Managerial cost mitigation tactics in offshore IT projects
| Pages | 1219-1233 |
| Date | 31 October 2008 |
| Published date | 31 October 2008 |
| DOI | https://doi.org/10.1108/02635570810914900 |
| Author | Lutfus Sayeed |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Managerial cost mitigation tactics
in offshore IT projects
Lutfus Sayeed
College of Business, San Francisco State University,
San Francisco, California, USA
Abstract
Purpose – The purpose of this paper is to enhance our understanding of managerial decision-making
process regarding offshore sourcing of information technology (IT) projects. The study explored the
relationship between transaction cost economics and maturity levels of a firm’s offshore sourcing
activities. Transactions costs theory and firms’ offshore sourcing maturity levels provided the
framework for studying the decision process.
Design/methodology/approach – The present study is a qualitative empirical investigation of the
underlying decision process to offshore IT projects. The study is based on interviews of executives in
fifteen large to medium size companies.
Findings – The data suggest that transaction cost mitigation approaches used by a firm vary based
on the size of the company as well as the maturity level of the firm’s offshore sourcing activities.
Research limitations/implications – The present study is based on interviews of IT executives in
fifteen firms. Case studies and confirmatory studies can provide further insights.
Practical implications – Offshore sourcing maturity can influence cost mitigation tactics used by
managers.
Originality/value – This is the first study to explore the relationship between transactions cost
economics and offshore sourcing maturity of a firm. Future studies can extend the findings to deepen
our knowledge of offshore sourcing challenges.
Keywords Outsourcing,Decision making, Qualitative research
Paper type Research paper
Introduction
Growth of offshore outsourcing will continue in the foreseeable future (Ilie and Parikh,
2004; Levina and Ross, 2003; Susaria et al., 2003). Researchers have argued that firms
offshore information technology (IT) projects to minimize transaction costs (Aubert etal.,
1996; Carmel and Nicholson, 2005; Miranda and Kim, 2006; Rustagi et al., 2008; Wang,
2002). Carmel and Agarwal (2002) concluded that the experience of continued offshore
sourcing has led US firms to varying stages of maturity. The present paper is an
exploratory investigation of the relationship between the two factors mentioned above –
IT offshoring maturity stage and transaction cost mitigation tactics employed by client
firms. The goal of this study is to explore if firms in higher maturity levels of offshoring
IT projects employ different cost mitigation tactics than firms in lower maturity levels.
The present study is significant for three reasons. First, the present study is the first
investigation to explore the relationship between transactions cost economics (TCE) and
offshore sourcing maturity of a firm. In the process, the study integrates two streams of
research – TCE and offshore sourcing maturity. Therefore, the current investigation
will expand theoretical boundaries of research on IT offshore sourcing. Second, in spite
of a growing body of research on IT offshore sourcing, our knowledge in this area is not
The current issue and full text archive of this journal is available at
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Managerial cost
mitigation tactics
1219
Received 10 April 2008
Revised 27 June 2008
Accepted 17 July 2008
Industrial Management & Data
Systems
Vol. 108 No. 9, 2008
pp. 1219-1233
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570810914900
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