RESEARCHERS: Vijay Gurbaxani, David Fitoussi


The outsourcing of IT activities and services has become the dominant sourcing strategy in the past two decades. More recently, the domain of outsourced activities has been extended to IT-enabled business processes and services. While external sourcing of IT-enabled services promises business impact and opportunity, it also presents significant new management and organization challenges.

The focus is to develop insights into best practices for sourcing governance in the context of IT and business process outsourcing. Studies in this domain have examined the economic impact of IT outsourcing arrangements measured both in terms of the productivity of client firms and as captured in stock market returns. The results show that IT outsourcing results in higher productivity for firms that outsource, and a small but measurable, impact on their stock price. Studies have also focused on the design and implementation of governance arrangements, focusing in particular, on the role of contract in these arrangements. One study analyzed how contracts address the multi-task nature of outsourcing arrangements wherein vendors must allocate effort to various outsourced tasks that compete for their time but the outcomes of some tasks are not easily measurable. The results demonstrate how clients introduce multiple imperfect measures for less measurable tasks as a means of balancing the incentives to vendors provided by clear metrics for measurable outcomes. Another study examines how contracts account for the additional risks associated with transferring critical IT assets to the vendor. The results show that additional clauses are introduced to account for the specific risks associated with asset transfer that protect both the client and the vendor. Results from this research were published in an edited book, Management in the Information Economy, and are under publication consideration at several premier journals.