No abstract

The risks associated with outsourcing have been the principal limitation on the growth of business process outsourcing, especially cross border outsourcing. Technological improvements in risk management have lead to the dramatic increase in outsourcing in India. Further progress now comes from redesigning work flows and dividing work among multiple vendors, increasing the range of tasks that are now appropriate candidates for outsourcing.

Industrial organization /IC)) literature provides a comprehensive treatment o the many factors that affect the costs and risks of transacting to obtain goods and senices. These exogenous factors have caused firms to adopt vertically integrated structures to deal with the increased transactions costs resulting from the presence of these factors. It i s becoming increasingly clear that information technology ( I T ) aflects transactions costs, especially the direct costs of coordinating activities and of monitoring their performance, and the indirect costs associated with inadequate performance. The impact of I T on transactions cost should be more pronounced in situations where the exogenous factors, zdentified by the I O literature, are present to a high degree. This paper discusses how I T can reduce the costs and risks associated vith each of these factors, thereby facilitating the adoption of economically efficient organizational forms. The set of propositions derived from our discussion are largely consistent with our "move to the middlen hypothesis (see 171, and also 191).monitoring capability of I T and the lower relationshipspecificity of I T investments will cause firms to engage in a greater degree of outsourcing; moreover, this increased outsourcing will be from a reduced set of suppliers with whom the firm has long-term cooperative relationships.

No abstract

No abstract