Research Highlights
IT Outsourcing: The growth opportunity. The business risk. And the contract that best regulates it all.
by Aurora Abt
Sometimes it is best to leave technical matters to an expert. Such is the logic behind information technology outsourcing. ITO (as it is called) is the act of farming out information systems services to H[WHUQDO VHUYLFH SURYLGHUV ,W HIIHFWLYHO\ UHGXFHV D ÀUP·V RYHUKHDG DQG VWUHQJWKHQV LWV WHFKQRORJLFDO capabilities. Moreover, ITO frees management to focus more attention on marketing, sales strategies, DQG QHZ SURGXFW GHYHORSPHQW ² DUHDV WKDW EHQHÀW IURP HQKDQFHG GLJLWDO FDSDELOLWLHV DQG IHHG FRUSRUDWH UHYHQXH 7KH DUUDQJHPHQW DSSHDUV HQWLFLQJ 0DQ\ ÀUPV DUH ELWLQJ DV ,72 UHYHQXH UHDFKHG DQ HVWLPDWHG ELOOLRQ ZLWK D SHUFHQW DQQXDO JURZWK <HW ,72 LV QRW DV VLPSOH DV ÁLSSLQJ D VZLWFK ,W LV DQ XQGHUWDNLQJ WKDW UHTXLUHV SUHFLVH SODQQLQJ DQG FRPHV ZLWK VLJQLÀFDQW ULVNV The pairing of a company with a vendor LV PXFK OLNH D PDUULDJH 7KH EHQHÀWV RI WKH SDUWQHUVKLS PD\ EH REYLRXV DW ÀUVW ZLWK HDFK eager to proceed forward. However, without guidelines stated, understood, and agreed upon at the outset, discord is likely just a matter a WLPH 7KLV LV IXUWKHU FRPSOLFDWHG ZKHQ WKH ÀUP·V technology assets are transferred to the vendor. ITO is a risky business, indeed – for all involved. 6R KRZ FDQ ÀUPV DQG VHUYLFH SURYLGHUV PDQDJH ULVN DQG EHQHÀW PXWXDOO\"
6 UCI PAUL MERAGE SCHOOL OF BUSINESS
Fail to plan, plan to fail A new study in MIS Quarterly examined the role of contracts in reducing the most common business risks associated with ITO deals: missed performance targets and constraints on the ability of the business to innovate. In many ITO arrangements, corporate technology assets previously used by in-house technology groups are sold to the vendor. In the study, titled, Information Technology Outsourcing: Asset 7UDQVIHU DQG WKH 5ROH RI &RQWUDFW 3URIHVVRU 9LMD\
