The structure of the decision faced by a firm to outsource or to retain information services is developed in this paper. Theory regarding the decision structure is discussed and the results of in-depth interviews with a variety of chief information officers presented. Specifically, the forces that drive the outsourcing decision are identified, the incentives and disincentives of outsourcing relationships being addressed in detail. A framework for contemplating the outsourcing option is presented, followed by recommendations on managing relationships with outsourcing vendors.
Get full access to this article
View all access options for this article.
References
1.
AnthesG.H. (1991). Perot wins 10-year outsourcing deal. ComputerWorld, 8 April, p. 96
2.
BairdI.S., and ThomasH. (1985). Toward a contingency model of strategic risk taking. Academy of Management Review, 10, 230–243.
3.
BarreyreP.Y. (1988). The concept of ‘impartition’ policies: a different approach to vertical integration strategies. Strategic Management Journal, 9, 507–520.
4.
BettisR.A. (1982). Risk considerations in modeling corporate strategy. Academy of Management Proceedings, 22–25.
5.
BookerE. (1990). Sun R&M opts for outsourcing. ComputerWorld, 6 August, p. 4.
6.
CaldwellB. (1992a). EDS running out of gas at Enron. InformationWeek, 11 May, p. 13.
7.
CaldwellB. (1992b). Swapping outsourcers, InformationWeek, 11 May, pp. 12–13.
8.
CaldwellB., and KrassP. (1992). IBM without the shackles. InformationWeek, 4 May, pp. 24–30.
9.
CarrollP.B., and WilkeJ.R. (1989). Calculated move. Wall Street Journal, 15 August, p. 1 and p. 4.
10.
ClemonsE.K., and KnezM. (1988). Competition and cooperation in information systems innovation. Information and Management, 15, 25–35.
DueR.T. (1992). The real costs of outsourcing. Information Systems Management, 9, Winter, 78–81.
13.
EisenhardtK.M. (1989). Agency theory: an assessment and review. Academy of Management review, 14, 57–74.
14.
GuptaU.G., and GuptaA. (1992). Outsourcing the IS function: is it necessary for your organization?Information Systems Management, 9, Summer, 44–50.
15.
HorwittE. (1992). J.P. Morgan on outsource bandwagon. ComputerWorld, 17 February, p. 50.
16.
JohnstonR., and LawrenceP.R. (1988). Beyond vertical integration – the rise of the value-adding partnership. Harvard Business Review, 66, July-August, 94–101.
17.
KellyJ. (1990). Outsourcing: who pulls the strings?Datamation, 36, 15 September, 103–106.
18.
KirkpatrickD. (1991). Why not farm out your computing?Fortune, 23 September, pp. 103, 104, 109, and 112.
19.
KleinB., CrawfordR.G., and AlchianA.A. (1978). Vertical integration, appropriate rents, and the competitive contracting process. The Journal of Law and Economics, 21, 297–326.
20.
KogutB. (1989). The stability of joint ventures: reciprocity and competitive rivalry. The Journal of Industrial Economics, 38, 183–198.
21.
KogutB., and ZanderU. (1992). Knowlege of the firm, combinative capabilities, and the replication of technology. Organization Science, 3, 383–397.
22.
LacityM.C., and HirschheimR. (1993). Information Systems Outsourcing: Myths, Metaphors and Realities (John Wiley and Sons, Chichester).
23.
LaPlanteA. (1991). Taking a second look at the concept of outsourcing. InfoWorld, 13 May, pp. 58 and 60.
24.
LayneR., CaldwellB., GarveyM., and MyersK. (1989). IBM to run Kodak data processing. Information Week, 31 July, 12–13.
25.
LohL, and VenkatramanN. (1992). Diffusion of information technology outsourcing: influence sources and the Kodak effect. Information Systems Research, 3, 334–358.
26.
LyonsT.F., KrachenbergA.R., and HenkeJ.W.Jr (1990). Mixed motive marriages: what's next for buyer-supplier relations?Sloan Management Review, 31(3), Spring, 29–36.
27.
McMullenJ. (1990). New allies: IS and service suppliers. Datamation, 36, 1 March, 42–46 and 51.
28.
MontverdeK., and TeeceD. (1982). Supplier switching costs and vertical integration in the automobile industry. Bell Journal of Economics, 13, 206–213.
