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Strategic Dependence on the IT Resource and Outsourcing: A Test of the Strategic Control Model

In: Information Systems Outsourcing

Author

Listed:
  • Detmar Straub

    (Georgia State University)

  • Peter Weill

    (MIT, Sloan School of Management)

  • Kathy S. Schwaig

    (Kennesaw State University)

Abstract

When managers outsource all or part of IT, the motivation is to create business value for the firm. One means of creating business value is by achieving dramatic cost savings through outsourcing; another is through decisions that lead to strategic control of IT resources. In the former, IT outsourcing returns profits to the firm by taking advantage of economies in the marketplace. Theoretically, IT vendors/ outsourcers drive down the costs of production and technical expertise by spreading these expenses over a large client base; accordingly, their customers are able to benefit indirectly from these economies of scale through attractive pricing of IT products and services by vendors (Dibbern, Goles, Hirschheim, & Jayatilaka 2004). Strategic control is the second avenue for value creation. Managers who identify IT resources that are critical to their firm's operations and to its strategic direction are theoretically better able to manage those resources if the firm maintains control over them. By divesting themselves of activities that are not strategic, they can capitalize on superior design, marketing, production, inbound logistics, or distribution capabilities. Thus, organizations that outsource IT activities that are not strategic can concentrate energies on distinctive resources that are directly related to value creation for the firm. The notion of strategic control of the IT resource has strong theoretical underpinnings in resource dependency theory (Pfeffer & Salancik 2003). Strategic control is the second avenue for value creation. Managers who identify IT resources that are critical to their firm's operations and to its strategic direction are theoretically better able to manage those resources if the firm maintains control over them. By divesting themselves of activities that are not strategic, they can capitalize on superior design, marketing, production, inbound logistics, or distribution capabilities. Thus, organizations that outsource IT activities that are not strategic can concentrate energies on distinctive resources that are directly related to value creation for the firm. The notion of strategic control of the IT resource has strong theoretical underpinnings in resource dependency theory (Pfeffer & Salancik 2003).

Suggested Citation

  • Detmar Straub & Peter Weill & Kathy S. Schwaig, 2009. "Strategic Dependence on the IT Resource and Outsourcing: A Test of the Strategic Control Model," Springer Books, in: Rudy Hirschheim & Armin Heinzl & Jens Dibbern (ed.), Information Systems Outsourcing, pages 175-199, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-88851-2_8
    DOI: 10.1007/978-3-540-88851-2_8
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    Cited by:

    1. Yang, Qian & Zhao, Xiande & Yeung, Hoi Yan Jeff & Liu, Yanping, 2016. "Improving logistics outsourcing performance through transactional and relational mechanisms under transaction uncertainties: Evidence from China," International Journal of Production Economics, Elsevier, vol. 175(C), pages 12-23.

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