The strategic value of IT insourcing: An IT-enabled business process perspective (original) (raw)

The Aftermath of Information Technology Outsourcing: An Empirical Study of Firm Performance Following Outsourcing Decisions

Journal of Information Systems, 2008

Increasingly, organizations are jumping onto the information technology (IT) outsourcing bandwagon in an effort to create value. However, evidence indicating the positive economic consequences of such initiatives has been limited. This study attempts to fill this void by synthesizing the process-oriented research in IT business value literature and the resource-based theory to develop an integrative research framework for assessing the value proposition of IT outsourcing. With a process-oriented lens, the framework suggests that the effects of IT outsourcing are best documented at the process level and hence, it is imperative that one takes into consideration the impact of IT outsourcing on performance at both the process level as well as the firm level. Grounded in the resource-based view, the framework also accounts for the complementary role of firms' core IT capability as a critical condition for the value creation of IT outsourcing. Consistent with the process-oriented prediction, the findings suggest that the positive effects of IT outsourcing appear mostly at the process level, but not at the firm level. Moreover, it is found that the level of business value created by IT outsourcing is contingent on firms' core IT capability. Firms with superior core IT capability are found to enjoy an advantage in leveraging their outsourcing initiatives to enhance firm value.

DOES EXTERNAL KNOWLEDGE ENHANCE COMPETITIVE ADVANTAGE? A RESEARCH AGENDA ON IT OUTSOURCING PRACTICES

Since last two decades offshore outsourcing gaining fast momentum and now this new evolution of business process has achieved its maturity. Standardization of manufacturing sector is almost matured and now this sector is on the automation mode. Western firms in the service sector are very much eager to standardize their process and for multiple reasons, they are seeking external partner to achieve their goal. Modularity is the basic principle of standardization because standardization can not deliver any value if it is not flexible and agile. Modular, flexible and agile standardized systems can lead us towards the next stage of business process evolution which is, 'automation'. Automation in service sector is envisaged since long but now it seems a reality due to the rapid advances in information technology. It seems very encouraging that the western firms are heading towards right direction in achieving competitiveness but question remains, if this achieved competency is su...

The correlation between outsourcing and the business value of information technology

1998

Ensuring a return on information technology investments and deciding to outsource are closely intertwined. This paper reports research conducted to examine the association between these issues from the viewpoints of experienced executives, managers, and consultants in comparison with those of veteran information technology professionals. The results show that the expected results from outsourcing are changing. Moreover, understanding the areas where managers and IT professionals agree and where they differ provides valuable insights into strategies for gaining adequate returns on IT spending.

Business Process Outsourcing Strategy on Competitive Advantage and Organizational Performance

International Journal of Academic Research in Business and Social Sciences, 2019

This study was set to find the impact of business process outsourcing (BPO) on competitive advantage and organizational performance. This study identified two independent variables (strategic evaluation and relationship management) and four second order constructs (strategic risks evaluation, capability evaluation, relationship commitment and cooperation) of BPO which was then evaluated against competitive advantage and organizational performance. The study in conducting its analysis, a sample size of eighty-six was employed and data was analyzed using Microsoft excel (2010) to code and screen and SMARTPLS3 software for further statistical analysis. The SMARTPLS 3 showed us the casual relationship existing among the different variables. This paper concluded that there exists an indirect relationship between BPO activities and organizational performance. This study recommended that BPO activities should be stepped up by organizations because rather than impacting indirectly on organizational performance, a direct impact will be more significant to the performance of the organization.

Organizational Readiness for Business Process Outsourcing: A Model of Determinants and Impact on Outsourcing Success

Proceedings of the 41st Annual Hawaii International Conference on System Sciences (HICSS 2008), 2008

In innovation adoption literature, the important role of the organizational context as a determinant of information systems (IS) success has long been pointed out. Various factors such as top management support, process formalization, and availability of resources have been shown to contribute to the successful implementation of new information systems. By drawing on relevant insights from IT innovations literature, our conceptual piece of research aims at identifying organizational context factors which are critical for the success of business process outsourcing (BPO) as part of a firm's overall Business Process Management activities. More specifically, process readiness, IT readiness and business management readiness are proposed to be important dimensions of organizational readiness for BPO. Furthermore, IT business alignment, as a routine-based process of knowledge sharing and creation, is proposed to be a driver of organizational readiness for BPO.

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

Information Systems Frontiers, 2008

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 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 five years of data on 54 business units(BUs) in 27 global companies located in seven countries. Study 1 examined the linkagesof these 54 BUs to firm performance. In study 2, managers in these firms reported on 378 different outsourcing decisions each of 7 core and 7 noncore IT activities. Findings show that firms with strategic investments in IT tend to locate control of their IT resources inside the firm. 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. Strategic control proves to be a good explanation for how the most effective managers outsource IT. Firms with a more strategic view of IT outsourced fewer core assets. The selective outsourcing approach also has a complex statistical relationship with business unit performance, i.e., firms with selectively outsourcing IT having higher revenues per employee and faster completion times for new IT products. For these reasons, it is critical that a clear firm-wide process for management decision making on IT sourcing is in place to capture business value.

Strategic IT-outsourcing: What Do We Know and Need to Know?

2003

This paper presents a review of existing theoretical perspectives and empirical work on strategic IT outsourcing. By presenting the main findings of various recent studies and elaborating on current research gaps it conveys a picture of the past research, the present findings and the future applications of IT outsourcing. Prior research has generated theoretical insights and largely qualitative evidence on IT outsourcing. While quantitative studies remain sparse, limited to decisionmaking and performance, there is a lack of quantitative empirical research examining outsourcing processes more comprehensively. This paper outlines a simple, yet integrative process model and develops propositions, which serve to integrate and compare theoretical strands, to evaluate existing empirical research and to stimulate new avenues of empirical research.

Antecedents and Performance Outcomes of Onshore and Offshore Business Process Outsourcing

2006

Firms are increasingly utilizing onshore and offshore business process outsourcing (BPO) to manage their operations and achieve their strategic objectives. However, there is a lack of understanding of when firms are likely to use BPO, and when firms are likely to see business value from BPO. Building on previous research in transaction cost economics, business process management, strategy and international business, this paper proposes a theoretical framework for adoption and benefits of onshore and offshore BPO, and tests the framework using data on U.S. firms. Our analysis indicates that firms with broader IT application deployment and stronger business process codification are more likely to engage in onshore and offshore BPO. We also find that firms with broader IT application deployment are more likely to experience both cost and quality benefits from BPO.

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. #