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A quantitative analysis of culture-induced differences in pivotal IT outsourcing contract features
(2019)
More than 30 years after its first implementation, IT outsourcing (ITO) is unanimously considered a critical component of corporate strategy for private and public institutions alike. While implementations of ITO around the world share some common characteristics like typical reasons for outsourcing, key success factors, or dimensions along which they can be classified, extant research also points to regional differences. However, research on this topic, specifically regarding pivotal contract features like contract value, contract length, or pricing methods, is still in its infancy, and quantitative analyses on the subject are particularly scarce. We address this research gap by analyzing data on 14,917 ITO contracts closed between 2007 and 2017 through the lens of cultural regions and three statistical methods. The contribution of our paper is threefold. First, our descriptive analysis points to globally decreasing contract lengths and contract values, confirming previous studies and practice reports. Second, an ANOVA with independent post-hoc testing provides quantitative supportfor the degree of dissimilarity among individual regions in pivotal ITO contract features. Finally, our quantitative replication of a previous study identifies culture-induced regional differences between USA and Japan regarding the effect of influence factors on ITO contract features.
Incomplete conceptualization of the information technology outsourcing (ITO) literature represents a challenge for navigating extant research and engaging into purposeful academic discourse. We extend the analysis of empirical findings on determinants of ITO decisions, outcomes, and governance. We identify increasing levels of research maturity, analyze effects of 38 new independent variables, highlight contradictory findings, and observe increasing interest in emerging topics such as innovation through ITO and multisourcing.
Information technology outsourcing (ITO) has long been recognized for its numerous potential advantages such as lowering costs, accessing external skills, and improving efficiency, flexibility, and quality. However, it also exposes client companies to various risks, including vendor lock-in, poor agility, or insufficient vendor expertisein individual domains, especially inincreasingly dynamic market environments. Consequently, companies increasingly implement multisourcing by composing a “best of breed” set of vendors for their various IT services. In this paper,we use a dataset of 1,016 ITO deals closed with Austrian, Swiss, and German client companies between 2006 and 2017 to analyze the development of the ITO market in general and multisourcing in particular. Our results show decreasing services run rates, shorter contract lengths, an increasing number of concurrent service providers per client,and a distribution of the total number of contracts to a larger set of vendors, all pointing towards an increasing popularity of multisourcing.
PURPOSE
IT outsourcing (ITO) has developed into an established practice for organizations but the interorganizational and oftentimes international collaboration it involves comes at a price: Reports from academia and practice suggest that more than 25% of all ITO projects fail, many because of cultural differences between client and provider organizations. Against this background, this paper analyzes the complex nature of cultural distance and its multi-faceted effect on ITO success.
DESIGN/METHODOLOGY/APPROACH
This paper builds upon extant literature on culture on the national, organizational and team level, conceptualizes its effect on relationship quality and ITO success, and hypothesizes a model on potential moderators and management techniques to offset culture-induced challenges. It then evaluates and refines the model by means of an interpretive qualitative research design for an in-depth single-case study of ProSiebenSat.1 Media SE (P7S1), a leading European media company that reconfigured its IT sourcing model three times in 10 years.
FINDINGS
The results from interviews with top managers from client and provider organizations represent one of the first integrated views on the critical importance of cultural compatibility on multiple levels, provide manifold examples for its complex effect on ITO success, as well as moderators and potential management techniques to promote ITO success.
RESEARCH LIMITATIONS/IMPLICATIONS
This paper contributes relevant empirical insights to the growing body of literature on culture and its underestimated role in ITO success. It builds on tentative theory that is confirmed and refined.
PRACTICAL IMPLICATIONS
The paper helps in substantiating the complex and intangible nature of culture and demonstrates means for its effective management.
ORIGINALITY/VALUE
The results from interviews with top managers from client and provider organizations represent one of the first integrated views on the critical importance of cultural compatibility on multiple levels, provide manifold examples for its complex effect on ITO success, as well as moderators and potential management techniques to promote ITO success.