The Information Technology Outsourcing Risk: A Transaction Cost and Agency Theory-Based Perspective

2003 ◽  
Vol 18 (3) ◽  
pp. 211-221 ◽  
Author(s):  
Bouchaib Bahli ◽  
Suzanne Rivard
Keyword(s):  
Risk Assessment ◽  
Information Technology ◽  
Agency Theory ◽  
Transaction Cost ◽  
Risk Mitigation ◽  
It Outsourcing ◽  
Assessment Framework ◽  
Specific Context ◽  
Point Of Departure ◽  
It Operations

Many firms have adopted outsourcing in recent years as a means of governing their information technology (IT) operations. While outsourcing is associated with significant benefits, it can also be a risky endeavour. This paper proposes a scenario-based conceptualization of the IT outsourcing risk, wherein risk is defined as a quadruplet comprising a scenario, the likelihood of that scenario, its consequences and the risk mitigation mechanisms that can attenuate or help avoid the occurrence of a scenario. This definition draws on and extends a risk assessment framework that is widely used in engineering. The proposed conceptualization of risk is then applied to the specific context of IT outsourcing using previous research on IT outsourcing as well as transaction cost and agency theory as a point of departure.

A Risk Assessment Framework for Airport Development Projects

2018 ◽  
Vol 2672 (29) ◽  
pp. 35-47
Author(s):  
Anna Hopper
Keyword(s):  
Risk Assessment ◽  
Financial Risk ◽  
Risk Mitigation ◽  
Mitigation Strategies ◽  
Development Projects ◽  
Assessment Framework ◽  
Risk Mitigation Strategies ◽  
Risk Forecast ◽  
Risk Determinants ◽  
Development Risk

This paper develops a risk assessment framework for airport development projects. It discusses the major types of inherent development risk, including political risk, environmental risk, financial risk, airline risk, forecast risk, and regulatory or operational risk, and it offers suggestions for risk mitigation strategies. Furthermore, it identifies and analyzes relative risk determinants, which affect the magnitude and type of risk that development projects will likely face. These include the presence of a dominant airline, the airport’s rate structure, the airport’s ownership and operating structure, local demand, and geopolitical events. These factors and their interconnected relationships are illustrated through case studies of relevant airport development projects.

The Role of Risk and Return in Information Technology Outsourcing Decisions

1995 ◽  
Vol 10 (4) ◽  
pp. 239-247 ◽  
Author(s):  
Jaak Jurison
Keyword(s):  
Information Technology ◽  
Transaction Cost ◽  
It Governance ◽  
It Outsourcing ◽  
Future Research ◽  
Transaction Cost Theory ◽  
Risk And Return ◽  
The Relationship ◽  
Principal Contribution

This paper views information technology (IT) outsourcing decisions as classical make-or-buy decisions. In essence, these decisions consist of finding an acceptable balance between benefits and risks. The principal contribution of this paper is the development of a model that describes the relationship between outsourcing benefits and risks. It draws on work from two streams of research: transaction cost theory and modern financial theory. The model can assist managers in determining whether outsourcing or in sourcing is a better choice for a particular IT function and in evaluating and comparing competing vendor proposals. The model can also serve as a framework for future research in IT governance issues.

Outsourcing and Political Power: Bureaucrats, Consultants, Vendors and Public Information Technology

2001 ◽  
Vol 30 (4) ◽  
pp. 495-514 ◽  
Author(s):  
Alon Peled
Keyword(s):  
Information Technology ◽  
Political Power ◽  
Public Information ◽  
It Outsourcing ◽  
Feedback Information ◽  
Political Clout ◽  
Enormous Amount ◽  
The Status ◽  
The Government ◽  
It Operations

The rapidly growing governmental IT outsourcing trend raises different questions: Who, inside bureaucracy, governs computer systems after outsourcing? Which actors gain or lose political clout when the government begins to aggressively outsource its IT operations? How does IT outsourcing change the relationships among bureaucrats, consultants, and vendors? The article highlights the increasingly important and behind-the-scenes role the consultant plays as an intermediary between the MIS bureaucrat and technological vendors. IT consultants exert an enormous amount of political power because they are the “glue” binding together all the actors involved in producing and maintaining public information technology. Regrettably, this new consultant-centered environment is responsible for the degradation of the organizational and technological skills of MIS bureaucrats and also impairs the feedback information flow between bureaucrats and vendors regarding the status of public computer projects. Therefore, the article suggests that the unchecked power of IT consultants hinders the ability of bureaucrats to be accountable for the systems they manage.

Information Technology Outsourcing in Australia

2011 ◽  
pp. 192-219
Author(s):  
Nicholas Beaumont ◽  
Christina Costa
Keyword(s):  
Information Technology ◽  
Business Processes ◽  
Academic Research ◽  
It Outsourcing ◽  
Company Size ◽  
Cultural Match ◽  
Contractual Arrangements ◽  
Black Letter ◽  
Industry Sectors ◽  
It Operations

In Australia, popular discussion of the growing market in outsourcing information technology (IT) has been spurred by decisions of several large companies and the Australian government to outsource IT operations, but there has been little academic research into outsourcing in Australia. This chapter reports research into Australian IT outsourcing based on data collected in 1999. The research objectives were to measure the incidence of outsourcing among Australian firms, identify the functions outsourced, the reasons why managers considered outsourcing, the costs and benefits of outsourcing, possible changes in modes of and motivations for outsourcing and factors that are associated with successful outsourcing arrangements. The nature of and motivations for outsourcing have evolved; for example, cost saving is not (if it ever was) the prime motivator. The three most important factors driving outsourcing in Australia are access to skills, improved service quality and increasing managers’ ability to focus on core business activities. Decisions to outsource are weakly correlated with company size, but are not related to industry sectors. The factors most associated with successful IT outsourcing were the cultural match between the vendor and client, and the nature of the contractual arrangements—partnerships are more fruitful than rigidly interpreted black letter contracts. Outsourcing (not just of IT) is becoming increasingly popular; we suggest reasons for this and propose further research. The research used quantitative and qualitative data. A survey was used to collect data from 277 informants, and six interviews were used to explore managers’ reasons for outsourcing and relate these to the success of outsourcing arrangements. Outsourcing of many business processes (not just IT) is becoming increasingly frequent in Australia. Where appropriate, themes are illustrated by outsourcing activities other than IT.

scholarly journals A Novel Dynamic Algorithm for IT Outsourcing Risk Assessment Based on Transaction Cost Theory

2015 ◽  
Vol 2015 ◽  
pp. 1-10 ◽  
Author(s):  
Guodong Cong ◽  
Tinggui Chen
Keyword(s):  
Risk Factors ◽  
Risk Assessment ◽  
Transaction Cost ◽  
Real Data ◽  
Critical Issue ◽  
It Outsourcing ◽  
Transaction Cost Theory ◽  
Or Efficiency ◽  
Dynamic Algorithm ◽  
Equation Group

With the great risk exposed in IT outsourcing, how to assess IT outsourcing risk becomes a critical issue. However, most of approaches to date need to further adapt to the particular complexity of IT outsourcing risk for either falling short in subjective bias, inaccuracy, or efficiency. This paper proposes a dynamic algorithm of risk assessment. It initially forwards extended three layers (risk factors, risks, and risk consequences) of transferring mechanism based on transaction cost theory (TCT) as the framework of risk analysis, which bridges the interconnection of components in three layers with preset transferring probability and impact. Then, it establishes an equation group between risk factors and risk consequences, which assures the “attribution” more precisely to track the specific sources that lead to certain loss. Namely, in each phase of the outsourcing lifecycle, both the likelihood and the loss of each risk factor and those of each risk are acquired through solving equation group with real data of risk consequences collected. In this “reverse” way, risk assessment becomes a responsive and interactive process with real data instead of subjective estimation, which improves the accuracy and alleviates bias in risk assessment. The numerical case proves the effectiveness of the algorithm compared with the approach forwarded by other references.

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