INFORMATION TECHNOLOGY OUTSOURCING AND NON-IT OPERATING COSTS: AN EMPIRICAL INVESTIGATION.

Author List: Han, Kunsoo; Mithas, Sunil;
MIS Quarterly, 2013, Volume 37, Issue 1, Page 315-331.
Does information technology outsourcing reduce non-IT operating costs? This study examines this question and also asks whether internal IT investments moderate the relationship between IT outsourcing and non-IT operating costs. Using a panel data set of approximately 300 U.S. firms from 1999 to 2003, we find that IT outsourcing has a significant negative association with firms' non-IT operating costs. However, this finding does not imply that firms should completely outsource their entire IT function. Our results suggest that firms benefit more in terms of reduction in non-IT operating costs when they also have higher levels of complementary investments in internal IT, especially IT labor. Investments in internal IT systems can make business processes more amenable to outsourcing, and complementary investments in internal IT staff can facilitate monitoring of vendor performance and coordination with vendors. We discuss the implications of these findings for further research and for practice.
Keywords: business value of IT; information technology; IT expenditures; IT governance; IT human capital; IT impacts; IT labor; IT services; non-IT operating costs
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#271 0.373 technology investments investment information firm firms profitability value performance impact data higher evidence diversification industry payoff return findings decisions greater
#274 0.114 outsourcing transaction cost partnership information economics relationships outsource large-scale contracts specificity perspective decisions long-term develop requirements economic association factors hypotheses
#197 0.111 agility capital substitution non-it enablers significant inhibitors link dynamism does agile labor executives enabling dual adaptive contrast substitute practices literature
#58 0.084 internal external audit auditing results sources closure auditors study control bridging appears integrity manager effectiveness auditor controls facilitating boundaries potential
#151 0.075 costs cost switching reduce transaction increase benefits time economic production transactions savings reduction impact services reduced affect expected optimal associated
#182 0.064 percent sales average economic growth increasing total using number million percentage evidence analyze approximately does business flow annual book daily
#47 0.053 outsourcing vendor client sourcing vendors clients relationship firms production mechanisms duration mode outsourced vendor's effort activities in-house managing technology domestic