We propose a model to explain success in large scale, complex outsourcing arrangements. The work is based on a field study of current outsourcing practice and review of literature. The model links outsourcing success to modularity and firm level performance. Data collected from a survey of Chief Information Officers and other senior managers supports our hypotheses. In particular, we observe the effect of outsourcing success on business performance. Modularity has a direct effect on business performance. In addition, outsourcing success mediates the effect of modularity on business performance. Novel conceptualization and operationalization of architectural modularity, is a contribution to empirics and theory. Outsourcing success is seen to be associated with firm level performance, within the boundary conditions of large, multifunction, multiyear IT outsourcing initiatives. The results show several characteristics of “transformational” outsourcing that goes beyond cost reduction, and addresses firm level performance.
Available at: http://works.bepress.com/kalle_lyytinen/49/