Determinants of Information Technology Outsourcing: A Cross-Sectional Analysis

This paper develops and tests a mode! of the determinants of information technology (IT) outsourcing by integrating both business and IT perspectives. Specifically, we attempt to explain the degree of IT outsourcing using business and IT competences as represented by their cost structures and economic performances. In addition, we posit that outsourcing is dependent on business govemance, particularly financial leverage. Based on factor analyses and multiple regressions using data from fifty-five major U.S. corporations, we observed that the degree of IT outsourcing is positively related to both business and IT cost structures. We also established that the degree of IT outsourcing is negatively related to IT performance. Finally, we conclude with implications and future research directions. Acknowledgments: Authors are listed alphabetically.Thisproject was supported by the research consortium on Managing Information Technology in lhe Next Era (MITNE) of lhe Center for Information Systems Research (CISR) at the Massachusetts Institute of Technology. We tliank John Rockart. Judith Quillard, three journal reviewers, and the Editor-in-Chief for comments on earlier versions of the paper. Journal o/MaMogemginfii/bmaiioHSysttms/SwrmusT 1992. Vol. 9. No, 1, pp. 7-24 Copyri^l © 1992. M.E Sharpe. Inc. 8 LOH A>a3 VENKATRAMAN