IT Outsourcing: Benefits, Risks and Performance Implications

1
IT Outsourcing Benefits, Risks and Performance
Implications

• Research study by L. Loh and N. Venkatraman

Proceedings of the 16th ICIS, Amsterdam, 1995.
pp. 277 - 286
2
Study purpose

• Development and test of a conceptual model of IT
  outsourcing
• Questionnaires to CIOs in 159 Fortune 500
  companies (primary data)
• Review of corporate financial statements
  (secondary data)

3
FINDINGS

• Outsourcing decisions
• Technical and business benefits (motivators)
• Control and Opportunism risks (inhibitors)
• Outsourcing may lead to improved organizational
  performance (cost structure of the firm has a
  moderating effect)

4
Background

• Outsourcing drivers
• Large firms (e.g., Kodak in 1989 data center to
  IBM, PC operations to Businessland, networking to
  DEC and IBM (Applegate and Montealegre, 1991 Loh
  and Venkatraman, 1992b)
• Aggressive push by vendors to win outsourcing
  contracts
• Martin Marietta IS Groups ad. You do not own a
  power plant for your electricity. Why own a data
  center for your information systems
• Extensive press coverage

5
CONCEPTUAL MODEL FOR IT OUTSOURCING

• Beyond the anecdotal evidence to a
  theory-oriented frameworks and empirical tests