Abstract
This paper takes stock from several studies on Information Technology outsourcing risk. A definition of risk is offered, and an illustration from five case studies is used to show how risk can be managed. Results show that an active risk management approach can reduce risk exposure substantially while enabling the organizations to still reap the benefits associated with outsourcing.
- Alchian, A. A. and Demsetz, H. (1972). "Production, Information Cost, and Economic Organization," American Economic Review, Vol.62, No. 5, pp. 777--795.]]Google Scholar
- Anderson, J. and Narasimhan, R. (1979). "Assessing Implementation Risk: A Methodological Approach," Management Science, Vol.25, No.6, pp. 512--521.]]Google ScholarDigital Library
- Arrow, K. (1983). "Behaviour Under Uncertainty and Its Implications for Policy," in Stigurn, B., and Wenslop, F. (Eds.), Foundations of Utility and Risk Theory with Applications, Dordrecht, Holland: Reidel Publishing Company, pp. 19--34.]]Google Scholar
- Aubert, B. A., Dussault, S., Patry, M., and Rivard, S. (1999a). "Managing the Risk of IT Outsourcing," Proceedings of the Thirty-Second Hawaii International Conference on System Sciences, Hawaii, 10 pages (CDROM).]] Google ScholarDigital Library
- Aubert, B. A., Patry, M., and Rivard, S. (1997). "The Outsourcing of IT: Autonomous Versus Systemic Activities", 28th Annual Meeting of the Decision Sciences Institute, San Diego, CA, pp. 809--812.]]Google Scholar
- Aubert, B. A., Patry, M., and, Rivard, S. (1999b). "Impartition des Services Informatiques au Canada : Une Comparaison 1993--1997," in Poitevin, M. (Ed.), Impartition Fondements et Analyse, Québec, Presses de l'Université Laval, pp. 203--220.]]Google Scholar
- Aubert, B. A., Patry, M., Rivard, S., and Smith, H. (2001). "IT Outsourcing Risk Management at British Petroleum," Proceedings of the Thirty-fourth Hawaii International Conference on Systems Sciences, Hawaii, 10 pages (CDROM).]] Google ScholarDigital Library
- Aubert, B. A., Patry, M., and Rivard, S. (2003) "A Tale of Two Outsourcing Contracts - An Agency Theoretical Perspective," Wirtschaftsinformatik, Vol.45, No.2, pp.181--190.]]Google ScholarCross Ref
- Aubert, B. A., Rivard, S., and Patry, M. (1996). "A Transaction Cost Approach to Outsourcing Behavior: Some Empirical Evidence," Information and Management, Vol.30, pp. 51--64.]] Google ScholarDigital Library
- Aubert, B. A., Rivard, S., and Patry, M. (1996b). "Development of Measures to Assess Dimensions of IS Operation Transactions," Omega, International Journal of Management Science, Vol.24, No.6, pp. 661--680.]]Google ScholarCross Ref
- Barki, H., Rivard, S., and Talbot, J. (1993). "Toward an Assessment of Software Development Risk," Journal of Management Information Systems, Vol.10, No.2, pp. 203--225.]] Google ScholarDigital Library
- Barzel, Y. (1982). "Measurement Cost and the Organization of Markets," Journal of Law and Economics, Vol.25, No.1, pp. 27--48.]]Google ScholarCross Ref
- Boehm, B.W. (1991). "Software Risk Management: principles and practices", IEEE Software, Vol.8, No.1, pp.32--41.]] Google ScholarDigital Library
- Bowers, L. N., Gerber, U. H., Hickman, C. J., Jones, A. D., and Nesbit, J. C. (1986). "Actuarial Mathematics," Itasca The Society of Actuaries.]]Google Scholar
- Cheung, S. (1983). "The Contractual Nature of the Firm," Journal of Law and Economics, Vol.26, No.1, pp. 1--21.]]Google ScholarCross Ref
- Coase, R. (1937). "The Nature of the Firm," Economica, Vol.4, No.16, pp. 396--405.]]Google ScholarCross Ref
- Crocker, K. and Masten, S. (1991). "Pretia ex Machina? Prices and Process in Long-Term Contracts," Journal of Law and Economics, Vol.34, No.1, pp. 69--99.]]Google ScholarCross Ref
- Cross, J. (1995). "IT Outsourcing: British Petroleum's Competitive Approach," Harvard Business Review, No. 3, pp. 95--102.]]Google Scholar
- Dorn, P. (1989). "Selling One's Birthright," Information Week, Vol. 241, pp. 52.]]Google Scholar
- Earl, M. J. (1996). "The Risks of Outsourcing IT," Sloan Management Review, Vol.37, No.3, pp. 26--32.]]Google Scholar
- Eisenhardt, K. (1989). "Agency Theory: An Assessment and Review," Academy of Management Review, Vol.14, No.1, pp. 57--74.]]Google ScholarCross Ref
- Grossman, S. and Hart, O. (1986). "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, Vol.94, pp. 691--719.]]Google ScholarCross Ref
- Holmstrom, B. (1979). "Moral Hazard and Observability," Bell Journal of Economics, Vol.10, No.1, pp. 74--91.]]Google ScholarCross Ref
- Joskow, P. L. (1987). "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, Vol.77, No.1, pp. 168--185.]]Google Scholar
- Kobs, A. (1998). "Sentinel Events -- A Moment in Time, A Lifetime to Forget," Nursing Management, Vol. 29, No.2, pp. 10--13.]]Google Scholar
- Lacity, M. C. and Hirschheim, R. (1993). Information Systems Outsourcing, New York: John Wiley & Sons.]] Google ScholarDigital Library
- Lacity, M., and Hirschheim, R. (1995), Beyond the Information Systems Bandwagon: The Insourcing Response, Chichester, Wiley.]] Google ScholarDigital Library
- Lacity, M. C., Willcocks, L. P., and Feeny, D. F. (1995). "IT Outsourcing: Maximize Flexibility and Control," Harvard Business Review, Vol. 73, No.3, pp. 84--93.]]Google Scholar
- Langlois, R. N. and Robertson, P. L. (1992). "Networks and Innovation in a Modular System: Lessons from the Microcomputer and Stereo Component Industries," Research Policy, Vol.21, pp. 297--313.]]Google ScholarCross Ref
- Lee, J. N. and Kim, Y. G. (1999). "Effect of Partnership Quality on IS Outsourcing: Conceptual Framework and Empirical Validation," Journal of Management Information Systems, Vol.15, No.4, pp. 29--61.]] Google ScholarDigital Library
- Levin, M. and Schneider, M. (1997). "Making the Distinction: Risk Management, Risk Exposure," Risk Management, Vol. 44, No. 8, pp. 36--42.]]Google Scholar
- Levine, E. (2000). "Defining Risks," CA Magazine, Vol. 133, No. 3, pp. 45--46.]]Google Scholar
- Linerooth-Bayer, J. and Wahlstrom, B. (1991). "Applications of Probabilistic Risk Assessments: the Selection of Appropriate Tools," Risk Analysis, Vol. 11, No.2, pp. 239--248.]]Google ScholarCross Ref
- Mahoney, D. (1988). Confessions of a Street-Smart Manager, New York: Simon & Shuster.]]Google Scholar
- March, J. and Shapira, Z. (1987). "Managerial Perspectives on Risk and Risk-Taking," Management Science, Vol.33, No.11, pp. 1404--1418.]]Google ScholarCross Ref
- Nam, K., Rajagopalan, S., Rao, H. R., and Chaudhury, A. (1996). "A Two-Level Investigation of Information Systems Outsourcing," Communications of the ACM, Vol.39, No.7, pp. 37--44.]] Google ScholarDigital Library
- Nelson, P., Richmond, W., and Seidman, A. (1996). "Two Dimensions of Software Acquisition," Communications of the ACM, Vol.39, No.7, pp. 29--35.]] Google ScholarDigital Library
- Nilakant, V. and Rao, H. (1994). "Agency Theory and Uncertainty in Organizations: An Evaluation," Organization Studies, Vol.15, No.5, pp. 649--672.]]Google ScholarCross Ref
- O'Leary, M. (1990). "The Mainframe Doesn't Work Here Anymore," CIO, Vol.6, No.6, pp. 77--79.]]Google Scholar
- Perry, M. K. (1989). "Vertical Integration: Determinants and Effects," in Shmalensee, R., and Willig, R. (Eds.) Handbook of Industrial Organization, Amsterdam: North-Holland, pp. 183--255.]]Google Scholar
- Prahalad, C. V. and Hamel, G. (1990). "The Core Competence of the Corporation," Harvard Business Review, Vol. 68, No. 3, pp. 79--91.]]Google Scholar
- Roy, V. and Aubert, B. A. (2000). "A Resource Based View of the Information Systems Sourcing Mode," Proceedings of the 33rd Hawaii International Conference on Systems Sciences, Maui, Hawaii, 10 pages (CD ROM).]] Google ScholarDigital Library
- Sappington, D. (1991). "Incentives in Principal-agent Relationships," Journal of Economic Perspectives, Vol.5, No.2, pp. 45--68.]]Google ScholarCross Ref
- Schirripa, F. and Tecotzky, N. (2000). "An Optimal Frontier," The Journal of Portfolio Management, Vol. 26, No. 4, pp. 29--40.]]Google ScholarCross Ref
- Simon, H. A. (1991). "Organizations and Markets," Journal of Economic Perspectives, Vol.5, No.2, pp. 25--44.]]Google ScholarCross Ref
- Teece, D. J. (1986). "Firm Boundaries, Technological Innovation and Strategic Management," in Thomas, L. (Ed.), The Economics of Strategic Planning, Lexington, M A: Lexington Books, pp. 187--199.]]Google Scholar
- Teece, D. J., Rumelt, R., Dosi, G., and Winter, S. (1994). "Understanding Corporate Coherence, Theory and Evidence," Journal of Economic Behavior and Organization, Vol.23, pp. 1--30.]]Google ScholarCross Ref
- Williamson, O. E. (1985). The Economic Institutions of Capitalism, New York: The Free Press.]]Google Scholar
- Williamson, O. E. (1989). "Transaction Costs Economics," in Shmalensee, R., and Willig, R. (Eds.), Handbook of Industrial Organization, Amsterdam: North-Holland, pp. 136--178.]]Google Scholar
Index Terms
- A framework for information technology outsourcing risk management
Recommendations
A logistic regression framework for information technology outsourcing lifecycle management
We present a methodology for managing outsourcing projects from the vendor's perspective, designed to maximize the value to both the vendor and its clients. The methodology is applicable across the outsourcing lifecycle, providing the capability to ...
Conceptual framework on risk management in IT outsourcing projects
Outsourcing is becoming a trend nowadays. Malaysia also takes this opportunity and embraces in IT outsourcing. As a result, Malaysia has been ranked as the third most attractive destination for outsourcing after India and China. Despite increasing ...
Comments