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Malhotra, Yogesh. (1995). An Empirical Analysis of the Determinants of Information Systems Productivity and the Role of Outsourcing Policy [WWW document], @BRINT Research Institute, www.brint.com. URL http://www.brint.com/papers/outsourc/.

"Sourcing amounts to renting the skills and competences of a potential competitor. Renting may appear cheap relative to ownership (and a large mortgage), but the lease may not be renewed or the rent may be dramatically increased. Furthermore, you are accumulating little if any technological knowledge (equity) and are unlikely to benefit if the skills and competences appreciate in value due to future business opportunities that cannot be clearly foreseen."
- Bettis, R.A., S.P. Bradley and G. Hamel (1992)

This paper provides a detailed perspective of the IS outsourcing policy decisions with specific focus on business strategy and financial considerations, which have been generally treated separately in this context. An integrative conceptual framework is proposed for studying the influence of business strategy and financial considerations on the IS outsourcing policy, and the influence of financial considerations and IS outsourcing policy on IS productivity. A structural equation model was created to represent the proposed conceptual framework. The model was operationalized by using factor analysis and stepwise regression analyses. Since the objective of the study was to investigate the influence of financial criteria and business strategy variables on IS performance, the set of companies listed as "the 100 most effective users of information technology" by Computerworld Premier 100 survey (1994) represents an acceptable sample. Data integrity was ensured by extracting remaining data from the same public sources as those used by the survey. Findings of the study suggest that financial considerations are the predominant criteria that influence IS outsourcing policy as well as IS productivity. The study has important implications regarding the reliability of the new measure of IS effectiveness (Information Productivity Index) used by Computerworld, and the continued emphasis on primarily macro-level financial measures for determining the effectiveness of IS.

Keywords: research, information systems, business strategy, IS performance, technology, outsourcing policy, financial considerations, theory, framework, Information Productivity Index, Strassmann, Computerworld, control, relationship, core competence, learning competencies, two stage least squares.

Please click on the following links to access the specific sections.

[Introduction]

[Characteristics of I/S Outsourcing Decisions]

[ 1. Conceptual Framework for the Proposed Model]

[ 2. Determination of Indices to Be Used in the Analysis]

[ 3. Two Stage Least Squares Method]

[ 4. Conclusion]

[ References]

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A summary of this paper entitled
IS Productivity And Outsourcing Policy: A Conceptual Framework and Empirical Analysis
was published in the
Proceedings of Inaugural Americas Conference on Information Systems (Managerial Papers)

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