An Empirical Study of Information Technology Outsourcing: Benefits, Risks, and Performance Implications

Abstract

In this paper, we develop a conceptual model of information technology outsourcing using a set of benefits and risks as determinants and performance as consequences. We then test our model using primary data from a questionnaire survey involving the chief information officers in 159 Fortune 500 corporations, combined with appropriate seeondarydata from corporate financial statements. Our results show that technical and business benefits as well ascontrolandopportunismrisksarecriticalexplanatoryfactorsforoutsourcing. Inaddition,wedemonstratethat outsourcing leads to superior performance but this is moderated by cost structure of the firm.