This document discusses a study that aimed to identify patterns of IT outsourcing strategies that are associated with greater outsourcing success. The study analyzed data from 321 companies to cluster them based on their degree of outsourcing, relationship type, outsourcing period, and number of vendors. It identified 3 "congruent" clusters that showed higher outsourcing success than the other 3 "non-congruent" clusters. The congruent clusters involved strategies like total outsourcing with a long-term partnership and multiple vendors or selective outsourcing with a fee-for-service, mid-term contract and single vendor. The findings provide guidance for organizations on developing outsourcing strategies.

1. A strategic fit mode for IT outsourcing
Success: An exploratory approach –
Jae-Nam Lee, PACIS
- SUMMARY BY MANISH KUMAR, EFPM10011

2. Need of the study
IT outsourcing accounts huge percentage in organizations’ overall expenses. The
estimated market size of $152 billion warrants top-level attention as major strategic
alternative in IS management
Increasing scope & complexity of outsourcing projects demands well-organized
outsourcing strategy in the initial stage
Current studies have studied various outsourcing strategies focussed on one or two
of these dimensions but not considered the combination effects
The paper examines the congruence among these major four dimensions & its
impact on outsourcing outcomes

3. Context & Relevance
ITO decision requires precise assessment of existing IT resources & capabilities &
projected IT needs
ITO outcomes are related to strategic, economic, & technological benefits including
system’s efficiency, availability, customer satisfaction, service quality, cost reduction
etc.
Existing research suggests typical outsourcing strategies that impacts outcomes
include –
◦ Degree of outsourcing
◦ Vendor relationship
◦ Outsourcing period
◦ Number of vendors

4. Context & Relevance
1. Degree of outsourcing
Core function & Commodity Function (Basis Value chain)
2. Relationship type
Fee-for-service type, Partnership, & buy-in contracts
3. Outsourcing period
Short-term & long term contracts
4. Number of Vendors
Single vendor & multi-vendor ITO (Performance, switching cost, communication &
coordination)

5. Research objective
This is an empirical study to identify patterns of outsourcing strategies with
greater outsourcing success.
Hence, The study proposes that the success of outsourcing depends on the
proper fit among the four strategic dimensions. A mode describing such
congruence is –

6. Preposition
Organizations with congruent combinations of the four outsourcing strategies - degree of
outsourcing, relationship type, period of outsourcing, and number of vendor – will show
greater outsourcing success than those without such congruence.
Congruent combinations :-
1. Total outsourcing, partnership, long-term & multi-vendor strategy
2. Selective outsourcing, fee-for-service contract, mid-term, and single vendor strategy
3. Total insourcing, buy-in contract, short-term, and single vendor strategy

7. Methodology
A. Measurement scales – Existing & Validated
1. Degree of outsourcing –
1. Total outsourcing (more than 80%),
2. Selective outsourcing (20 to 80%),
3. Total insourcing (less than 20%) - in each organization
2. Relationship Type –
1. Fee-for-service (Standard),
2. Fee-for-service (Detailed),
3. Fee-for-service (Loose),
4. Fee-for-service (Mixed),
5. Partnership , and
6. buy-in contract
3. Outsourcing period
1. Short-Term period (<4 years)
2. Mid-Term period (4-7 years)
3. Long-Term period (>7 years)
4. Degree of achieving ITO benefits (7 point Likert Scale from extremely-low to extremely-high)
◦ Core business, IT competence, skilled personnel, economies of scale in human and technical resources, control of IT expenses, avoidance of obsolescence
risk, accessing to key IT, and overall satisfaction

8. Methodology
B. Data Collection
1. Survey questionnaire to 1000 CIOs of 1000 companies in Annual corporation Reports , listed in Korea
Stock Exchange
2. Total Design Method of Dillman (1991) used to increase response rate – Followups after 1-week, 4-
week & 7-week of original mail (39% response rate). 79 discarded for no ITO or incomplete data
C. Content Validity
1. Factor analysis of asked 9 items was done to check unidimensionality of items
2. Factor loading was above 0.5 for all items ranging from 0.805 to 0.883
3. Cronbach’s alpha at 0.946 (internal consistency)

9. Analysis & Findings
Analysis
K-mean clustering(exploratory analysis) was done for the unknown number & attributes of
groups – 6 cluster solution
The ANOVA test was conducted to assess differences of outsourcing performance among 6
clusters

10. Analysis & Findings
Findings
3 of the 6 clusters are congruent clusters while 3 are non-congruent
Group means of six clusters is significantly different on all composite measures of outsourcing benefits
Cluster 6 displays the highest level of mean ratings on the most measures of outsourcing benefits
Clusters 1,2 and 6 displayed high congruency while remaining three clusters are non-congruent
Cluster 1 - Firms with low-range IT outsourcing. Firms in this cluster want to internally retain most of the management
responsibility for IT services. They need more clear and obvious outsourcing strategies like short-term, buy-in contract, and single
vendor
Cluster 2 - Pursue mid-range IT outsourcing. In this case, they just want to pay a fee in exchange for delivery of specified IT
services. Furthermore, the fee-for-service prefers more controllable outsourcing contract period (4 to 7 years) and number of
vendor (one vendor)
Cluster 6 - These firms transfer assets, staffs and management responsibilities for IT services to their service providers. This
permits the long-term beneficial relationship between the service receiver and provider. Moreover, considering market
opportunities and relationship safety, they combine and utilize several vendors’ expertise and resources

11. Analysis & Findings
A. Six cluster solution
B. Three Congruent clusters
C. Outsourcing success

12. Contribution
Theoretical
Conceptualizes proper fit of outsourcing strategy & empirically validated with cluster analysis
Since It’s a exploratory research, further work in exploring other dimensions, demographics, &
respondents can be explored
Managerial
The result of this study provides a meaningful guidance model for organizations in deciding their
outsourcing strategies
Congruent outsourcing strategies identified in this study provide organizations with a benchmark
against which they can compare their current own outsourcing strategies.

13. Thanks !