Companies outsource IT either to obtain resources they lack or to obtain IT resources more effectively and efficiently. Vendors are not limited to only providing common solutions. Innovative use of IT resources is critical to the success of organizations, and innovativeness also contributes to competitiveness. However, in outsourcing, more emphasis on cost savings, the need to focus on core competencies and the need to focus on strategic activities overshadows the need for innovativeness. The prescriptions of treating IT outsourcing as a strategic decision (Quinn 1999), outsourcing nonstrategic IT while focusing on internal strategic activities and outsourcing IT for cost savings are sound advice. Vendor innovativeness must complement client activities that are directed towards these more obvious objectives. Although IT outsourcing is often regarded as outsourcing of a nonstrategic resource for cost savings, both vendors and clients gain from vendors' innovations (Quinn 1999, 2000). There are risks such as opportunism involved and it is necessary to have proper contracts and relationship management for obtaining benefits. Despite rapid changes in technologies, focus in academic IT research has been more on cost savings and nonstrategic outsourcing (Dibbern, Goles, Hirschheim, & Jayatilaka 2004). This paper attempts to make a contribution by exploring the organizational and IT factors enabling innovation in outsourced IT.
IT research on innovativeness in outsourcing is scanty. During the early days of IT outsourcing, researchers treated it as an administrative or an organizational innovation where companies rearranged the organizational arrangements for producing IT in a profitable manner (Loh & Venkatraman 1992; Hu, Saunders, & Gebelt 1997). Most of the focus had been on viewing IT outsourcing as a market transaction, which matched the early types of IT outsourcing. IT outsourcing has evolved from facilities management to obtaining IT services (e.g., systems development, data centers) and IT supported services (e.g., Business Process Outsourcing (BPO ) ). Vendor—customer relationships evolved from managing contracts (Currie & Seltsikas 2001) to more involved relationships where both the vendors and the customers participate in the outsourced activities (Kaiser & Hawk 2004), sometimes referred to as ‘co sourcing’. These changes allowed for the discovery of the need for more involvement of the vendors in providing customer specific solutions.
Keywords
- Business Process
- Transformational Leadership
- Organizational Innovation
- Transaction Cost Economic
- Asset Specificity
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Amabile, T. M., Conti, R., Coon, H., Lazenby, J., & Herron, M. (1996). Assessing the work environment for creativity. Academy of Management Journal, 39(5), 1154–1184.
Anderson, P., & Tushman, M. L. (1991). Managing through cycles of technological change. In M. L Tushman & P. Andersen (eds.), Managing strategic innovation and change. New York: Oxford University Press.
Ang, S., & Straub, D. W. (1998). Production and transaction economies and IS outsourcing: A study of the U.S. banking industry. MIS Quarterly, 22(4), 535–552.
Apte, U. M., Sobol, M. G., Hanaoka, S., Shimada, T., Saarinen, T., Salmela, T. & Vepsalainen, A. P. J. (1997). IS outsourcing practices in the USA, Japan and Finland: A comparative study. Journal of Information Technology, 12, 289–304.
Argyris, C., & Schon, D. (1977). Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley.
Aubert, B. A., Dussault, S., Patry, M., &Rivard, S. (1999). Managing the risk of IT outsourcing. Paper presented at Proceedings of the 32nd Annual Hawaii International Conference on System Sciences, Hawaii.
Cheon, M. J., Grover, V., & Teng, J. T. C. (1995). Theoretical Perspectives on the Outsourcing of Information Systems. Journal of Information Technology, 10, 209–210.
Cooper, R., & Jayatilaka, B. (2006) “Group creativity: The effects of extrinsic, intrinsic, and obligation motivations.” Creativity Research Journal, 18(2), 153–173.
Cooper, R. B., & Zmud, R. W. (1990). Information technology research: A technological diffusion approach. Management Science, 36(2), 123–139.
Currie, W. L., & Seltsikas, P. (2001). Exploring the supply-side of IT outsourcing: evaluating the emerging role of application service providers. European Journal of Information Systems, 10, 123–134.
Daft, R.L. (1978). A dual-core model of organizational innovation. Academy of Management Journal, 21, 193–210.
Dibbern, J., Goles, T., Hirschheim, R., & Jayatilaka, B. (2004). Information systems outsourcing: a survey and analysis of the literature. Database for Advances in Information Systems, 35(4), 6–102.
DiRomualdo, A., & Gurbaxani, V. (1998). Strategic intent for IT outsourcing. Sloan Management Review, Summer, 67–80.
Dougherty, D., & Hardy C. (1996). Sustained product innovation in large, mature organizations: Overcoming innovation-to-organization problems. Academy of Management Journal, 39(5), 1120–1153.
Feeny, D., Lacity, M., & Willcoks, L. (2005) Taking the measure of outsourcing providers, Sloan Management Review, 46(3), 41–48.
Globerman, S. (1980). Markets, hierarchies and innovation. Journal of Economic Issues 14(4), 977–998.
Grover, V., Cheon, M. J., & Teng, J. T. C. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12(4), 89–116.
Hancox, M., & Hackney. R. (1999). Information technology outsourcing: conceptualizing practice in the public and private sector. Paper presented in 32nd Annual Hawaii International Conference on System Sciences, Hawaii.
Hirschheim, R. A., & Lacity, M. C. (2000). The myths and realities of information technology insourcing. Communications of the ACM, 43(2), 99–107.
Hu, Q., Saunders, C., & Gebelt, M. (1997). Research report: Diffusion of information systems outsourcing: a reevaluation of influence sources. Information Systems Research, 8(3), 288–301.
Kaiser, K. M., & Hawk, S. (2004). Evolution of offshore software development: from outsourcing to cosourcing. MISQ Executive, 3(2), 69–81.
Kimberly, J.R., & Evanisko, M.J. (1981). Organizational innovation: The influence of individual organizational and contextual factors on hospital adoption of technological and administrative innovation. Academy of Management Journal, 24, 689–713.
Lacity, M. C., & Hirschheim, R. A. (1993). Information systems outsourcing: myths, metaphors, and realities. Chichester, New York: Wiley.
Levina, N., & Ross, J. W. (2003). From the vendor's perspective: exploring the value proposition in information technology outsourcing. MIS Quarterly, 27(3), 331–364.
Loh, L., & Venkatraman, N. (1992). Diffusion of information technology outsourcing: influence sources and the kodak effect. Information Systems Research, 3(4), 334–358.
Lyytinen, K., & Rose, G. M. (2003). The disruptive nature of information technology innovations: the case of internet computing in systems development organizations. MIS Quarterly, 27(4), 557–595.
Mahnke, V., & Ozcan, S. (2006). Outsourcing innovation and relational governance. Industry and Innovation, 13(2), 121–125.
McLellan, K. L., Marcolin, B. L., & Beamish, P. W. (1995). Financial and strategic motivations behind IS outsourcing. Journal of Information Technology, 10, 299–321.
Miller, D., Kets De Vries, M.F.R., & Toulouse, T. (1982). Top executive locus of control and its relationship to strategy-making, structure, and environment. Academy of Management of Journal, 25(2), 237–253.
Monteverde, K., & Teece, D. J. (1982). Appropriable rents and quasi-vertical integration. The Journal of Law and Economics, 25, 321–328.
Murmann, J. P., & Tushman, M. L. (2001) From the technology cycle to the entrepreneurship dynamic: The social context of entrepreneurial innovation. In C.B. Schoonhoven & E. Romanelli (eds.), The entrepreneurship dynamic Origins of entrepreneurship and the evolution of industries 178–203. Stanford, CA: Stanford University Press
Nadler, D. A., & Tushman, M. L. (1997). A Congruence model for organization problem solving. In M.L Tushman & P. Andersen (eds.), Managing strategic innovation and change. New York: Oxford University Press.
Nohria, N., & Gulati, R. (1996). Is slack good or bad for innovation? Academy of Management Journal, 39(5), 1245–1264.
O'Reilly III, C. A., Tushman, M. L. (1997). Using culture for strategic advantage: promoting innovation through social control. In M. L Tushman & P. Andersen (eds.), Managing Strategic Innovation and Change. New York: Oxford University Press.
Poppo, L. & Zenger, T. (1998) Testing alternative theories of the firm: Transaction cost, knowledge-based, and measurement explanations for make-or-buy decisions in information services, Strategic Management Journal, 19(9), 853–877.
Prahalad, C. K., & Krishnan, M. S. (2004). The building blocks of global competitiveness. Optimize, 3(9), 30–40.
Quinn, J. B. (1999). Strategic outsourcing: leveraging knowledge capabilities. Sloan Management Review, Summer, 9–21.
Quinn, J. B. (2000). Outsourcing innovation: The new engine of growth. Sloan Management Review, Summer, 13–28.
Quinn, J., & Hilmer, F. (1994) Startegic outsourcing. Sloan Management Review, 35(4), 43–55.
Rogers, E. M. (1983). Diffusion of innovation. New York: Free Press.
Schon, D. (1971) Beyond the stable state, New York: Norton.
Sitkin, S. B., & Pablo, A. L. (1992). Re-conceptualizing the determinants of risk behavior. Academy of Management Review, 17(1), 9–38.
Slaughter, S. A., & Ang, S. (1996). Employment outsourcing in information systems, Communications of the ACM, 39(7), 47–54.
Smith, M. A., Mitra, S. A., & Narasimhan, S. (1998). Information systems outsourcing: A study of pre-event firm characteristics. Journal of Management Information Systems, 15(2), 61–93.
Sobol, M. G., & Apte, U. M. (1995). Domestic and global outsourcing practices of America's most effective IS users. Journal of Information Technology, 10, 269–280.
Tapon, F. (1989). A transaction costs analysis of innovations in the organization of pharmaceutical R&D. Journal of Economic Behavior and Organization, 12, 197–213.
Van de Ven, A. H. (1986). Central problems in the management of innovation. Management Science, 32(5), 590–607.
Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, London: Free Press, Collier Macmillan.
Zaltman, G., Duncan, R. & Holbek, J. (1973). Innovations and organizations. Wiley: New York.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2009 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Jayatilaka, B. (2009). Reaching Across Organizational Boundaries for New Ideas: Innovation from IT Outsourcing Vendors. In: Hirschheim, R., Heinzl, A., Dibbern, J. (eds) Information Systems Outsourcing. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-88851-2_12
Download citation
DOI: https://doi.org/10.1007/978-3-540-88851-2_12
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-88850-5
Online ISBN: 978-3-540-88851-2
eBook Packages: Business and EconomicsBusiness and Management (R0)