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.
AlbrightJJParkHM (2009) Confirmatory Factor Analysis using Amos, LISREL, Mplus, SAS/STAT CALIS. The Trustees of Indiana University1: 1–85.
2.
AndersonE (1988) Transaction costs as determinants of opportunism in integrated and independent sales forces. Journal of Economic Behavior & Organization9: 247–264.
3.
AngSCummingsLL (1997) Strategic response to institutional influences on information systems outsourcing. Organization Science8: 235–256.
4.
AngSStraubDW (1998) Production and transaction economies and IS outsourcing: a study of the US banking industry. MIS Quarterly22: 535–552.
5.
AubertBARivardSPatryM (1996) Development of measures to assess dimensions of IS operation transactions. Omega24: 661–680.
6.
AubertBARivardSPatryM (2004) A transaction cost model of IT outsourcing. Information & Management41: 921–932.
7.
BahliBRivardS (2005) Validating measures of information technology outsourcing risk factors. Omega33: 175–187.
8.
BaldwinLIraniZLoveP (2001) Outsourcing information systems: drawing lessons from a banking case study. European Journal of Information Systems10: 15–24.
BentlerPM (1990) Comparative fit indexes in structural models. Psychological Bulletin107: 238.
11.
BiesWZachariaL (2007) Medical tourism: Outsourcing surgery. Mathematical and Computer Modelling46: 1144–1159.
12.
BritzBTramacereGBlackmoreD. (2012) Market share analysis: IT outsourcing services, worldwide, 2011, 30 April 2012. Available at: http://wwwgartnercom/it/pagejsp?id=2021215
13.
BrownTA (2006) Confirmatory factor analysis for applied research: Guilford Press.
14.
BrowneMWCudeckR (1993) Alternative ways of assessing model fit. CA: Sage Publications, Inc.
15.
ByrneBM (2001) Structural equation modeling with AMOS: Basic concepts, applications, and programming. Mahwah, NJ: Lawrence Erlbaum Associates Publishers.
16.
ByrneBM (2010) Structural equation modeling with AMOS: Basic concepts, applications and programming, NY: Taylor & Francis Publishers.
17.
ChiasakulS (2004) Production networks, trade and investment policies, and regional cooperation in Asia: a case study of automotive industry in Thailand. Manila, Angelo King Institute for Economic and Business Studies - De La Salle University. 46p.
18.
DahlbergTLahdelmaP (2007) IT governance maturity and IT outsourcing degree: an exploratory study. HICSS 2007. 40th Annual Hawaii International ConferenceIEEE, 236a–236a.
19.
DahlbergTNyrhinenMSantonenT (2006) The success of selective and total outsourcing of firm-wide IT-infrastructure: an empirical evaluation. In Proc. ECIS, 2006. pp.
835–846.
20.
DeCosterJ (1998) Overview of factor analysis. Retrieved May24: 2006.
21.
EarlMJ (1996) The risks of outsourcing IT. Sloan Management Review37: 26–32.
22.
FowlerAJeffsB (1998) Examining information systems outsourcing: a case study from the United Kingdom. Journal of Information Technology13: 111–126.
23.
GewaldHDibbernJ (2009) Risks and benefits of business process outsourcing: A study of transaction services in the German banking industry. Information & Management46: 249–257.
24.
GonzalezRGascoJLlopisJ (2005a) Information systems outsourcing reasons in the largest Spanish firms. International Journal of Information Management25: 117–136.
25.
GonzalezRGascoJLlopisJ (2005b) Information systems outsourcing success factors: a review and some results. Information Management & Computer Security13: 399–418.
26.
GooJKishoreRRaoHR (2000) A content-analytic longitudinal study of the drivers for information technology and systems outsourcing. ICIS '00 Proceedings of the twenty first International Conference on Information Systems. Association for Information Systems, 601–611.
27.
GoolsbyKFurnissTWhitlowFK (2002) An assessment of the outsourcing market in the banking sector of Japan’s financial institutions industry. Executive paper, Everest Group.
28.
GottschalkPSolli-SætherH (2005) Critical success factors from IT outsourcing theories: an empirical study. Industrial Management & Data systems105: 685–702.
29.
GottschalkPSolli-SætherH (2006) Maturity model for IT outsourcing relationships. Industrial Management & Data systems106: 200–212.
30.
GrossmanGMHelpmanE (2002) Integration versus outsourcing in industry equilibrium. The Quarterly Journal of Economics117: 85–120.
31.
GroverVCheonMJTengJTC (1996) The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems12: 89–116.
32.
GullaUGuptaM (2012) Impact of information systems outsourcing: a study of Indian banking sector. International Journal of Business Information Systems10: 131–150.
33.
HairJBlackW,BabinB. (2006) Multivariate data analysisSixth ed.: New Jersey: Prentice-Hall.
34.
HamzahNAmanA,MaelahR. (2010) Outsourcing decision processes: A case study of a Malaysian firm. African Journal of Business Management4: 3307–3314.
35.
HanHSLeeJNSeoYW (2008) Analyzing the impact of a firm's capability on outsourcing success: A process perspective. Information & Management45: 31–42.
36.
HeideJB (1994) Interorganizational governance in marketing channels. The Journal of Marketing: 71–85.
37.
HirschheimRLacityM (2000) The myths and realities of information technology insourcing. Communications of the ACM43: 99–107.
38.
HooperDCoughlanJMullenM (2008) Structural equation modelling: guidelines for determining model fit. Articles: 2.
HuL-tBentlerPM (1998) Fit indices in covariance structure modeling: Sensitivity to underparameterized model misspecification. Psychological Methods3: 424.
41.
JiangBFrazierGVPraterEL (2006) Outsourcing effects on firms' operational performance: An empirical study. International Journal of Operations & Production Management26: 1280–1300.
42.
KaplanRSNortonDP (2004) Strategy maps: Converting intangible assets into tangible outcomes: Harvard Business Press.
43.
KarydaMMitrouEQuirchmayrG (2006) A framework for outsourcing IS/IT security services. Information Management & Computer Security14: 402–415.
44.
KessPPhusavatKTorkkoM. (2008) External knowledge: sharing and transfer for outsourcing relationships. International Journal of Business and Systems Research2: 196–213.
45.
KitcharoenP (2003) The potential of logistics outsourcing industry in Thailand. MBA thesis, Assumption University, Bangkok. 182 p.
46.
KlineRB (1998) Software review: software programs for Structural Equation Modeling: Amos, EQS, and LISREL. Journal of Psychoeducational Assessment16: 343–364.
47.
KlineRB (2010) Principles and practice of structural equation modeling: The Guilford Press.
48.
LacityMCHirschheimRA (1993) Information systems outsourcing: Myths, metaphors and realities: Wiley.
49.
LacityMCWillcocksLP (1998) An empirical investigation of information technology sourcing practices: Lessons from experience. MIS Quarterly: 363–408.
50.
LacityMCWillcocksLP (2000) Survey of IT outsourcing experiences in US and UK organizations. Journal of Global Information Management (JGIM)8: 5–23.
51.
LacityMCWillcocksLPFeenyDF (1995) IT sourcing: maximize flexibility and control. Long Range Planning28: 128–128.
52.
LacityMCWillcocksLPFeenyDF (1996) The value of selective IT sourcing. Sloan Management Review37: 13–25.
53.
LeeJN (2001) The impact of knowledge sharing, organizational capability and partnership quality on IS outsourcing success. Information & Management38: 323–335.
54.
LeeJNKimYG (1999) Effect of partnership quality on IS outsourcing success: conceptual framework and empirical validation. Journal of Management Information Systems: 29–61.
55.
LeeJNMirandaSMKimYM (2004) IT outsourcing strategies: Universalistic, contingency, and configurational explanations of success. Information Systems Research15: 110–131.
56.
LinCPervanGMcDermidD (2007) Issues and recommendations in evaluating and managing the benefits of public sector IS/IT outsourcing. Information Technology & People20: 161–183.
57.
LohLVenkatramanN (1992) Determinants of information technology outsourcing: a cross-sectional analysis. Journal of Management Information Systems: 7–24.
58.
MahoneyJTPandianJR (1992) The resource–based view within the conversation of strategic management. Strategic Management Journal13: 363–380.
59.
MalikANilakantV (2011) Extending the “size matters” debate: Drivers of training in three business process outsourcing SMEs in India. Management Research Review34: 111–132.
60.
MarcolinBLMcLellanKL (1998) Effective IT outsourcing arrangements. Published by the IEEE Computer Society, 654.
61.
MarloweJSullivanP (2007) Medical tourism: the ultimate outsourcing. Hum Res Plan30: 8–10.
62.
McDonaldRPHoMHR (2002) Principles and practice in reporting structural equation analyses. Psychological Methods7: 64.
63.
MedlinBDSchnebergerSHunsingerDS (2007) Perceived technical information technology skill demands versus advertised skill demands: An empirical study. Journal of Information Technology Management18: 14–23.
64.
MiozzoMGrimshawD (2005) Modularity and innovation in knowledge-intensive business services: IT outsourcing in Germany and the UK. Research Policy34: 1419–1439.
65.
MulaikSAJamesLRVan AlstineJ. (1989) Evaluation of goodness-of-fit indices for structural equation models. Psychological Bulletin105: 430.
66.
NamKRajagopalanSRaoHR. (1996) A two-level investigation of information systems outsourcing. Communications of the ACM39: 36–44.
67.
NECTEC (2010) Exceutive summary: Thailand ICT Market & Industry 2009. National Electronics and Computer Technology Center Thailand.
68.
NgwenyamaOKBrysonN (1999) Making the information systems outsourcing decision: A transaction cost approach to analyzing outsourcing decision problems. European Journal of Operational Research115: 351–367.
69.
ÖsterleHWinterR (2003) Business Engineering: Auf dem Weg zum Unternehmen des Informationszeitalters. Business Engineering Auf dem Weg zum Unternehmen des Informationszeitalters2.
70.
PatiNDesaiMS (2005) Conceptualizing strategic issues in information technology outsourcing. Information Management & Computer Security13: 281–296.
71.
PoppoLZengerT (2002) Do formal contracts and relational governance function as substitutes or complements?. Strategic Management Journal23: 707–725.
72.
PorterMEMillarVE (1985) How information gives you competitive advantage. Harvard Business Review63: 149–160.
73.
RobertsonTRGatignonH (1998) Technology development mode: a transaction cost conceptualization. Strategic Management Journal19: 515–531.
74.
RochesterJDouglasD (1993) New wrinkles in IS outsourcing. IS Analyzer31: 1–18.
75.
RottmanJWLacityMC (2009) A US client's learning from outsourcing IT work offshore. Information Systems Outsourcing: 443–469.
76.
SantosFMEisenhardtKM (2005) Organizational boundaries and theories of organization. Organization Science: 491–508.
77.
SeddonPBCullenSWillcocksL (2002) Does Domberger's theory of the contracting organization explain satisfaction with IT outsourcing?'23rd International Conference on Information Systems.
78.
SegarsAHGroverV (1993) Re-examining perceived ease of use and usefulness: a confirmatory factor analysis. MIS Quarterly17: 517–525.
79.
SharmaSMukherjeeS,KumarA. (2005) A simulation study to investigate the use of cutoff values for assessing model fit in covariance structure models. Journal of Business Research, 58: 935–943.
80.
ShiZ (2010) The role of IS architecture planning in enhancing IS outsourcing's impact on IS performance: Its antecedents and an empirical test. Journal of Enterprise Information Management23: 439–465.
81.
SufianFHabibullahMS (2010) Developments in the efficiency of the Thailand banking sector: a DEA approach. International Journal of Development Issues9: 226–245.
82.
TaftiMHA (2005) Risks factors associated with offshore IT outsourcing. Industrial Management & Data Systems105: 549–560.
83.
ThangaveluSMChongvilaivanA (2011) The impact of material and service outsourcing on employment in Thailand's manufacturing industries. Applied Economics43: 3931–3944.
84.
ThompsonBDanielLG (1996) Factor analytic evidence for the construct validity of scores: A historical overview and some guidelines. Educational and Psychological Measurement56: 197–208.
85.
UdoGG (2000) Using analytic hierarchy process to analyze the information technology outsourcing decision. Industrial Management & Data Systems100: 421–429.
86.
UllmanJBBentlerPM (2003) Structural equation modeling. Handbook of psychology. New York: Wiley.
87.
WangJJYangDL (2007) Using a hybrid multi-criteria decision aid method for information systems outsourcing. Computers & Operations Research34: 3691–3700.
88.
WatjatrakulB (2005) Determinants of IS sourcing decisions: A comparative study of transaction cost theory versus the resource-based view. The Journal of Strategic Information Systems14: 389–415.
89.
WhittenDLeidnerD (2006) Bringing IT back: An analysis of the decision to backsource or switch vendors. Decision Sciences37: 605–621.
90.
WillcocksLLacityMKernT (1999) Risk mitigation in IT outsourcing strategy revisited: longitudinal case research at LISA. The Journal of Strategic Information Systems8: 285–314.
91.
WillcocksLPLacityM (1998) Strategic sourcing of information systems: Wiley.
92.
WilliamsonOE (1981) The economics of organization: The transaction cost approach. American Journal of Sociology: 548–577.
93.
WilliamsonOE (1985) The economic institutions of capitalism: Firms, markets, relational contracting: The Free Press.
94.
ZarnekowRScheegJBrennerW (2004) A survey of the life cycle costs of IT application systems. Wirtschaftsinformatik46: 181–187.
