Department of Information Systems, Business Statistics and Operations Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong.
Questions pertaining to the locus of information systems (IS) governance have been extensively examined in existing research. However, questions pertaining to the decision rationale applied for IS portfolio prioritization (why are certain initiatives approved, and why are certain others rejected), noted to be a critical component of IS governance, need further investigation. We submit that the IS strategy of a firm is likely to explain the decision rationale it applies to IS portfolio prioritization and maintain that it is critical to ensure this decision rationale is in congruence with the firm's IS strategy. By extending prior theoretical work on IS strategy types, we develop theoretical profiles of the decision rationale applied to IS portfolio prioritization using three attributes: communicability of decision rationale, consistency in applying decision rationale, and risk appropriateness of decision rationale. Since the decision rationale applied for IS portfolio prioritization is often tacit, unknown even to the decision makers themselves, we employ the decision tree induction methodology to discover this tacit decision rationale. We analyze over 150 IS portfolio prioritization decisions on a multimillion dollar IS portfolio of a multibusiness, Fortune 50 firm and our findings, which support our propositions, indicate that firms that adopt different IS strategies rely on systematically different profiles of decision rationale for IS portfolio prioritization. Implications for IS governance practices are developed.
The complexity and scope of outsourced information technology (IT) demands relationship-specific investments from vendors, which, when combined with contract incompleteness, may result in underinvestment and inefficient bargaining, referred to as the holdup problem. Using a unique data set of over 100 IT outsourcing contracts, we examine whether contract extensiveness, i.e., the extent to which firms and vendors can foresee contingencies when designing contracts for outsourced IT services, can alleviate holdup. While extensively detailed contracts are likely to include a greater breadth of activities outsourced to a vendor, task complexity makes it difficult to draft extensive contracts. Furthermore, extensive contracts may still be incomplete with respect to enforcement. We then examine the role of nonprice contractual provisions, contract duration, and extendibility terms, which give firms an option to extend the contract to limit the likelihood of holdup. We also validate the ex post efficiency of contract design choices by examining renewals of contracting agreements.