Table Of ContentInformationAge Economy
EditorialBoard
H.U.Buhl
W.Konig
R.M.Lee
H. Mendelson
A. Picot
B.Schmid
R.Wigand
Information Age Economy
F.Rose
The Economics,Concept, and Design
ofInformationIntermediaries
1999,ISBN 3-7908-1168-8
S.Weber
InformationTechnologyinSupplier Network
2001,ISBN 3-7908-1395-8
K.Geihs,W.Konig and F.vonWestarp (Eds.)
Networks
2002,ISBN 3-7908-1449-0
F.vonWestarp
ModelingSoftwareMarkets
2003,ISBN 3-7908-0009-0
D.Kundisch
New Strategiesfor FinancialServices Firms
2003,ISBN 3-7908-0066-X
T.Weitzel
EconomicsofStandards
inInformation Networks
2004,ISBN 3-7908-0076-7
Jens Dibbern
The Sourcing
of Application
Software Services
Empirical Evidence of Cultural,
Industry and Functional Differences
With 21 Figures
and 27 Tables
Springer-Verlag Berlin Heidelberg GmbH
Dr. Jens Dibbem
Universitat Mannheim
Lehrstuhl fur Wirtschaftsinformatik 1
Schloss S 135
68131 Mannheim
Germany
[email protected]
ISBN 978-3-7908-0217-7 ISBN 978-3-7908-2704-0 (eBook)
DOI 10.1007/978-3-7908-2704-0
Zugl. Diss., Univ. Bayreuth, 2003
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To my Parents
Preface
Outsourcing hasbeen oneofthe most controversiallydiscussed topics inthe infor
mation systems(IS)management field within the lastdecade. Whilesome organi
zations havebeenquicktoadoptoutsourcing,others havebeenslowtoconsiderthis
sourcingoption. Still others haveevaluated outsourcingbutadopted insourcing in
stead.Inother words,organizations appear tobehavetotallydifferent inthe sourc
ing oftheir IS tasks. There are no generally accepted practices, e.g., outsourcing
certaintypesofISserviceswhilekeepingothers in-house.Thesourcingdecisionap
pearsto behighly dependentonthe specific situation ofeachorganization.
Recognizing theunique context ofeach organization,thisbook presents anempiri
cally tested model that can be used to analyze the options ofIS insourcing versus
outsourcing ofevery organization.The model takes into account the unique IS re
quirements and the differences between insourcingand outsourcing at both the in
dividual (i.e., worker) andthe organizational level.
The development ofthe model isguided by the following question: Why do some
organizations wholly or partially outsource particular ISfunctions while others
keepthemin-house?Thisresearchquestion,iscloselyrelatedtooneofthemostfun
damental questions ineconomicsandbusinessadministration:The question ofwhy
firmsexistatall,i.e.whynotallofthemultitudeoftasksthatarerequired toproduce
certain products and services are performed by individual companies (or persons)
whodealwitheach otherbasedoncontractualarrangements- asitwasproposedby
Adam Smith inhis 'WealthofNations' in 1776.
Obviously, there are certain situations where economic actors find it useful or ad
vantageous to organize themselves under one common umbrella, called organiza
tion(e.g.,acompanywithan independentlegal form),ratherthan buildinganet of
contractual relationships between eachother.Insearching forsuchageneral theory
ofthe(existenceofthe)firm,itsoonbecame apparentthattherearevarious different
explanatoryapproaches intheliterature andthatnoneofthem appears tosatisfacto
rilyandexclusivelyexplain why organizations exist atall.
Itistherefore oflittlesurprisethatresearch on ISoutsourcingturned outtobevery
fragmented aswell. Many different theoretical lenses have been applied to address
the factors and processes that explain why firms outsource IS functions. This, ac
companiedwith a number ofissuesthat make the context even morecomplex,like
the fact that particulartheories were applied differently,that different research ap
proaches were usedtoexamine sourcingdecisionsandrelationships,thattheunitof
analysis(i.e.,theISfunction)wastreated very differently,andthatthephenomenon
wasstudied invarious organizationalsettings(e.g.,different countriesandbusiness
types,such as industriesandpublic versusprivate organizations)has leadto alack
ofgenerallyagreed uponknowledgeabout the ISoutsourcingphenomenon.
viii Preface
Accordingly, itisnowonderthat practitionersare faced with ahigh level ofuncer
tainty about the sourcingofISfunctions and itswider implications.
Itherefore feltthat the time was ripe to integrate existingresearch onthe theory of
thefirm,onISoutsourcing,andongeneral decision making, andtocome upwith a
comprehensivemodel. This model addresses the needs oftwopractitionergroups.
First, ithelps client organizations to make better IS sourcing decisions. Second, it
showsvendors whattheyneedtodoinordertoinfluence theevaluativeappraisalof
potential and existing customerstowards outsourcingparticularISfunctions.
Readers should recognize, however, that this model on IS sourcing is specifically
developed to explain under which circumstances application services, including
both thedevelopmentandmaintenanceofsoftware applications,areoutsourced.In
otherwords, themodel would needtobeadjustedifusing ittoexplain why other IS
functions, likesystems operations,thedesign andmaintenanceofthenetwork infra
structure,orevennon-IS business functions, maybeoutsourced.Inparticular, read
ers need to recognize the service nature of the application development and
maintenanceworkwhich oftenrequires collaborativeeffortsbetweenvarious stake
holders including users, different groups ofISprofessionals aswell as ISand non
IS managers. Recognizing the focus ofthis study is particularly important when
consideringthe empirical findings about thevalidityofthe ISsourcing model.
The ISsourcingmodel isempiricallytested across two countries(Germanyversus
USA), two industries(FinanceversusMachinery),and,asalready indicated, two IS
functions (Application Development versus Maintenance). Altogether, data about
the sourcing behavior of180 companies was gathered via a mailed questionnaire
survey and systematicallyanalyzed.
Some ofthe lessons learned from the model testing appear tobe generally applica
ble, no matterwhat country, what industry, and what particularapplication service
islooked at.Others arevalid only forGermany orthe US,fortheMachineryorFi
nance Industry, and for the development or maintenance ofsoftware applications.
This means that the sourcingcontexthas aprofoundimpact onthe ISsourcingde
cision- an issuewildly ignored inprevious contributionsonISoutsourcing.
I hope that both researchers and practitioners will benefit from the theoretical and
empirical insights onthe ISsourcingphenomenonprovidedinthisbook, andIwish
you happy reading!
Acknowledgment
Iwould liketoacknowledgewithgreat appreciationthecontributionsandassistance
ofmany individuals that supported me inthe research process that finally resulted
inthisbook.Firstandforemost,IwouldliketothankmyacademicadvisorProf.Dr.
Armin Heinz\. During myinteractionwith himasastudent, Idiscoveredmyenjoy
ment indoing researchand itwas Armin Heinzl who motivatedme to continuemy
research with the creation ofa dissertation at his department. From then on, he
thoughtfully guided my research efforts, encouraged me to write a proposal at the
DeutscheForschungsgemeinschaft(DFG) and to submitpapers toconferencesand
journals. Moreover, he enabled my visiting scholarship at the University ofHous
ton, Texas, which gave methe opportunitytoget toknow two outstandingU.S.ac
ademics that turned outtobecomehighly influentialonmyresearch. They areProf.
Rudy Hirschheim, who recently moved on to Louisiana State Universityand Prof.
Wynne Chin from UH. My conversations with Rudy have broadened my research
perspectiveconsiderably.AlthoughRudy nevertold methat Ishouldtryalternative
empirical research methods beside the quantitative approach, reading his research
articles and talkingtohimneverthelessmotivatedmetostudy the ISsourcingdeci
sion from a different perspective:that ofa participantobserverthat tries to under
stand ISsourcingbyconductinginterviewswith decision makers intwelve German
companies.Today,IcansaythattheknowledgethatIgainedthroughthis qualitative
assessment was so valuable that I would never approach an empirical research
projectwithoutspendingasignificantamountoftimeinthefield.Ontheotherhand,
noperson hadagreaterinfluenceonmyunderstandingofcausal model buildingand
testing than Wynne Chin. He was able to explain to me how theorizing, measure
ment, and statistical data analysis techniques relate to each other- an issue that I
could not find inany text book. Aforth academic who deservesspecial mentioning
isProf. Dr.KUhlmann,whose dedicatedcommentson myquestionnaire helped me
to improve my measurement instruments. Beside Armin Heinzl and Wynne Chin,
he also took the burden to serve at my dissertation committee and to review my
work. I greatly acknowledge the extra effort that this has caused for the three of
them.
Beyondthese credits tomyacademicadvisors, Iwouldliketoexpress mygratitude
toanumberofpeoplethat also supportedmeduring my"dissertationtime".First, I
thank mycolleaguesBirteAutzen, Franz Rothlauf,FrederickLoos,TobiasGrosche,
andTorstenPaulussenaswellasmyformer colleaguesChristofGobel, LarsBrehm,
Jurgen Gerstacker,Michael Zapf, Sigrid Mandel,Stefan Hocke, ThomasSchoberth,
and WolfgangGuttierfornotonlybeing helpful andsupportiveinallmatters ofdai
lywork life,butalso inestablishingasocial environmentthat has made mytime in
Bayreuth and Mannheim very enjoyable. Second, I thank all ofthe students that
worked forandwith me.Insupportingmeinorganizingthe2ndInternationalCon-
x Acknowledgment
ference onOutsourcingofInformationServices,held inBayreuthin200I, Iampar
ticularly grateful to Andreas Gaube, Jan Herzhoff, Stephan Loffler,and Katharina
Pfeuffer.Intheprocess ofgatheringthedataformydissertation,Iammuchobliged
to Bastian Popp, Katrin Mullahy, Nicole Oemus, Stefan Wittenbeck, and Timo
Berger. Third, I would like to thank Alexander Georgius, Anja Schumann, Silvia
LeibbrandtandChristianNeunerforgreatly illuminatingmyresearch. Inthisrealm,
I am also grateful to Jens Arndt, and Jessica Winkler for being conscientious and
creativeeditors ofpartofmywork. Fourth, Iwould liketothank theteam attheIn
stitute forSmall andMedium Sized FirmsattheUniversityofBayreuth (BF/M) for
their support. Fifth,Ihighly appreciatethediscussionsthatIhadwithPeterGlanzel,
the former CIOfromHeidelbergerDruck,andhisefforts inreactivatinghisnetwork
ofrelationshipswith other ITmanagers tostimulatemysurvey response rate.
The price that my partnerSabine paid forthis book was high. Nevertheless, she al
ways exercisedpatience and supported me wherevershe could. Her pragmatic ad
viseoften saved mefromloosing time andspace.This isjustoneofthereasons that
make lifewith hersowonderful.
Finally, Iwould like to express my gratitude and indebtednessto my parents.The
book isdedicatedtothem.
Mannheim,February2004 Jens Dibbern
Table ofContents
Preface vii
Acknowledgment ix
1 Introduction 1
1.1 Problem Statement .
1.2 Research Focus andObjectives 4
1.3 Overview ofResearch Methodology " 6
1.4 Study Organization 6
2 TheoreticalFrameworkon Information Systems Sourcing 9
2.1 The Nature ofthe Information Systems Sourcing Decision .......... 10
2.1.1 Definition ofCoreConcepts. ............................ 10
2.1.1.1 Information Systems Function .................... 10
2.1.1.2 Sourcing ..................................... 13
2.1.2 MainComponentsofSourcing Decision ................... 15
2.1.2.1 The Phase-theorem............................. 15
2.1.2.2 Applyingthe Phase-theorem. ..................... 16
2.1.3 Framingthe Sourcing Decision intoaVariance Theory 20
2.1.3.1 Varianceversus ProcessTheory 20
2.1.3.2 Structural Elements ofaVariance Theory 22
2.2 Analysis and Selection ofTheoretical Lenses 23
2.2.1 Literature Review 24
2.2.1.1 Theoreticaland MethodologicalDiversity 24
2.2.1.2 TheoreticalChallenges 26
2.2.2 TheTheory ofthe Firm 27
2.2.2.1 Neoclassics,Industrial Economics and Gutenberg 31
2.2.2.2 Behavioralism 33
2.2.2.3 New InstitutionalEconomics 35
2.2.2.4 Dynamic Theories 39
2.2.3 From Innovation Diffusion toAttitude-BehaviorApproaches 41
