Information systems outsourcing strategies for affiliated firms of the Korean conglomerate groups

Using a contingency model based on an organization's information intensity and group influence, this paper offers a set of outsourcing strategies for the affiliated firms of the conglomerate groups and results support the model in that user satisfaction is higher when the firm's current outsourcing strategy matches the recommended strategy.

Abstract

Information systems (IS) outsourcing has received little academic attention in the non-Western context. This paper reports on IS outsourcing strategies for the affiliated firms of the Korean conglomerate groups which possess their own IS subsidiaries. Aggregating the IS departments of the groups' firms into a separate IS division has been a major trend among the Korean conglomerate groups. The IS division is a separate corporation wholly owned by the parent group. The IS companies of the conglomerate groups occupy a major share of the Korean IS outsourcing market. This is due to the ‘guaranteed’ IS outsourcing contracts they secure from their groups' affiliated firms. From the affiliated firms' perspective, however, this arrangement prevents them from selecting the best IS solution provider and potentially undermines their information technology (IT) strategy. Using a contingency model based on an organization's information intensity and group influence, this paper offers a set of outsourcing strategies for the affiliated firms of the conglomerate groups. Subsequently the model and the recommended strategies are verified through multiple case studies. Results from these case studies support our model in that user satisfaction is higher when the firm's current outsourcing strategy matches the recommended strategy.