Determinants of Netsourcing: An Empirical Evaluation

Among the broad range of outsourcing offerings, netsourcing presents an emerging opportunity in the e-business context. Netsourcing allows companies to selectively source software applications from external providers via the Internet. External providers claim cost advantages over in-house development and operations of software applications. Several research streams on strategy however list a number of arguments from different angles against outsourcing. We apply a research framework based on two theoretical approaches, strategic management and transaction cost economics, which both have prominently been applied to full IT outsourcing. Surveying the 500 largest companies nationwide, we find an application's competitive relevance, strategic vulnerability, technical specificity, human capital specificity, transaction frequency, and transaction uncertainty to impact a company's decision for or against netsourcing. We conclude with lessons learned, their managerial implications and some topics for further research.