Assessing the Risk of IT Outsourcing
AbstractOutsourcing decisions, and contractual arrangements of the type required by an IT outsourcing deal, entail risks. This is not to say that outsourcing is bad in itself. It only means that, as in other risky business ventures such as new product development, capital investments, and IS projects, risk assessment and risk management are important contributors to the success of an IT outsourcing venture. This paper focuses on risk assessment. After providing a brief conceptual definition of risk, the paper reviews the empirical literature in order to identify the0501n undesirable outcomes that may result from an IT outsourcing deal. It then uses transaction cost and agency theory as a primary theoretical basis, and proposes a framework for categorizing risk factors which have been identified in the literature. Finally, the paper discusses the dynamics of risk, by examining how the various risk factors are linked to the undesirable outcomes Ce texte porte sur l'évaluation du risque d'impartition des services informatiques. Le risque est défini ici comme étant fonction d'événements indésirables pouvant résulter d'une décision d'impartir, et des facteurs pouvant mener à ces événements indésirables. La théorie des coûts de transaction et la théorie de l'agence servent de base théorique à l'identification des principaux facteurs de risque. Les événements indésirables sont identifiés à partir d'une recension des écrits sur l'impartition des services informatiques.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CIRANO in its series CIRANO Working Papers with number 98s-16.
Date of creation: 01 May 1998
Date of revision:
Contact details of provider:
Postal: 2020 rue University, 25e étage, Montréal, Quéc, H3A 2A5
Phone: (514) 985-4000
Fax: (514) 985-4039
Web page: http://www.cirano.qc.ca/
More information through EDIRC
Outsourcing of IS; agency theory; transaction cost economics; Sous-traitance des systèmes informatiques; théorie de l'agence; économie des coûts de transaction;
Find related papers by JEL classification:
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oliver Hart & Sanford Grossman, 1985.
"The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
- Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
- Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- David E. M. Sappington, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring.
- Fine, Charles H. & Whitney, Daniel E., 1996. "Is the make-buy decision process a core competence?," Working papers #140-96. Working paper (S, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
- Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Armen A. Alchian & Harold Demsetz, 1971.
"Production, Information Costs and Economic Organizations,"
UCLA Economics Working Papers
10A, UCLA Department of Economics.
- Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
- Langlois, Richard N. & Robertson, Paul L., 1992. "Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries," Research Policy, Elsevier, vol. 21(4), pages 297-313, August.
- Julia Trampel, 2004. "To Offshore or Nearshore IT services? An investigation using transaction cost theory," Industrial Organization 0406001, EconWPA.
- Benoit A. Aubert & Michel Patry & Suzanne Rivard & Heather Smith, 2000. "IT Outsourcing Risk Management at British Petroleum," CIRANO Working Papers 2000s-31, CIRANO.
- Benoit A. Aubert & Vital Roy, 1999. "A Resource Based View of the Information Systems Sourcing Mode," CIRANO Working Papers 99s-34, CIRANO.
- Benoit A. Aubert & Vital Roy, 2000. "A Resource-Based Analysis of IT Oursourcing," CIRANO Working Papers 2000s-30, CIRANO.
- Benoit A. Aubert & Sylvie Dussault & Michel Patry & Suzanne Rivard, 1998. "Managing the Risk of IT Outsourcing," CIRANO Working Papers 98s-18, CIRANO.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster).
If references are entirely missing, you can add them using this form.