest spending on computer services primarily by outsourcing the core banking and service management system. Nonetheless, research on ITO in Thailand’s financial industry has been limited. This study is among the first to empirically investigate the relationship between the levels of ITO, defined as the percentage of IT activities and components selected to be outsourced, and ITO success, defined by the benefits received from outsourcing in Thailand. A three-pronged approach is used in this study. It began with a comprehensive literature review. This was followed by in-depth expert interviews with representatives from financial institutions, academia, and outsource vendors, all of who offered opinions that shaped the development of the research model. A survey was then carried out with 428 IT personnel from the Thai financial sector. The results were analyzed using structural equation modeling (SEM). Contrary to previous researches, this study found that internal uncertainty and internal IT skills were two factors that do not affect the levels of ITO, while transaction costs and specific assets do. In addition, it was found that levels of ITO have impacts on ITO success. In a real world application, this study focuses on the different levels of ITO implementation among Thailand’s top five banks and their effects on ITO success. The findings increase researchers’ understanding regarding the factors that affect the levels of ITO and suggest that practitioners must consider the levels of ITO, in addition to other factors, when making ITO decisions. The framework can help practitioners optimize ITO practice for successful ITO outcomes.

Cost escalation in information technology outsourcing: A moderated mediation study

Although the issue of cost escalation has often been mentioned in the literature on information technology outsourcing (ITO), the mechanisms by which cost escalation occurs in the ex-post stage of contracting has received little attention. Evidence suggests that cost escalation is common in ITO engagements. Drawing on transaction cost economics (TCE), this study examines the determinants of cost escalation in ITO. We propose and test a research model by positing that transaction attributes or characteristics (relation-specific investments, bargaining power and, measurement difficulties) do not affect cost escalation directly, but rather through the mediation of the holdup problem and disputes between the contracting parties. Furthermore, we examine how the multi-sourcing strategy and clan mechanisms, as a soft contracting mode, moderate this mediation. Data from a survey of 132 ITO decisions were analyzed. The results provide good support for the main hypotheses of the study and yield interesting insights about the determinants of cost escalation in ITO arrangements. Both research and practical implications of the results are discussed.

Outsourcing Decision-making: A Multiple Case Study

This paper investigates outsourcing decisions with a focus on what impact the decision-making process has on the outcome of the outsourcing decision. The paper briefly reviews the IT outsourcing literature to find that there is a lack of empirical research on IT outsourcing decision processes and the effect they have on outsourcing outcomes. The paper reviews the strategic decision-making literature, which provides useful constructs for describing and assessing decision-making processes and their effect on outcomes. This paper applies these constructs to IT outsourcing decisions at four large Australian based companies. Of the four organisations reviewed, two organisations decided to offshore outsource application development services. These two organisations were outsourcing for the first time and the decision was triggered by a powerful stakeholder that pushed the idea from inception through to implementation. The other two organisations studied had renewed their existing IT outsourcing contracts. In both of these cases, a rigorous and highly formalised decision process was followed. The paper finds that the adoption of different process types leads to different results. We conclude that decision makers should adhere to more rational and formalized discovery process resulting in better decision outcomes.