Analyzing the impact of a firm's capability on outsourcing success: A process perspective

We investigated the effect of a firm's resource capabilities and interaction processes on the success of IT outsourcing. Grounded in available literature on outsourcing relationship and process theory as well as a resource-based view of the IT resource capability, a conceptual model was composed to examine the causal structure of capability, process, and relationship in IT outsourcing. We identified the firm's resource capability factors and, based on the premise that relationship intensity should be affected by the IT outsourcing process, we developed a first-order factor analysis of resource capabilities in the interactions between the outsourcer and provider. Results of empirical testing using responses from 267 IT outsourcing project teams in Korea supported most of our hypotheses. The integration of corporate IT resource and capability theories with social exchange theory distinguishes our research from that of others, who have generally treated these theories separately.     

An integrative model of trust on IT outsourcing: Examining a bilateral perspective

Trust has been considered a central aspect of successful IT outsourcing. Although a great deal of interest in trust has been described, there are very few theoretical models in the IT outsourcing literature to explain mutual trust, its role, and its impact in IT outsourcing. This study proposes a trust-based relationship research model to assess the perceived IT outsourcing success in terms of (1) mutual trust with its temporal dimension of initial trust and initial distrust, and (2) knowledge sharing with the moderating effect of mutual dependency. This model was then validated and applied in a study involving organizations in Korea. The data was collected and analyzed to understand initial trust, initial distrust, knowledge sharing, and mutual dependency as contributing factors to success in IT outsourcing. The results show that mutual trust between the service receiver and provider is very important for knowledge sharing and outsourcing success, and is affected by the initial perception to each other’s partner at the beginning of the outsourcing process. Interestingly, this study also shows that initial trust is considered a significant factor in the perception of mutual trust from the service receiver’s perspective, but not from the service provider’s viewpoint. The results help extend our understanding of critical success factors in outsourcing success and of different standpoints between the service receiver and provider.

Strategic dependence on the IT resource and outsourcing: A test of the strategic control model

Using resource dependency theory (RDT), this research analyzes how organizations control their information technology resources to improve organizational performance. According to RDT, organizations must manage their dependency on external organizations and limit external dependencies when resources are considered critical. The current study proposes and tests a portion of a Strategic Control Model positing that managers seek to control important, strategic resources in order to create value for the firm and to avoid dependency on external entities. Utilizing a research design that captured extensive quantitative data on the control of IT functions and services, the research team gathered 5 years of data on 54 business units (BUs) in 27 global companies located in seven countries. Study examined the linkages of these 54 BUs to firm performance. Locating the Extent of Control within the firm in cases where the firm depends on IT as a strategic resource proves to be a good explanation for effective decisions leading to higher performance. Viewing IT as a strategic resource alone does not lead to positive business unit outcomes, but the moderating influence of Extent of Control is found to establish the complex statistical relationship with business unit performance. For these reasons, it is critical that a theoretically grounded firm-wide process for decisions on locating IT control is in place to capture business value.

Outsourcing success in the eye of the beholder: Examining the impact of expectation confirmation theory on IT outsourcing

Expectations have been found to exert a significant impact on client satisfaction in outsourcing projects and have been utilized to understand how individuals accumulate experiences and develop beliefs. In this study, we examine the impact of expectations on IT outsourcing success. Although extant studies identify multiple potential expectations, the expectations construct is often viewed as unidimensional with expectations examined at a general level. Furthermore, our multidisciplinary literature review indicates a gap in the literature regarding which expectations to employ. We therefore draw upon the Expectation Confirmation Theory (ECT) to determine a parsimonious set of expectations that combine to influence outsourcing success. Through an international survey of chief information officers (CIOs) and other senior IT outsourcing practitioners, we demonstrate the impact of expectations on IT outsourcing success. Moreover, we evidence that the should, minimally acceptable, and intolerable expectations can be used to predict outsourcing success. This study contributes to the outsourcing literature, specifically, and the multidisciplinary ECT literature, generally, by evaluating the multi-faceted nature of expectations. The results have practical implications for clients and vendors engaged in IT outsourcing and those who engage in expectation management.     

Analyzing IT maintenance outsourcing decision from a knowledge management perspective

IT outsourcing is a complex and opaque decision problem. Managers facing a decision about IT outsourcing have difficulty in framing what needs to be thought about further in their discourses. Framing is one of the most crucial steps of human decision making and needs to be assisted to better understand a decision situation. In this research, we examine a number of decision primitives in the context of an IT outsourcing decision situation. We demonstrate how the decision primitives can be employed so that managers can probe deep to better understand a decision situation and to establish a decision basis. In the organizational setting, we exemplify the use of the decision primitives in relation to the perceived outsourcing implications for the managers looking for assistance in accommodating a knowledge management perspective on IT outsourcing. Consequently, we induce insight and a guideline on how to use knowledge management for effective outsourcing in one of the leading financial institutes in Europe.

IT outsourcing and firm-level performance: A transaction cost perspective

We analyzed the effect of the level of low asset specificity IT outsourcing on firm-level financial performance. We used transaction cost economics (TCE) as the theoretical basis to explain the effect of the level of network and telecommunication services outsourced on financial performance. An analysis of 1444 Integrated Healthcare Delivery Systems revealed that higher levels of network and telecommunication services outsourced were associated with superior financial performance. Specifically, each additional network and telecommunication service outsourced resulted in an average $3,120,000 in savings, a 25% increase in profit. In addition, increases in IT budgetary expenditures were found to be associated with increased financial performance. Our study provided preliminary support for the use of asset specificity to guide outsourcing decisions. In particular, IT activities that have become commodities (having ‘low specificity’) should be outsourced to improve the firm's financial performance.     

An empirical examination of a process-oriented IT business success model

The value of information technology (IT) to modern organizations is almost undeniable. However, the determination of that value has been elusive in research and practice. We used a process-oriented research model developed using two streams of IT research to examine the value of IT in business organizations. One stream is characterized by examining how IT and non-IT variables affect other so-called IT success variables. The second stream is commonly referred to as IT business value, defined as the contribution of IT to firm performance. The resulting research model is referred to in our paper as the IT business success model. Data was collected from 225 top IS executives in fairly large organizations to empirically examine several hypotheses derived from theory concerning the causal nature of the IT business success model. A set of measures for the IT business success model was developed through an intense investigation of the IT literature. The measures were tested for validity and reliability using confirmatory factor analysis. The hypotheses that resulted from past research and conceptually illustrated in the research model were assessed using structural equation analysis. The implications of these findings and the limitations of the study are discussed in an effort to contribute to building a process-oriented theory base for IT business success at the organizational level of analysis.     

Social IT outsourcing and development: theorising the linkage

In recent years, a growing number of social enterprises have focused their attention on harnessing the benefits of trade in software by involving underprivileged communities from developing countries in the production of information technology (IT). The goal of this type of activity, known as social IT outsourcing, is not only to provide employment and income to low‐income individuals but also to address wider development priorities within the locality. This paper focuses on strengthening our understanding of social IT outsourcing as a promoter of development. Based on research in Jharkhand, eastern India, we seek to understand how social IT outsourcing activity is interpreted from the perspective of employees who provide data services for the market and from the perspective of the social enterprise that balances its market orientation with its social development goals. Our findings generate new insights into the mechanisms at play through which social IT outsourcing is able to provide a variety of developmental advantages to rural poor communities leading to policy implications for governments and development agencies.     

An IT outsourcing cost estimation model based on Fuzzy Decision Tree

One of the most popular strategies in business today is global outsourcing. A lot of companies outsource their IT （Information Technology）. In this paper, an IT outsourcing cost estimation model based on Fuzzy Decision Tree （FDT） is presented. The model can combine inductive learning capability of FD1 with the expressive power of fuzzy sets to predict the relative error in the form of a fuzzy set and analyze the source of error using decision tree rule. Finally, the validity of the IT outsourcing cost estimation model is validated with historical project data.     

A probabilistic model for optimal insurance contracts against security risks and privacy violation in IT outsourcing environments

Day by day the provision of information technology goods and services becomes noticeably expensive. This is mainly due to the high labor cost for the service providers, resulting from the need to cover a vast variety of application domains and at the same time to improve or/and enhance the services offered in accordance to the requirements set by the competition. A business model that could ease the problem is the development or/and provision of the service by an external contractor on behalf of the service provider; known as Information Technology Outsourcing. However, outsourcing a service may have the side effect of transferring personal or/and sensitive data from the outsourcing company to the external contractor. Therefore the outsourcing company faces the risk of a contractor who does not adequately protect the data, resulting to their non-deliberate disclosure or modification, or of a contractor that acts maliciously in the sense that she causes a security incident for making profit out of it. Whatever the case, the outsourcing company is legally responsible for the misuse of personal data or/and the violation of an individual’s privacy. In this paper we demonstrate how companies adopting the outsourcing model can protect the personal data and privacy of their customers through an insurance contract. Moreover a probabilistic model for optimising, in terms of the premium and compensation amounts, the insurance contract is presented.     

IT outsourcing: frameworks for conceptualizing practice and perception

This paper seeks to conceptualize theory and practice of information technology (IT)‐based outsourcing. It uses four conceptual frameworks in this respect – core competencies, transaction cost economics, agency theory and partnership – in an empirical comparison of IT outsourcing in the public and private sectors within the UK. The qualitative research methodology involved interviews with IT managers in both sectors and documentary analysis of outsourcing vendors’ literature. The findings suggest that practices and perceptions of IT outsourcing found in the two sectors support the basic principles of some frameworks more than others, e.g. core competencies, transaction cost economics and agency theory are well developed with partnerships less so. However, using all four frameworks improves understanding of multifaceted strategic practice in fundamentally different types of organization and helps to expose some issues which have not emerged in previous outsourcing studies.     

IT outsourcing research from 1992 to 2013: A literature review based on main path analysis

Applying main path analysis, this paper investigates the IT outsourcing (ITO) field by identifying a set of papers that have played a central role in the development of the field and the major research themes emerging from the citation patterns. We selected the top 120,000 main paths from 6.45 million main paths among 798 ITO papers, resulting in a data set of 280 papers that represent the most important nodes supporting ITO knowledge flow. Based on our analysis of the multiple main paths, twelve major research themes emerged: ITO motivations, ITO decisions, ITO risks, debate around transaction cost theory, client–vendor relationship, the vendor's perspective, psychological and formal contracts, ASP, BPO, opensourcing and crowdsourcing, offshore outsourcing, and multisourcing. Finally, we discussed future directions of ITO research based on our findings. Our study is among the few studies that have used bibliometric analysis methods to analyze and visualize the citation network characterizing the rich body of ITO literature. The main path analysis precisely identified and visualized the major knowledge flow in the evolution of ITO research and major ITO research streams, thus providing an in-depth understanding of ITO research in the last 20 years.     

Knowledge transfer and utilization in IT outsourcing partnerships: A preliminary model of antecedents and outcomes

We developed a nomological network of antecedents and outcomes of knowledge transfer and utilization in IT outsourcing relationships, and tested it using a survey of 146 IT outsourcing partnerships in Singapore.     

Resolving paradoxes in IT success through IT ambidexterity: The moderating role of uncertain environments

As information technology (IT) success is both essential and elusive, researchers and practitioners are faced with an ongoing challenge to determine what IT capabilities should be developed to ensure IT success. Drawing on the paradox and ambidexterity theory, we highlight paradoxes in IT success and propose that firms manage these paradoxes by developing an IT ambidexterity capability. We hypothesize that IT ambidexterity capability enhances IT success, and that uncertain environments strengthen this relationship. Our hypotheses find support in a sample of 292 British high-tech firms. This research contributes to conceptualize paradoxes in IT success and advances the theory for a more comprehensive understanding of the impacts of IT ambidexterity capability.     

Risk assessment in IT outsourcing using fuzzy decision-making approach: An Indian perspective

Outsourcing of Information Technology (IT) is a common practice in global business today. IT Outsourcing (ITO) refers to the contracting out of IT services (or functions) with the objective of achieving strategic advantages as well as cost benefits. Recently, many IT industries are facing daunting challenges in terms of healthy alliances on their ITO strategy due to existence of inherent risks. These risks must be recognized and properly managed towards successful establishment of effective ITO strategy. Therefore, risk assessment appears to be an important contributor to the success of an ITO venture. In this paper, a hierarchical ITO risk structure representation has been explored to develop a formal model for qualitative risk assessment. The basic parameters for defining risks have been presented including the metrics for measuring likelihood and impact that aid to achieve consistent assessment. An improved decision making method using fuzzy set theory has been attempted for converting linguistic data into numeric risk ratings. In this study, the concept of ‘Incentre of centroids method’ for generalized trapezoidal fuzzy numbers has been used to quantify the ‘degree of risk’ in terms of crisp ratings. Finally, a framework for categorizing different risk factors has been proposed on the basis of distinguished ranges of risk ratings (crisp). Consequently, an action requirement plan has been suggested for providing guidelines for the managers to successfully manage the risk in the context of ITO exercise.     

IT infrastructure services as a requirement for e-learning system success

Evaluation of e-learning systems success is an essential process in managing and developing these types of systems. There are still arguments about the factors can be used to evaluate the success of e-learning systems. Inadequate attention has been paid to investigate the role of IT infrastructure services as a foundation to create the success of e-learning systems. The focus of this study is the role of IT infrastructure services in terms of the success of e-learning systems. A model is proposed which includes five constructs: IT infrastructure services; perceived usefulness; user satisfaction; customer value; and organizational value. A quantitative study was conducted at an Australian University, with survey responses from 110 Academic staff members and 720 students who use the e-learning system. The empirical study confirmed that an IT infrastructure services is a valid and reliable construct to measure e-learning systems success. In addition, this study provides evidence of the critical role of IT infrastructure services in the success of e-learning systems via its significant effect on perceived usefulness, user satisfaction, customer value, and organizational value.     

Formal and relational governance in IT outsourcing: substitution,complementarity and the role of the psychological contract

This study aims to contribute to the literature on IT outsourcing governance by advancing our understanding of mechanisms of substitution and complementarity between formal and relational governance. Our study illustrates certain conditions under which substitution and complementarity can occur and depicts a two‐way causal relationship between them. Our examination further provides a more in‐depth assessment of relational governance by using the concept of the psychological contract. Our results demonstrate that the psychologically binding nature of the psychological contract makes it a particularly forceful substitute to formal governance, while its associations with other relationship aspects make it a forceful complement.     

A dynamic capabilities perspective of IS project portfolio management

Organizations use information systems project portfolio management (IS PMM) to reconfigure their IS resources and capabilities to match changing market and economic conditions. IS PPM can therefore be characterised as a dynamic capability. We investigate how firms developed and adapted IS PPM to match the turbulent recessionary conditions witnessed after 2008–2009. This study contributes to an understanding of IS PPM by identifying the constituent dynamic capabilities and providing empirical examples of adaptation. To our knowledge, the study is the first to apply the notion of second order dynamic capabilities to the IS domain and also makes an important contribution to the more general concept of dynamic capabilities by providing empirical evidence and theoretical justification of the increased detailed, centrally controlled and analytical nature of IS PPM dynamic capabilities in recessionary conditions.     

Understanding the outsourcing learning curve: A longitudinal analysis of a large Australian company

Outsourcing continues to capture the attention of researchers as more companies move to outsourcing models as part of their business practice. Two areas frequently researched and reported in the literature are the reasons why a company decides to outsource, and outsourcing success factors. This paper describes an in-depth, longitudinal case study that explores both the reasons why the company decided to outsource and factors that impact on success. The paper describes how Alpha, a very large Australian communications company, approached outsourcing and how its approach matured over a period of 9 years. The paper concludes that although a number of reasons are proposed for a company's decision to outsource, lowering costs was the predominant driver in this case. We also describe other factors identified as important for outsourcing success such as how contracts are implemented, the type of outsourcing partner arrangement, and outsourcing vendor capabilities.