Information Systems Outsourcing Strategies for Affiliated Firms of the Conglomerate Groups with Respective Group Systems Integration Companies

Abstract

This paper reports on Informations Systems(IS) outsourcing strategies for affiliated firms of the Korean conglomerate groups with their own Systems Integration(SI) companies. Integration of the affiliated firms IS departments into a group SI company has been the major trend among the Korean conglomerate groups. Despite the short outsourcing history and the lack of expertise to support customer requirements effectively, SI companies of the conglomerate groups occupy a large share of the Korean IS outsourcing market. It is because of the guaranteed IS outsourcing contracts they secure form their groupsaffiliated firms. From the affiliated firms perspective, however, this arrangement prevents them selecting the best Information Technology (IT) solution provider and potentially undermines their IT-based competition and opportunities. To suggest and appropriate outsourcing strategy for each affiliatd firm, this study introduces two factors-organizations information intensity and group influence index. Using a contingency model based on these factors, we recommend appropriate outsourcing strategies for affiliated firms of the conglomerate groups and verify the model and the recommended strategies through multiple case studies. Results from these case studies support our model in that user satisfaction tends to be higher when a firms current outsourcing strategy matches our recommendation.