Information Systems Outsourcing (eBook)

Enduring Themes, New Perspectives and Global Challenges

Rudy Hirschheim, Armin Heinzl, Jens Dibbern (Herausgeber)

eBook Download: PDF

2007 | 2nd ed. 2006
X, 704 Seiten
Springer Berlin (Verlag)
978-3-540-34877-1 (ISBN)

Infos

Four years have been passed away since the first edition of this book has been published. While certain key issues on IS sourcing like determinants and application service provision have become more mature from an academic and industry perspective, additional topics have arisen on the horizon. In particular, offshoring and business process outsourcing have led to numerous insightful publications which offer a valuable and indispensable holistic sourcing persp- tive. Thus, the second edition of our outsourcing book deals with enduring themes, new perspectives, and global challenges. In addition to classical themes like Sourcing Determinants (Part I), Relationship Aspects (Part II), and Experiences (Part III), we felt it worthwhile to add three new parts. They cover information systems outsourcing from a Vendor and Individual Perspective (Part IV), Application Service Providing (Part V) as well as Offshoring and Global Outsoucing (Part VI). Again we have thoughtfully tried to arrange a compilation of contemporary outsourcing research as a primer and a platform for scientific discourse. In contrast to the first edition, this book is not the outcome of an International Conference, but rather an update of important and relevant perspectives. Since the Third International Conference on Outsourcing of Information Services will take place 2007 in Heidelberg, Germany, it may be considered as an epilogue for further interactions and discussions.

Inhalt

Preface 5
Contents 6
Part I: Overview 10
Information Technology Outsourcing in the New Economy – An Introduction to the Outsourcing and Offshoring Landscape 11
1 Introduction 11
2 IT Outsourcing Motivation and History 12
3 Offshore Outsourcing 14
4 Motivation for the Second Edition 16
5 Book Structure and Outline 17
5.1 Determinants of the IT Outsourcing Decision 19
5.2 Arranging and Managing IT Outsourcing Relationships 20
5.3 Experiences and Outcome of IT Outsourcing 21
5.4 Vendor View and Individual Level Perspective 23
5.5 Application Service Providing (ASP) and Business Process Outsourcing ( BPO) 24
5.6 Offshoring and Global Outsourcing 26
6 Conclusions 27
References 28
Part II: Determinants of the IS Outsourcing Decision 32
Costs, Transaction-Specific Investments and Vendor Dominance of the Marketplace: The Economics of IS Outsourcing1 33
1 Introduction 33
2 Theory Development and Hypotheses 35
2.1 Production Economies 35
2.2 Transaction Economies 36
2.3 Financial Slack 38
2.4 Firm Size 40
2.5 Firm Performance 40
3 Study Method 41
3.1 Sample and Design 41
3.2 Test of Non-Response Bias 43
3.3 Procedure 44
3.4 The Survey Design 44
3.5 Archival Data 46
4 Analysis and Results 47
5 Discussion 50
5.1 Production and Transaction Economics Findings 50
5.2 Financial Slack Findings 51
5.3 Firm Size Findings 51
6 Study Limitations 52
7 Conclusion 52
References 53
Appendix A 58
Definition and Operationalization of Constructs in the Survey 58
Selective Outsourcing of Information Systems in Small and Medium Sized Enterprises 62
1 Introduction 62
2 Theoretical Framework 64
2.1 Transaction Cost Theory 65
2.2 Resource-based Theory 66
2.3 Power Theory 68
3 Research Methodology 69
3.1 Data 69
3.2 Measures 69
3.3 Partial Least Squares Analysis 71
4 Empirical Results 72
4.1 Descriptive Statistics 72
4.2 Findings from Model Testing 73
5 Discussion 75
6 Summary and Outlook 78
References 80
Appendix 84
Survey Items for Scales used in PLS Analysis (translated from German) 84
Measurement Reliability 86
Antecedents of Information Systems Backsourcing 87
1 Backsourcing Phenomenon 87
2 IS Backsourcing vs. IS Outsourcing 89
3 Backsourcing Framework 92
4 Economic Considerations 93
5 Economic Considerations: Illustration 95
6 Strategic Considerations 96
7 Strategic Considerations: Illustration 97
8 Relationship Considerations 98
9 Relationship Considerations: Illustration 99
10 Triangulation of Factors 100
11 Multiple Factor Considerations: Illustration 100
12 Conclusion 101
References 103
IT Sourcing a Dynamic Phenomena: Forming an Institutional Theory Perspective 107
1 Introduction 107
1.1 Motivation 107
1.2 Organizational Change in IS Research 108
1.3 The Theoretical Perspective 109
2 Outsourcing Changes - Definitions and Possible Change Processes 110
2.1 Basic Definitions 110
2.2 IS Outsourcing Change 115
2.3 Antecedents to Change 117
2.4 Changes Within Existing Arrangements 118
3 Institutional Perspective 119
3.1 Institutional Theory Perspective Explaining Change 119
3.2 IS Sourcing and Institutional Processes 123
4 Method 125
5 Analysis and Findings 127
6 Conclusion 132
References 134
Part III: Outsourcing Relationship Issues 139
Legal and Tax Considerations in Outsourcing 140
1 Introduction 140
2 Structuring Outsourcing Projects 142
3 Offshore Outsourcing Agreements 145
3.1 The Scope of Services 146
3.2 Service Levels 146
3.3 Service Fees 147
3.4 Managing the Service Provider 147
3.5 Coordination of Project Activities 147
3.6 Intellectual Property (IP) 148
3.7 Privacy and Data Protection 149
3.8 Employees and Subcontractors 150
3.9 Other Issues in Agreements 151
4 Project Term and Termination 153
4.1 Automatic Renewal 154
4.2 Early Termination 154
4.3 Transition 154
5 Tax Implications 155
6 Governing Law and Jurisdiction 156
6.1 Alternate Dispute Resolution (ADR) 156
6.2 Enforcement of Foreign Awards and Judgments 157
6.3 Applicability of Foreign Laws 158
7 Negotiation 159
8 Conclusion 161
References 162
Measuring and Managing IT Outsourcing Risk: Lessons Learned 164
1 Introduction 164
1.1 Risk Defined 165
2 IT Outsourcing Risk 167
2.1 Assessing IT Outsourcing Risk Exposure 168
3 The Case Studies 173
3.1 Managers’ Attitude Toward Risk 174
3.2 Risk Management as a Series of Compromises 176
3.3 Risk Management and Impact Evaluation 178
3.4 Risk Management and Contract Design 180
4 Discussion and Conclusion 183
References 184
Governance of Remotely Outsourced Software Development: A Comparison of Client and Vendor Perspectives 189
1 Introduction 189
2 Coordination and Control in IS Development 191
3 Research Methods 194
3.1 Data Analysis 197
4 Results 198
4.1 The Governance Mechanisms 198
4.2 The Evolution of Governance Mechanisms 204
5 Discussion 209
References 212
Appendix: The Cases 215
Study 1 215
Study 2 217
Study 3 220
Spiraling Effect of IS Outsourcing Contract Interpretations 225
1 Introduction 225
2 Tale of Two Contracts 226
2.1 First Fidelity Bancorporation 227
2.2 Republic Bank 229
3 Conceptual Foundation 230
3.1 Guiding Research Parameters 231
4 Case Research Methodology 234
4.1 Sample Selection 234
4.2 Procedures 235
4.3 Measures 235
4.4 Analysis 239
4.5 Case Descriptions 240
5 Results 242
5.1 Ideal IS Outsourcing Arrangements 242
5.2 Types Are Better When? 247
5.3 Discussion of Possible IS Outsourcing Arrangements 251
6 Summary 254
References 255
Appendix 1: Case Study Rigour 257
Part IV: Experiences and Outcome of IS Outsourcing 259
The Normative Value of Transaction Cost Economics: What Managers Have Learned About TCE Principles in the IT Context 260
1 Introduction 260
2 The Outsourcing Phenomenon from the Lenses of Economics and Strategy 262
2.1 Transaction Cost Economics 262
2.2 Theoretical Counter-Attacks and Alternatives to TCE 264
3 Research Approaches 265
4 The Optimal Governance of IT: Lessons Learned and Principles Applied by IT Managers 269
4.1 Lesson: TCE Logic Is Not Intuitive, and Managers Learned through Their Mistakes in the 1980’ s How to Craft More Effective Contracts in the Mid 1990’ s 269
4.2 Lesson: Managers Realize Higher Performance When They Apply the TCE Principle to Not Outsource the Most Specialized Activities 272
4.3. Lesson: Managers Realize Higher Satisfaction When They Apply the TCE Principle to Measure and Benchmark the Performance of IT Activities 275
4.4 Lesson: Managers Realize Higher Performance When They Complement Their Use of Customized Contracts with Supportive Relational Norms. They Also Realize Higher Performance When Investing in Just Relational Norms 277
5 Conclusion 281
References 282
Success of IS Outsourcing as a Predictor of IS Effectiveness: Does IT Governance Matter? 284
1 Introduction 284
1.1 Evolution of IS Outsourcing 284
1.2 Objectives and Outline of This Paper 286
2 The Theoretic Context of IS Outsourcing 287
2.1 Strategic Alignment Model 287
2.2 IT Governance 288
2.3 Discussion 288
3 Research Methodology 289
3.1 Framework and Hypotheses 289
3.2 Measurement of the Key Variables 291
3.3 Data Collection 292
4 Results 293
4.1 Responses 293
4.2 IS Outsourcing in General 293
4.3 Testing the Base Relation H1 293
4.4 Testing the Base Relations H2 and H3 294
4.5 Testing the Moderating Relationship of Integration and Outsourcing Success (H4) 295
4.6 Testing the Relationship Between IT Decision Power and Outsourcing Success (H5) 297
5 Conclusions 298
References 299
Appendix 302
Table A: Original Survey Questions 302
Four Stories of Information Systems Insourcing 304
1 Introduction 304
2 Sourcing Definitions 306
3 Research Design 306
3.1 Research Project 307
3.2 Data Collection 308
3.3 Data Interpretation 314
3.4 Research Validity 314
4 Four Stories of Insourcing 316
4.1 Story I – Senior Executives Enable Internal IS Managers To Cut Costs 318
4.2 Story II – IS Managers Terminate Failing Outsourcing Contracts 324
4.3 Story III – IS Managers Defend Insourcing 326
4.4 Story IV – Senior Executives Confirm The Value of IS 330
5 Morals of the Stories 334
Moral 1: IS can indeed replicate outsourcing vendor strategies leading to reduced IS costs 334
Moral 2: Perceptions of insourcing success are not solely related to financial outcomes 336
Moral 3: Senior management’s perceptions of insourcing success depends upon IS management’s ability to convince them they are cost- competitive relative to the market 339
6 Conclusions 342
References 344
Capabilities for Information Systems Outsourcing Success: Insights from the Resource- based View of the Firm 348
1 Introduction 348
2 Previous Research 348
3 Theoretical Framework 353
4 Model Development 354
4.1 Vendor Capabilities 355
4.2 Customer Capabilities 356
4.3 Overall Capabilities 358
4.4 Relationship Strength 358
4.5 Quality 359
4.6 Satisfaction 359
5 Research Methodology 360
5.1 Data Collection 360
5.2 Operationalization of Constructs 363
5.3 Analysis 363
6 Results 366
7 Discussion 367
7.1 Limitations and Implications 370
8 Conclusion 371
References 372
Appendix: Items and Descriptive Statistics 377
Part V: Vendor View and Individual Level Perspective 380
Vendor Strategies in the German Market for Information Technology and Business Process Outsourcing 381
1 Introduction 381
2 Conceptual Framework 382
2.1 Analysis of Internal CSF 384
2.2 Analysis of Strategy Profiles 386
3 Methodology 387
4 Empirical Results 388
4.1 Macro Level Environment 388
4.2 Analysis of Industry Structure 389
4.3 Formation and Analysis of Strategic Groups 391
5 Conclusion and Future Orientation 397
Literature 399
Work Outcomes and Job Design for Contract Versus Permanent Information Systems Professionals on Software Development Teams 403
1 Introduction 403
2 Study 1: The Survey Social Exchange and Norms of Reciprocity 406
2.1 Social Exchange Relationships and Social Comparisons in IS Contracting 406
2.2 Work Attitudes (Self-Assessments) 408
2.3 Work Behaviors 410
2.4 Work Performance 411
2.5 Method 413
2.6 Statistical Analysis 419
2.7 Results 420
2.8 Discussion 423
3 Study 2: The Case Studies 424
3.1 Job Design and Work Outcomes 424
3.2 Site Selection and Research Setting 425
3.3 Data Collection 425
3.4 Textual Analysis: Analytical Strategy and Reliability Assessment 426
3.5 Results 427
3.6 Job Design Features 430
4 Overall Discussion and Conclusion 432
References 435
When Subordinates Become IT Contractors: Persistent Managerial Expectations in IT Outsourcing 442
1 Introduction 442
2 Persistent Expectations in IT Outsourcing 444
3 Study 1: Development of Theoretical Model 446
3.1 Study 1: Method 447
3.2 Study 1: Results and Theoretical Model 449
4 Study 2: Validation of Theoretical Model 458
4.1 Study 2: Method 458
4.2 Study 2: Results 460
4.3 Study 2: Discussion 463
5 Conclusion 466
5.1 Limitations and Future Research 467
References 469
Appendix 474
Appendix A 474
Appendix B 476
Part VI: Application Service Providing and Business Process Outsourcing 477
Understanding the ‘Service’ Component of Application Service Provision: An Empirical Analysis of Satisfaction with ASP Services 478
1 Application Service Providers: Promise and Reality 478
2 Understanding Satisfaction with ASP 480
2.1 Satisfaction and IT Outsourcing 480
2.2 Satisfaction and the ASP Business Model 482
3 A Model of Satisfaction Determinants 483
3.1 Defining the Satisfaction Construct 483
3.2 The Role of Perceived Provider Performance 484
3.3 Expectations about ASP Service: The Effect of Technical Guarantees and Functional Capability of the ASP 485
3.4 Prior Experience of the Firm: The Effect of Prior Internet Usage, the Maturity of Internal IT and Prior Systems Integration 488
3.5 The Disconfirmation Experience 491
4 Research Method, Data Collection and Analysis 492
4.1 Initial Qualitative Survey and Instrument Design 492
4.2 Analyzing the Measure Validity and Reliability 494
4.3 Assessing Potential Over Identification Issues 496
4.4 Model Estimation and Goodness of Fit 497
4.5 Findings from the Study 498
5 Discussion of Results 500
5.1 Implications from Findings 500
5.2 Implications for IS Literature 502
6 Conclusions and Directions for Future Research 503
References 504
APPENDIX 514
Survey Instruments 514
I Perceived Provider Performance 515
II Satisfaction with ASP 515
III Prior Internet Usage of the Organization 516
IV Prior Systems Integration 516
V Maturity of Internal IT 517
VI Disconfirmation 517
VII Functional Capability of the ASP 518
VIII Technical Service Guarantees 518
Developing a Sustainable Value Proposition in Web Services: Lessons from Strategic Management 519
1 Introduction 519
2 Web Services: A New Paradigm for Business? 520
3 Key Factors for Sustaining Value in Web Services 521
4 Three Pilars of Competitive Advantage 524
4.1 Building Market Leadership 526
4.2 Creating Strategic Differentiation 528
4.3 Enhancing Revenue Generation 531
5 Conclusion and Future Research Directions 534
References 536
Business Process Outsourcing, Knowledge and Innovation – A Study of Enterprise Partnership 538
1 Introduction 538
2 Research Scope and Methodology 540
3 Background: Creating the Xchanging Company 541
4 The Distinctive Business Model: Enterprise Partnership 542
5 A New Implementation Model 545
6 Competencies – ‘The DNA of Xchanging’ 546
6.1 The People Competency 547
6.2 The Service Competency 548
6.3 The Process Competency 550
6.4 The Technology Competency 552
6.5 The Environment Competency 555
6.6 The Sourcing Competency 556
6.7 The Implementation Competency – Grit in the Oyster? 558
7 Progressing the Enterprise Partnerships Through Four Phases of Implementation 559
8 Transforming The Back Office: Summary of Five Approaches 561
9 The Xchanging Business Model – An Assessment 564
9.1 Assessment of Partnership, Xchanging-style 564
9.2 Sustainable Performance and Innovation in Xchanging Enterprise Partnerships 566
9.3 The ‘Fit’ of the Xchanging Business Model 567
9.4 Creating and Leveraging Knowledge 571
10 Conclusion 573
References 575
Business Process Outsourcing: The Hysteresis Effect and Other Lessons 577
1 Introduction 577
1.1 Previous Research on BPO 579
1.2 The Hysteresis Effect in Complex Outsourcing 580
2 Method 582
3 Case Study Findings 584
3.1 Motivations 584
3.2 Evaluations 584
3.3 Sources of Advice 585
3.4 Concerns 586
4 Discussion 586
4.1 Motivation 587
4.2 Biases in the Evaluation Process 587
4.3 Outsourcing, “Impression Management” and Cognitive Biases 589
4.4 Other Issues and Concerns 589
5 Implications and Recommendations for Decision- Makers 591
6 Conclusion 594
References 594
Part VII: Offshoring and Global Outsourcing 597
Business Process Offshoring to India: An Overview 598
1 Introduction 598
2 Offshore Outsourcing and the Global BPO Market 599
2.1 Issues in Offshore Outsourcing 601
3 India as an Offshore BPO Destination 603
3.1 Key Features of the Indian IT and IT-enabled BPO Industry 604
3.2 Economics of Business Process Offshoring to India 605
3.3 Impact of IT and ITES Offshoring on the Indian IT Services Landscape 608
3.4 Offshore Impact on IT Services Pricing 608
3.5 Impacts and Implications of Offshore Outsourcing in the US 609
3.6 Drivers and Inhibitors 609
4 BPO Service Category Classification 612
5 Case Study: GE’S BPO Operations in India 616
5.1 GE Capital International Services (GECIS) India 617
6 Conclusion and Challenges Ahead 621
References 622
The Maturation of Offshore Sourcing of Information Technology Work 624
1 Offshore IT Sourcing Is Gaining IT Management Attention 624
2 Four Stages of Offshore IT Sourcing 626
2.1 Stage 1: Offshore Bystander 627
2.2 Stage 2: Offshore Experimenter 629
2.3 Stage 3: Proactive Cost Focus 630
2.4 Stage 4: Proactive Strategic Focus 633
2.5 Tech Insourcers: One Type of Stage 4 Firm 634
3 U.S. Firms Will Move Up the Maturity Curve 636
4 Offshore IT Sourcing by U.S. Firms Will Continue to Grow 637
5 The Global IT Labor Supply Will Grow and Mature 638
6 Recommendations for IT Executives 640
References 641
Appendix: Study Methodology 642
The Study Sample 642
Data Collection Approach 643
Managing Cross-Cultural Issues in Global Software Outsourcing 644
1 Managing Cross-Cultural Issues in Global Software Outsourcing 644
2 Strategic Choice of Projects 646
3 Managing the Relationship 647
4 Staffing Issues 648
5 Training 649
6 Conclusions 650
References 651
Knowledge Management in Offshore Software Development 652
1 Introduction 652
2 Conceptual Scheme: Knowledge and Offshore Software Development 654
3 Research Approach 657
4 Case Description and Analysis 658
4.1 Initiation and Growth Phase (1998 – 1999) 659
4.2 Failure to Reach Maturity and Closure (1999-2000) 665
5 Discussion and Implications 669
5.1 Encultured Knowledge 669
5.2 Embedded Knowledge 670
5.3 Encoded Knowledge 671
5.4 Implications for Practice 673
5.5 Implications for Theory 674
References 676
Offshore Outsourcing: Challenge to the Information Systems Discipline 679
1 The Growth of Offshoring 679
2 The Immediate Consequences of Offshoring 679
3 The Fundamental Nature of Offshoring 682
4 Implications for the Future of the Discipline 683
5 Conclusions 687
References 689
Index 692

Textauszug

Costs, Transaction-Specific Investments and Vendor Dominance of the Marketplace: The Economics of IS Outsourcing (p. 26-27)

Soon Ang
School of Accountancy and Business, Nanyang Technological University, Nanyang Avenue 2263, Republic of Singapore, [e-mail], FAX: [phone]

Detmar Straub
Robinson College of Business, Computer Information Systems Department, Georgia State University, University Plaza, Atlanta, GA 30303-4012, [e-mail], 404-651-3880, FAX: [phone]

1 Introduction

The strategic importance of information systems (IS) in banking is widely substantiated (Steiner and Teixeira 1990, OECD 1992, Office of Technology Assessment 1984, Office of Technology Assessment 1987, Apte et al 1990, McFarlan and McKenney 1983). Yet, in spite of this, some banks have outsourced their entire information services function (American Bankers Association 1981, 1986, 1990). On the surface, it seems counterintuitive that banks should potentially erode their competence in the design and delivery of strategic financial services relying heavily on information technology (IT). Part of the explanation lies in past behaviors and long standing theories about how organizations respond to their environment. According to classical theories of the firm, organizations strive toward autonomy (Gouldner 1959, Burt 1982). They maintain independence by integrating as many business activities as possible within their hierarchical control. By means of backward and forward integration, organizations secure access to markets, safeguard suppliers to raw materials, and prevent competitors from obtaining such access.

While corporations overall have demonstrated many of these tendencies in the post World War II era, a reversal of this trend had begun to emerge by the mid- 1980s (Harrison and St. John 1996). Described as "hollowing out of the corporation," organizations began to relinquish internal control and depend more heavily on external service-providers. Outsourcing prompted firms to abandon internal production bases and rely on others for manufacturing, distribution, and other business functions.

The growing practice of outsourcing in modern corporations has led both academics and practitioners to theorize and speculate about the underlying momentum towards outsourcing. The intriguing question is: If organizations are "dependence-avoiders" (Gouldner 1959), why expose oneself to inter-organizational dependencies in outsourcing arrangements? In addition to external dependencies, outsourcing brings on costly and radical changes. It creates upheavals in existing organizational structure and redefines organizational roles. Organizations must hire and terminate employees, sell off fixed assets, and plan for geographical relocation of firm operations.

The evolving literature on information technology (IT) outsourcing offers a variety of explanations for why outsourcing occurs. Many of these arguments have a basis in economic theories and models. One of the most commonly cited reasons, for example, is that managers feel that they can gain cost advantages by hiring outsiders to perform certain services and produce certain products (Alpar and Sharia 1995, Loh and Venkatraman 1992a). Transaction cost theory offers another economic perspective (Nam, Rajagopalan, Rao, and Chaudhury 1996) that typically frames outsourcing as a decision about drawing firm boundaries (Pisano 1990, Mosakowski 1991) or as vertical integration (Anderson and Schmittlein 1984, Monteverde and Teece 1982, Harrigan 1985). Financial slack and firm size are other factors which can be conceptualized, at least in part, as economic constructs.

This study argues that we can improve our ability to explain outsourcing within the larger context of organizational responses to their strategic environment by focusing on such economic considerations. Our findings suggest which factors play into the outsourcing decision and their relative importance in sourcing choices.

Produkt-Details

• Erscheint lt. Verlag: 13.6.2007
• Zusatzinfo: X, 704 p. 55 illus.
• Verlagsort: Berlin
• Sprache: englisch
• Themenwelt: Wirtschaft ► Allgemeines / Lexika
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• Schlagworte: business • Business Process • Calculus • Development • information system • Information Technology (IT) • Insourcing • IT Governance • knowledge management • Management • Manager • Offshore • Outsourcing • Strategy • Web service
• ISBN-10: 3-540-34877-8 / 3540348778
• ISBN-13: 978-3-540-34877-1 / 9783540348771