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Achieving dramatic cost savings through outsourcing is one avenue managers can choose for value creation. Another is controlling and nurturing those resources
that are most likely to provide a competitive advantage due to their uniqueness. According to resource-based theory, organizations that have identified the core or distinctive competence of their business,
including IT core processes, are theoretically better able to concentrate on competitive strengths. By divesting themselves of activities unrelated or marginally related to their core functions, they can
benefit from superior marketing, production, inbound logistics, or distribution. The current study proposes and tests a Strategic Control Model positing that organizations seek to control resources that
enable them to earn above average rents and that cannot be easily duplicated by others. Thus, organizations with a strategic perspective on IT are more likely to selectively outsource their IT resources,
retaining control of those that enable above average rents and competitive advantage and outsourcing the remainder.
Utilizing a research design that captured extensive quantitative and qualitative
data on the sourcing of IT functions and services, the research team studied 54 business units of 27 companies in seven countries over a five-year period. For data analysis purposes, the managers in these
firms reported on several hundred different IT outsourcing decisions. Strategic control proves to be a good explanation for how the most effective managers outsource IT. Firms with more strategic investments
in IT outsourced fewer assets. The selective outsourcing approach also had a complex statistical relationship with business unit performance, i.e., firms selectively outsourcing IT having higher profits per
employee and greater returns on assets. For these reasons, it is critical that a clear firm-wide process for management decision making on IT sourcing is in place to capture business value. |
