Journal of Information Technology (2010) 25, 395–433

& 2010 JIT Palgrave Macmillan All rights reserved 0268-3962/10

palgrave-journals.com/jit/

Research article

A review of the IT outsourcing empirical

literature and future research directions
Mary C Lacity1, Shaji Khan1, Aihua Yan1, Leslie P Willcocks2
1
University of Missouri-St. Louis, St. Louis, MO, USA;
2
Information Systems and Innovation Group, Department of Management, London School of Economics, London, UK

Correspondence:
MC Lacity, University of Missouri-St. Louis, One University Boulevard, St. Louis, MO 63121, USA.
Tel: þ 1 314 516 6127;
Fax: þ 1 314 516 6827;
E-mail: Mary.Lacity@umsl.edu

Abstract
An enormous amount of information has been produced about the IT outsourcing
phenomenon over the last 20 years, but one has to look to the academic literature for
consistent, objective, and reliable research approaches and analyses. Our review finds
that, in practice, the academic literature on IT outsourcing has very much honored both
rigor and relevance in the ways in which research has been conducted. Our central
purpose in the review was to answer two research questions: What has the empirical
academic literature found about information technology outsourcing (ITO) decisions and
outcomes? What are the gaps in knowledge to consider in future ITO research? To answer
these questions, we examined 164 empirical ITO articles published between 1992 and
2010 in 50 journals. Adapting a method used by Jeyaraj et al. (2006), we encapsulated this
vast empirical literature on ITO in a way that was concise, meaningful, and helpful to
researchers. We coded 36 dependent variables, 138 independent variables, and 741
relationships between independent and dependent variables. By extracting the best
evidence, we developed two models of outsourcing: one model addressed ITO decisions
and one model addressed ITO outcomes. The model of ITO decisions includes
independent variables associated with motives to outsource, transaction attributes, client
firm characteristics, and influence sources. The model of ITO outcomes includes
independent variables associated with client and supplier capabilities, relationship
characteristics, contractual governance, decision characteristics, and transaction
attributes. We also examined the interactions among broad categories of variables and
the learning curve effects resulting from feedback loops. Overall, ITO researchers have a
broad and deep understanding of ITO. However, the field continues to evolve as clients
and suppliers on every inhabited continent participate actively in the global sourcing
community. There is still much research yet to be done. We reviewed recent studies that
have identified gaps in current knowledge and proposed future paths of research
pertaining to strategic motivations, environmental influences, dynamic interactions,
configurational and portfolio approaches, global destinations, emerging models, reference
theory extension, and grounded theory development.
Journal of Information Technology (2010) 25, 395–433. doi:10.1057/jit.2010.21
Published online 5 October 2010
Keywords: information technology outsourcing; information systems outsourcing; offshore
outsourcing; transaction cost economics

Introduction
uring the past 20 years, a rich but diverse body of – including theories from economics (e.g., Transaction Cost

D theoretical and empirical work has accumulated on

information technology outsourcing (ITO). Research-
ers have studied ITO from over 20 theoretical perspectives
Economics (TCE), Agency Theory), strategy (e.g., Resource
Based View, Resource Dependency Theory), sociology
(e.g., Relational Exchange Theory, Social Capital Theory,
 Review of the IT outsourcing empirical literature
396
Innovation Diffusion), and natural sciences (e.g., Punctuated
Equilibrium Theory) (Ekeh, 1974; Gould and Eldredge,
1977; Pfeffer and Salancik, 1978; Rogers, 1983; Eisenhardt,
1989; Barney 1991; Williamson, 1991; Nahapiet and Ghoshal,
1998). By appropriating so many theories, researchers
have tested a large number of relationships between
independent and dependent variables. Because of this
diversity, findings from the overall body of empirical ITO
literature have been difficult to summarize, analyze, and
evaluate succinctly.
To date, Dibbern et al. (2004) is the most comprehensive
in terms of depth of analyses.1 Their review covers ITO
studies between 1992 and 2000. Since Dibbern et al. (2004),
ITO researchers have continued to study the ITO phenom-
enon as suppliers, clients, practices, and enabling technol-
ogies have significantly changed and matured. Suppliers
on six continents – Asia, Europe, North America, South
America, Australia, and even Africa – now actively compete
in the space. Many clients are in their third and fourth
generation of outsourcing relationships. Technology has
continued to enable new sourcing models – like application
service provision (ASP) and cloud computing. It is
worthwhile to understand which ITO findings have
remained robust overtime and which new findings have
emerged since 2000. Our aim is to encapsulate the very
large body of empirical literature on ITO – covering two
decades – in a way that is concise, meaningful, and helpful
to researchers. Our review aims to answer two research
questions: What has the empirical academic literature
found about ITO decisions and outcomes? What are the
gaps in knowledge to consider when shaping future ITO
research?
In this review, we examined 164 empirical ITO articles
published between 1992 and 2010 in 50 journals. By
adapting a method developed in Jeyaraj et al. (2006), we
were able to aggregate findings across many studies and to
include results from both quantitative and qualitative
research. Our review includes findings from 71 quantitative
papers, 80 qualitative papers, and 13 papers that used both
qualitative and quantitative methods. From these, we
extracted the most frequently studied and frequently
supported constructs and developed two descriptive models
of ITO findings, one pertaining to ITO decisions and the
other to ITO outcomes. These models identify the direct
relationships between the independent and dependent
variables and serve as pictorial representations of the
best evidence accumulated about ITO decisions and ITO
outcomes based on 19 years of research.
This review contributes to the literature in a number
of important ways. For researchers new to the study of
ITO, we have documented and described 150 variables
previously used in ITO research and summarized the
findings of two decades worth of research. We have
identified a number of gaps in knowledge, thus signaling
where new researchers can readily contribute. For advanced
researchers, we have outlined more ambitious research
goals, such as using ITO research to inform reference
disciplines, and transforming the models of the findings
we present here to descriptive theories or normative
theories of ITO (Christensen, 2006).
The paper is structured as follows. First, we summarize
prior reviews of the ITO literature and explain how these
MC Lacity et al
reviews differ from our present ITO review in purpose,
review method, number of articles considered, and/or
time frame. We then explain the research method we used
to code the articles. One valuable output from this exercise
is a master list of 150 variable names and descriptions used
in ITO research over the 19-year period (see Appendix A).
The findings section is organized into four parts: findings
which examine 36 dependent variables used in ITO
research, findings which examine 138 independent vari-
ables used in ITO research, findings which examine 741
relationships between independent and dependent vari-
ables, and findings on interactions and learning curve
effects. The section on future paths of research reviews
current papers addressing gaps in knowledge and suggests
nine additional areas of research that are either currently
under-studied or that have produced mixed results, and
therefore may benefit from further inquiry. We also discuss
further theory development in the ITO context, research
‘dead ends,’ and the limitations of our review. We conclude
by summarizing the answers to the two primary research
questions.
Prior literature reviews on ITO
In this section, we summarize prior ITO literature reviews
to better distinguish our own contribution. We found six
major reviews of the ITO literature and will now establish
how this present review differs on several dimensions
(see Table 1).
Dibbern et al. (2004) covered the literature up until the
year 2000. The authors organized ITO papers by whether
the papers focused on the ITO decision (why, what, which)
and/or implementation (how, outcome). One of their
many findings was that 46 (55%) of the articles focused
on why firms make outsourcing decisions. The authors
also analyzed the theories used in ITO research, and found
that the most frequently used were TCE (19%), strategic
management theories (17%), and Agency Theory (12%).
Eighteen articles adopted more than one theory, 13 of
which included TCE supplemented by one other theory.
The authors also identified five gaps in knowledge
(discussed in the Future Paths of Research section).
Fjermestad and Saitta (2005) conducted a selective review
of 29 articles on ITO and strategic decision-making. The
purpose of their review was to compose a critical factors
framework. The resulting framework has eight components:
alignment of business strategy, contracts, infrastructure
and technology, culture, strategic partnership, management
support, governance committees, and economics.
Mahnke et al. (2005) reviewed 19 ITO articles that used
TCE, Resource-based View (also called the Competence
Perspective), and the Relational View or some combination
of the three theories. The purpose of the review was to
propose a process model of ITO based on empirical
findings from these three tested theories. The authors
concluded that the independent variables from current
theoretical explanations are too limited. The authors also
noted that we have a wide dispersion in our dependent
variable, in that outsourcing performance has been
measured as degree of outsourcing, outsourcing inten-
sity, outsourcing expenditure, technological performance,
 Review of the IT outsourcing empirical literature MC Lacity et al
397

Table 1 Outsourcing literature reviews

Authors Time period of Sample size Number of journals Analyses

included studies included
Dibbern et al. 1992–2000 84 ITO articles 21, including The authors categorized and analyzed
(2004) 2 proceedings the literature by outsourcing stage,
research approach, reference theory
used, and unit of analysis.

Fjermestad and 1981–2004 29 articles (some Not discussed The authors did a selective review of 29
Saitta (2005) articles are from articles for the purposes of developing a
strategic management) critical factors framework.

Mahnke et al. 1995–2002 19 ITO articles Not discussed The authors propose a process model of
(2005) ITO based on empirical findings from
Transaction Cost Economics,
Competence Perspective, and the
Relational View.

Gonzalez et al. 1988–2005 131 ITO articles 18 The authors categorized and analyzed
(2006) the literature by research approach,
research perspective (i.e., client,
supplier, or both), and author.

Lacity et al. 1990–2008 191 conceptual and 70 The authors organized the literature that
(2009) empirical ITO articles answered six practitioner questions
about ITO, such as ‘What is the strategic
intent behind outsourcing decisions?’
and ‘What are the risks of ITO and how
are they mitigated?’

Alsudairi and 1992–2008 315 articles, 128 30 The authors categorized the literature by
Dwivedi (2010) in ITO the frequency of articles published by
subject, journal, author, university
affiliation, and citations.

This review 1992–2010 164 empirical 50 We summarize the empirical academic

ITO articles literature by coding the independent
and dependent variables and their
relationships. The paper also addresses
gaps in knowledge.

partnership quality, exchange performance, and cost
savings achieved.
Gonzalez et al. (2006) analyzed 131 articles on ITO
published between 1988 and 2005. Of these, 63.4% were
empirical, most commonly field studies and case studies.
The authors also analyzed the perspectives of the articles
and found that 82% assume a firm-level perspective.
Specifically, 49% of the articles adopted the perspective of
the client firm, 16% assumed the perspective of the supplier
firm, and 17% considered both. The rest of the articles
assumed larger units of analyses (such as a country or IT
industry), or smaller units of analyses (such as the effect of
ITO on IS staff). The authors also identified the 24 most
prolific ITO researchers.
Lacity et al. (2009) focused a review of the ITO literature
on findings relevant to practice. They organized 191 ITO
articles published between 1990 and 2008 around six
practitioner concerns: (1) the types of firms most likely to
outsource ITO, (2) the strategic intent and effects of ITO
decisions, (3) the risks of ITO and risk mitigation strategies,
(4) practices associated with successful ITO deals, (5) client
and supplier capabilities, and (6) the extent to which ITO
practices must be adapted for other forms of outsourcing
such as business process outsourcing (BPO) and ASP.
Most recently, Alsudairi and Dwivedi (2010) examined
outsourcing research across 38 disciplines. The authors
categorized 315 outsourcing articles published from 1992 to
2008 by the frequency of articles published by subject area,
journal, author, university affiliation, and citation counts.
Among their findings, management had the most articles
on outsourcing (136 articles), followed by information
systems (128 articles). The Journal of Information Technol-
ogy was the most frequent outlet for outsourcing articles
with 23, followed by Information & Management with 18
articles. US authors accounted for 52% of the articles,
followed by UK authors with 15% of the articles. The most
 Review of the IT outsourcing empirical literature
398
cited papers were published in MIS Quarterly and Sloan
Management Review. The authors did not summarize the
findings of the academic research.
In this review, we coded the findings of 164 ITO articles
published from 1992 to the first quarter of 2010. Our review
is the most complete in terms of the number of empirical
ITO articles examined. (Note: Lacity et al. (2009) have a
higher number of articles because they included conceptual
papers in that review.) Our review focuses on empirical
findings from the research, not on the authors of ITO
research – a subject recently covered by Gonzalez et al.
(2006) and by Alsudairi and Dwivedi (2010). For this
review, the target audience is academics, not practitioners,
as contrasted with Lacity et al. (2009) and Fjermestad and
Saitta (2005). Unlike Dibbern et al. (2004) and Mahnke
et al. (2005), we do not comment broadly on specific
theories (the one exception being TCE). Instead, our review
focuses on findings at the level of dependent and
independent variables and the relationships between them.
We chose this unit of analysis because we wanted the data
to drive the findings and guide the development of the two
models of ITO – one for ITO decisions and one for ITO
outcomes. Data is at the foundation of any good theory
development and our hope is that the models can serve as a
foundation for future theory development (Strauss and
Corbin, 1997; Glaser and Strauss, 1999; Christensen, 2006;
Lyytinen, 2009).
Research method
Our review method comprised five processes to find, code,
validate, and analyze the empirical ITO literature.
Identification of 164 empirical ITO journal articles
We searched for empirical ITO journal articles in ABI
Inform, EBSCOHost, JSTOR, and Science Direct using
terms such as ‘information systems AND outsourcing,’
‘information technology AND outsourcing,’ ‘information
systems AND offshoring,’ ‘information technology AND
offshoring,’ and ‘offshore outsourcing.’ The preliminary
search resulted in a list of 347 papers related to ITO across
70 journals. Eliminating conceptual papers, papers not
related to IT outsourcing, duplicate findings (i.e., authors
using the same data to report the same findings in different
outlets), we were able to code 164 empirical articles found
in 50 publication outlets (see Table 2). These articles span
19 years (1992 to 2010).
Development of a list of 150 master codes
In order to aggregate findings across studies, we developed
a list of master codes and master code descriptions.
Creating the list was an iterative process and required
coding individual papers multiple times. The iterative
coding process began with three of us independently
coding 20 randomly chosen articles. We listed each
dependent and independent variable as named and
described by the author(s) of each of the 20 studies. These
became our list of ‘author variables’ and ‘author variable
descriptions.’ We then met to discuss the variables that
could be combined across studies to begin to build the
MC Lacity et al
master list of ‘master variables’ and ‘master variable
descriptions.’
In some cases, the author variables and the master
variables map identically. For example, many authors use
the variable name ‘Asset Specificity’ and adopt William-
son’s definition, ‘The degree to which an asset can be
redeployed to alternative uses and by alternative users
without sacrifice of productive value’ (Williamson, 1976,
1991). In other cases, the authors used slightly different
terminology to essentially capture the same variable. For
example, one article used the term ‘IT Activity Asset
Specificity’ (Barthélemy and Geyer, 2005), which we
re-coded using the master variable ‘Asset Specificity.’ Other
variables required more consideration. For example, we
coded 11 relationships which empirically examined the
variable we call ‘IS Human Resource Management Cap-
ability – Supplier’ and which we describe as ‘A supplier
organization’s ability to identify, acquire, develop, and
deploy human resources to achieve both supplier’s and
client’s organizational objectives.’ Examples of specific
variable names used by authors in the articles include,
‘Effective Human Capital Management’ (Koh et al., 2004),
‘IT Personnel Career Development’ (Levina and Ross,
2003), and ‘Vendor Staffing’ (Taylor, 2006).
Next, we re-examined the initial 20 articles and mapped
the author(s)’ variables to our master variables. During
the next iteration, three authors independently coded
the following set of 20 articles. That time, we coded the
dependent and independent variables as used by the
author(s) of each study and also mapped these variables
to the growing master list of variables and descriptions.
Three of us then met to compare and discuss our
independently coded articles. For each iteration, we added
new master variables and descriptions to the master list. As
new variables were added, we reviewed previously coded
articles to determine if any needed to be refined based on
the addition of new master variables. This process
continued until all the articles were coded. When the entire
set of articles was coded, the second author did a final pass
through all the articles to make sure we coded the articles
consistently using the master list.
By using this method, we were able to accumulate similar
variables across articles that used different terms to capture
essentially the same variable. The resulting list of master
codes and descriptions is found in Appendix A.
Codification of 741 findings across 164 empirical articles
Concurrent with the creation of the list of master variables
and descriptions, we also coded the empirical relationships
found between an independent variable and a dependent
variable within each study. The relationship coding scheme
(see Table 3) assigned four possible values to the relation-
ship between independent and dependent variables: ‘ þ 1,’
‘1,’ ‘0,’ and ‘M.’ We coded a ‘ þ 1’ for positive relation-
ships, ‘1’ for negative relationships, ‘0’ for relationships
that were studied but not empirically significant, and an ‘M’
for a non-directional relationship that mattered. Each
relationship code is explained below.
Positive relationships signify when higher values of
an independent variable were associated significantly with
higher values of a dependent variable. Negative relationships
Table 2 Empirical ITO articles included in this review by journal, year, and study method

Journals Year of publication Study methoda

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOT. L T M TOT.

1. Academy of Management Journal 1 1 1 1

2. Accounting, Management & Info Tech 1 1 1 1
3. California Management Review 1 1 2 2 2
4. Communications of the ACM 3 1 1 1 1 1 8 3 5 8
5. Communications of the AIS 1 2 1 1 5 4 1 5
6. Computers & Operations Research 2 2 1 1 2
7. Decision Sciences 1 1 2 2 2
8. Decision Support Systems 1 1 1 1
9. E-Service Journal 1 1 1 1
10. European Journal of Info Sys. 2 2 1 5 4 1 5
11. European Journal of Operational 1 1 1 1
Research
12. Harvard Business Review 1 1 2 1 1 2
13. Health Care Management Science 1 1 1 1
14. IEEE Transactions on Engineering 1 1 1 1
Review of the IT outsourcing empirical literature

Management
15. Industrial Management+Data Systems 1 1 1 1
16. Industrial Marketing Management 1 1 1 1
17. Information & Management 2 1 1 2 2 1 1 1 2 13 4 9 13
18. Information and Software Technology 1 1 1 1
19. Information Resources Management 1 1 2 1 1 2
MC Lacity et al

Journal
20. Information Systems Frontiers 1 6 7 4 3 7
21. Information Systems Management 1 1 1 3 2 1 3
22. Information Systems Research 1 1 2 2 1 7 1 5 1 7
23. Info Tech & People 1 1 1 1
24. Int. J. Production Economics 1 1 1 1
25. International Journal of Accounting 1 1 2 2 2
Information Systems
26. International Journal of Info. 1 1 1 3 1 1 1 9 5 2 2 9
Management
27. International Journal of Management 1 1 1 1
28. Journal of Global Information 1 1 1 3 3 3
Management
29. Journal of Global Info Tech 1 1 1 3 3 3
Management
30. Journal of High Tech. Management 1 1 1 1
Research
399
Table 2 Continued
400
Journals Year of publication Study methoda

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOT. L T M TOT.

31. Journal of Information Systems 1 1 1 1

32. Journal of Information Technology 5 2 2 1 1 1 12 8 4 12
33. Journal of Info Tech Case and App. 1 1 1 3 2 1 3
Research
34. Journal of Info Tech Cases and 1 1 2 1 1 2
Applications
35. Journal of International Management 1 1 1 1
Studies
36. Journal of Management Info Sys. 1 1 1 1 1 1 1 1 8 2 6 8
37. Journal of Operations Management 1 1 2 1 1 2
38. Journal of Strategic Info Sys. 1 1 1 3 2 1 3
39. Journal of Systems Management 1 1 1 1
40. Journal of the Assoc. for Info Sys. 1 1 1 1
41. Management Science 1 1 2 2 2
42. MIS Quarterly 2 2 1 2 7 3 2 2 7
43. MIS Quarterly Executive 2 2 1 1 3 9 8 1 9
44. Omega 1 1 1 1
45. Organization Science 1 1 1 1
46. Project Management Journal 1 1 1 1
Review of the IT outsourcing empirical literature

47. Sloan Management Review 1 1 1 2 1 1 1 1 1 1 11 9 2 11

48. Strategic Management Journal 1 1 2 2 2
49. Strategic Outsourcing: An Intl. 2 2 2 2
Journal
50. The Journal of Computer Info Sys. 1 1 1 1 1 5 1 4 5
MC Lacity et al

Grand total 2 2 6 11 5 8 8 3 2 6 11 12 14 14 18 11 14 15 2 164 80 71 13 164

a
These are broad study methods coded into, L: Qualitative; T: Quantitative; M: Mixed methods.
 Review of the IT outsourcing empirical literature MC Lacity et al
401

Table 3 Relationship coding scheme

Relationship Code Meaning

Significant +1 Positive Relationship: higher values of the independent variable was associated with
higher values of the dependent variable; Po0.05 for quantitative studies or strong
argument by authors for qualitative studies.
1 Negative Relationship: higher values of the independent variable was associated with
lower values of the dependent variable; Po0.05 for quantitative studies or strong
argument by authors for qualitative studies.
M A relationship between a categorical independent variable and a dependent variable
mattered; Po0.05 for quantitative studies or strong argument by authors for
qualitative studies.

Not 0 Relationship was studied and no significant relationship was found.

significant

signify when higher values of an independent variable were
associated significantly with lower values of a dependent
variable. If the study was quantitative, we used Po0.05 as
the requirement for a significant positive or negative
relationship. If the study was qualitative, we relied on the
authors’ strong arguments for a significant positive or
negative relationship. For an example of coding a
qualitative study, consider Dibbern et al. (2008). Using
qualitative research, the authors collected rich data about a
German financial institution that offshored six software
projects to an India-based supplier. They found a negative
relationship between Absorptive Capacity of the vendor
and a client’s extra costs. We coded this relationship as a
‘1’ between Absorptive Capacity-Supplier and Outsour-
cing Outcomes-IS Performance.
The ‘M’ code was needed because some significant
relationships were categorical (i.e., not ordinal, interval, or
continuous), but a relationship clearly mattered between
the independent and dependent variable. If the study was
quantitative, we relied on the significance of statistical
analyses such as a chi-square of Po0.05. For example,
in Gopal et al. (2003), contract type was a categorical
variable (either fixed price or time and materials) and the
authors found, using Probit Analysis, that requirements
uncertainty was associated with time and materials
contracts, (Pr (|Z|4z) ¼ 0.006). We thus coded the relation-
ship between Uncertainty and Contract Type as an ‘M.’ If
the study was qualitative, we relied on strong arguments by
the authors. In Lacity and Willcocks (1998), for example,
Decision Sponsorship was operationalized as a categorical
variable with three possible values: ‘Senior Executive,’ ‘IT
Manager,’ or ‘Joint Senior Executive/IT Manager’ spon-
sored ITO decision. The authors found that senior
executives and IT managers who made decisions jointly
achieved expected cost savings with a higher relative
frequency than when either stakeholder group acted alone.
It did not make sense to code this relationship as a ‘ þ 1’
because we could not say that higher values of decision
sponsors led to greater IT success. Rather, we can say that
whoever sponsored the decision affected ITO success.
Thus, we coded the relationship between the independent
variable (Decision Sponsorship) and the dependent variable
(Outsourcing Outcome: IS Performance) as ‘M’ for the
relationship mattered.
All told, we coded 741 relationships between an
independent and dependent variable. Of these, 433 were
positive and significant, 151 were negative and significant,
63 relationships mattered and 94 relationships were not
significant.
The major benefit of our review method is that it allows us
to consider results from both qualitative and quantitative
studies. Qualitative studies cannot be included in tradi-
tional meta-analyses because they do not statistically report
effect sizes such as Pearson correlations. IT researchers
have long called for more qualitative approaches to
supplement quantitative approaches (Orlikowski and Bar-
oudi, 1999). Our review includes 71 quantitative papers, 80
qualitative papers, and 13 papers that used both qualitative
and quantitative methods. Although a quantitative meta-
analysis can assess the strength of an independent variable
on a dependent variable, not just the existence of a
significant relationship, as our method does, we selected
our method over a meta-analysis because we wanted to
capture the findings from a greater number of studies
(Jeyaraj et al., 2006). We did not want to eliminate over half
of the empirical ITO articles because they were qualitative.
Verification of codes by surveying a sample of original authors
In addition to independently coding the articles, we sought
to confirm further the reliability and validity of the coding.
We sent emails to the first authors of 16 randomly chosen
studies and asked them to indicate the extent to which they
agreed with our coding of their findings. In total, we
solicited feedback for 105 findings, representing 14% of the
sample. We provided the variables used in their studies, our
master variables (and descriptions) that their variables were
‘coded as’ and the relationships between the independent
and dependent variables per our coding scheme provided
in Table 3. (See Appendix B for the email template sent to
original authors.) Of the 16 emails sent, we received
responses from 10 within the requested one-week time-
frame. Reminder emails resulted in three more responses,
for an overall response rate of 81%. These 13 studies
covered 80 of the relationships coded (11% of the total).
Overall, the original authors strongly agreed with our
coding, with a mean rating of 6.72 (SD ¼ 0.98) on a 7-point
 Review of the IT outsourcing empirical literature MC Lacity et al
402

Likert scale with a ‘1’ indicating ‘Strongly disagree with the Table 4 Dependent variables used in ITO research
coding’ and a ‘7’ indicating ‘Strongly agree with the coding.’ # Dependent variable Freq.
We only made changes to two findings: one author
convinced us to change one relationship coded from an ITO decisions
‘M’ to a ‘ þ 1’ and one author pointed us to a data entry 1. Outsourcing Decision-Make or Buy 280
error. Overall, results of the author verification provide 2. Outsourcing Decision – Offshoring 33
strong confidence in our coding. 3. Contract Type 18
4. Outsourcing Decision – Degree of 12
Build two models of ITO – one pertaining to ITO decisions and the Outsourcing
other pertaining to ITO outcomes – based on frequency counts and 5. Contract Size 4
consistency of evidence 6. Contract Detail 4
To extract concise, meaningful, and helpful findings across 7. Outsourcing – Telecommunications and 3
the literature, we counted the number of times a relation- Networks
ship between an independent and dependent variable was 8. Outsourcing – Systems Operations 3
studied and the number of times it was found to be 9. Outsourcing – End-user support 3
positively significant, negatively significant, insignificant, 10. Outsourcing – Planning and 3
or that a relationship mattered. We created two models by Management
extracting the most frequently examined variables that 11. Outsourcing – Applications 2
produced consistent results across studies, using the rules Development and Maintenance
that the variable had to be empirically examined at least five Total 365
times (Jeyaraj et al., 2006) and that at least 60% of evidence
had to be consistent. One model pertains to ITO decisions ITO outcomes
and the other model pertains to ITO outcomes. 1. Outsourcing Outcomes – Success 134
2. Outsourcing Outcomes – Success – 44
Offshore
Findings 3. Relationship Quality 33
We organized the findings into four sections. The first 4. Outsourcing Outcomes – Business 31
section examines the dependent variables used in ITO Performance – Client
research, the second section examines the independent 5. Outsourcing Outcomes – Project 28
variables used in ITO research, and the third section Performance – Offshore
examines the relationships between independent and 6. Outsourcing Outcomes – IS 26
dependent variables. The fourth section reports on findings Performance
pertaining to interactions among variables and learning 7. Outsourcing Outcomes – SET 23
curve effects. Satisfaction
8. Length of Relationship 9
9. Service Quality 9
Findings on dependent variables 10. Outsourcing Outcomes – Project 9
Mahnke et al. (2005) noted that ITO researchers adopt a Performance
wide dispersion of dependent variables. Our review corro- 11. Outsourcing Outcomes – Business 8
borates this finding. We identified 36 dependent variables Performance – Supplier
(see Table 4) used in ITO research. We categorized these 12. Trust 6
36 variables into two broad categories: dependent variables 13. Relational Governance 3
that examine ITO decisions and dependent variables that 14. Initial Trust 2
examine ITO outcomes. These two broad categories have 15. Supplier Employee Performance 1
received nearly equal attention, with ITO decisions repre- 16. Maintenance Efforts 1
senting 365 of the 741 (49%) relationships and ITO outcomes 17. Process Performance 1
representing 376 of the 741 relationships (51%). 18. Conflict 1
19. IS Human Resource Management 1
ITO decisions Capability – Supplier
ITO researchers have clearly studied a range of outsourcing 20. Client Relationship Management 1
decisions from the most fundamental make-or-buy deci- Capability
sion (e.g., Arnett and Jones, 1994) to more nuanced 21. IS Department Power 1
decisions about sourcing specific IT functions (e.g., Grover 22. Supplier Management Capability 1
et al., 1994). ITO researchers have studied decisions about 23. Cooperation 1
which types of contracts to sign, and how big and detailed 24. IS Technical and Methodological 1
these contracts are (e.g., Gopal et al., 2003). ITO researchers Capability – Supplier
have also studied decisions about sourcing locations, such 25. IS Technical and Methodological 1
as sourcing to suppliers located offshore (e.g., Kaiser and Capability – Client
Hawk, 2004). In all, the ITO research in our sample used 11 Total 376
dependent variables to address ITO decisions (see Table 4). Total number of dependent variables: 36 Grand total
In examining the specific dependent variables in Table 4, 741
the two most frequently studied dependent variables in this
 Review of the IT outsourcing empirical literature MC Lacity et al
403

category include decisions about whether to insource or

outsource (Outsourcing Decision – Make-or-Buy examined
280 times) and whether to source offshore or not (Out-
sourcing Decision – Offshoring examined 33 times). The
third most frequently examined dependent variable relates
to decisions about which type of contract clients chose to
govern an outsourcing transaction (Contract Type exam-
ined 18 times). The primary units of analysis have been the
IS function or the transaction. At the IS function level, ITO
researchers have looked at the degree of outsourcing within
an IS department in terms of the number of functions
outsourced (e.g., Koh et al, 2004) or the amount
of the IT operating budget outsourced (e.g., Lacity and
Willcocks, 1998). At the level of the transaction, ITO
researchers have examined individual decisions to out-
source a transaction or which types of contracts are selected
to govern a specific transaction (e.g., Gopal et al., 2003).

ITO outcomes Figure 1 The dependent variable over time.

ITO researchers have also examined a plethora of ITO
outcomes as evidenced by the 25 dependent variables used
to examine the consequences of IT outsourcing. The most
researchers asked less about what determines whether a
frequently studied dependent variables in this category
company decides to outsource or not and proceeded to
include outcomes that capture a client’s general perceptions
study increasingly the outcomes of outsourcing. By 2001,
of the success or level of satisfaction with outsourcing
there was a trend towards an increase in the study of ITO
(Outsourcing Outcomes - Success examined 134 times) and
outcomes relative to ITO decisions. (Note: the dip in 2010
offshoring (Outsourcing Outcomes – Success – Offshore
arises from our completion of coding in the first quarter
examined 44 times). ITO researchers have studied the
of 2010; clearly, more ITO articles will be published in 2010
perceptions of the quality of relationships (Relationship
and beyond.)
Quality) 33 times, followed closely by the effects of
We also looked more closely at the growth in research
outsourcing on a client organization’s business perfor-
that addresses offshore outsourcing (see Table 5). In total,
mance (Outsourcing Outcomes – Business Performance –
offshore outsourcing decisions and outcomes have been
Client examined 31 times).
examined 105 times, representing 14% of the overall sample
Researchers have generally studied ITO outcomes using
(e.g., Dutta and Roy, 2005; Cha et al., 2008). The majority of
four units of analysis – the organization, the IS function,
this research has been done after 2000. This analysis is
the client and supplier relationship, and the project. At an
particularly important because it shows that offshore
organizational level, ITO researchers have examined the
outsourcing of IT has matured from an evolving research
consequences of ITO on firm-level performance using such
area, as identified by Dibbern et al. (2004), to a more
metrics as stock price performance and financial perfor-
mature topic 10 years later. (The distinctive spike in 1995 is
mance (e.g., Madison et al., 2006; Gewald and Gellrich,
actually 11 findings from one particularly forward-thinking
2008; Wang et al., 2008). At the level of an IS function, ITO
paper by Sobol and Apte (1995). Those authors surveyed
researchers have examined the consequences of ITO on
the most effective users of IT in the USA and asked them
improvements such as reduced costs or increased service
about the advantages and disadvantages of outsourcing
levels (e.g., Domberger et al., 2000; Dibbern et al., 2008). At
domestically and globally.)
the level of a client and supplier relationship, ITO
researchers have examined the effects of ITO on Relation-
ship Quality, Trust, Conflict, and Cooperation between Findings on the independent variables
partners (e.g., Grover et al., 1994; Lee and Kim, 1999). At We identified 138 independent variables used in ITO
the level of a project, ITO researchers have examined the research. To facilitate the discussion of such a large number
consequences of ITO on cost, quality, and time to complete of independent variables, we categorized them into 13
outsourced projects (e.g., Gopal et al., 2002). broader categories and sorted them by frequency of use
(see Table 6). Each category is briefly discussed below.
The dependent variables over time
Because the sample spans 19 years, we can also gain a clear Motivation to outsource
understanding of how the dependent variables have Overall, independent variables that examined the motiva-
changed over time. In Figure 1, we map the two broad tions or reasons that client firms pursue IT outsourcing
categories of dependent variables (ITO decisions and ITO were the most frequently studied category among the 13
outcomes) over time. Early ITO research was focused more broader categories. Within this category, 20 different
on ITO decisions. In 1995 alone, the ITO decision was independent variables have been examined a total of 161
examined 69 times compared to ITO outcomes, which was times. Cost Reduction was the most common motive
studied 22 times that year. Over time, however, ITO studied by researchers (examined 43 times), followed by
 Review of the IT outsourcing empirical literature MC Lacity et al
404

Table 6 Independent variables used in ITO research

Offshore outsourcing decisions and outcomes 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOT
33
28

44

105
# Independent variable Freq.

Motivation to outsource
1. Cost Reduction 43

5
6

12
2. Focus on Core Capability 25
3. Access to Expertise/Skills 18
4. Business/Process Performance 16

5
15

20
Improvements
5. Technical Reasons 10
3

11

14
6. Political Reasons 7
7. Concern for Security/Intellectual Property 6
4

11

15 8. Fear of Losing Control 5

9. Flexibility Enablement 4
10. Commercial Exploitation 4
3

11. Change Catalyst 4

12. Access to Global Markets 3
10

12

22

13. Scalability 3
14. Rapid Delivery 2
15. Alignment of IS and Business Strategy 2
16. Career Development of IS Employees 2
17. Cost Predictability 2
5

18. Need to Generate Cash 2

19. Head Count Reduction 2
20. Innovation 1
Motivations to outsource total 161

Transaction attributes
1. Uncertainty 26
2

2. Asset Specificity 21
3. Measurement Difficulty 11
4. Transaction Costs 11
5. Critical Role of IS – Transaction 9
6. Business Risk 5
7. External Production Cost Advantage 5
8. Transaction Size 4
9. Task Complexity 4
10. Transaction Frequency 3
11

11

11. Task Interdependence 3

12. Client-specific Knowledge Required 3
13. Technical Knowledge Required 3
14. Opportunism 3
15. Transaction Homogeneity 2
16. Task Structure 1
17. Switching Costs 1
Transaction attributes total 115
Outsourcing outcomes – success – offshore

Relationship characteristics
Cells indicate number of relationships coded.

1. Effective Knowledge Sharing 12

Table 5 Offshore outsourcing research over timea

2. Cultural Distance 11
3. Trust 11
Outsourcing decision – offshoring
Outsourcing outcomes – project

4. Prior Client/Supplier Working Relationship 10

5. Communication 9
6. Relationship Quality 6
7. Partnership View 6
performance – offshore

8. Relationship Flexibility 5
9. Geographic Distance 5
10. Client-Supplier Interface Design 4
11. Commitment 4
12. Number of Liaisons 3
13. Benefits and Risk Sharing 3
14. Mutual Understanding 3
Total

15. Social Capital 2

16. Frequency of Project Status Meetings 2
a
 Review of the IT outsourcing empirical literature MC Lacity et al
405

Table 6 Continued Table 6 Continued

17. Conflict 2 3. Contract Duration 8

18. Norms 2 4. Control Mechanisms 5
19. Relationship Specific Investment 1 5. Contract Size 5
20. Time Zone Differences 1 6. Contract Flexibility 3
21. Future Business Potential 1 7. Prompt Payment 1
22. Persistence of Expectations 1 8. Contract Recency 1
23. Cooperation 1 Contractual governance total 45
24. Relational Governance 1
25. Mutual Dependency 1 Supplier firm capabilities
Relationship characteristics total 107 1. IS Human Resource Management Capability 11
– Supplier
Client firm characteristics 2. IS Technical and Methodological Capability 9
1. Client Size 18 – Supplier
2. Industry 15 3. Domain Understanding 7
3. Prior IS Department Performance 13 4. Managing Client Expectations 4
4. Prior Firm Performance 10 5. Risk Management Capability – Supplier 3
5. IS Department Size 9 6. Supplier’s Core Competencies 3
6. Client Experience with Outsourcing 7 7. Client Management Capability 2
7. Information Intensity 6 8. Project Scoping Accuracy 1
8. Critical Role of IS – Organization 5 9. Absorptive Capacity – Supplier 1
9. Financial Leverage 3 10. Demonstratability 1
10. Centralization of IS department 2
11. IS Department Power 2 Supplier firm capabilities total 42
12. Business Strategic Type 2 Decision characteristics
13. Financial Slack 2 1. Evaluation Process 8
14. Country 1 2. Top Management Commitment/Support 7
15. Culture 1 3. Decision Sponsorship 5
16. CIO – CEO Proximity 1 4. Engagement of Multiple Suppliers 3
17. IS Chargeback Structure 1 5. Client User Participation 1
Client firm characteristics total 98 6. Stakeholder Buy-in 1
Client firm capabilities Decision characteristics total 25
1. Supplier Management Capability 11 ITO outcomes
2. IS Technical and Methodological Capability 8 1. Service Quality 3
– Client 2. Supplier Employee Performance 2
3. Risk Management Capability – Client 7 3. Product Quality 2
4. Contract Negotiation Capability 7 4. Outsourcing Outcomes – Success 2
5. Cultural Distance Management Capability 7 5. Supplier Profitability 1
6. IT Management Competence 5 6. Project Execution Swiftness 1
7. Client Outsourcing Readiness 3
8. IS Change Management Capability 3 ITO outcomes total 11
9. Absorptive Capacity – Client 2
Environment
10. Transition Management Capability 2
1. Supplier Competition 7
11. IS Human Resource Management Capability 2
2. Legal and Political Uncertainties 3
– Client
3. Ethnocentricism 1
Client firm capabilities total 57
Environment total 11
ITO decisions
1. Outsourcing Decision - Make-or-Buy 27 Influence sources
2. Outsourcing Decision – Degree of 12 1. Influences – Mimetic 5
Outsourcing 2. Influences – External and Internal 3
3. Outsourcing Decision – Offshoring 4 3. Influences – Normative 1
4. Outsourcing – Telecommunications and 2 4. Influences – Coercive 1
Networks Influence sources total 10
5. Outsourcing – End-user support 1
6. Outsourcing – Planning and Management 1 Supplier firm characteristics
7. Outsourcing – Applications Development 1 1. Supplier Reputation 5
and Maintenance 2. Supplier Size 4
8. Outsourcing – Systems Operations 1 3. Clear Authority Structures 1
ITO decision total: 49 Supplier firm characteristics total 10

Contractual governance Total number of independent variables: 138

1. Contract Detail 14 Grand total 741
2. Contract Type 8
 Review of the IT outsourcing empirical literature
406
the desire to Focus on Core Capabilities (examined 25
times) and Access to Expertise/Skills (examined 18 times).
Although many practitioners and researchers argue that
ITO decisions are driven by strategic reasons (e.g.,
McFarlan and Nolan, 1995), truly strategic reasons for
outsourcing IT have been relatively under-studied. In our
sample, strategic reasons like Commercial Exploitation
(examined four times) and Innovation (examined once)
may point to a gap in our knowledge (e.g., Kishore et al.,
2004).
Transaction attributes
ITO researchers have broadly studied the transaction
attributes that client firms consider when outsourcing or
have studied how transaction attributes affect ITO out-
comes 115 times. Among the 17 independent variables in
this category, the most frequently examined transaction
attributes come directly from TCE (Williamson, 1991,
2005): Uncertainty (26 times), Asset Specificity (21 times),
Measurement Difficulty (11 times), and Transaction Costs
(11 times) (e.g., Nam et al., 1996). Other TCE variables in
this category include External Production Cost Advantage,
(e.g., Poppo and Zenger, 1998), Transaction Frequency, and
Opportunism. We also see the influence of many task
characteristics such as Task Complexity, Task Interdepen-
dence, and Task Structure (e.g., Fisher et al., 2008).
Relationship characteristics
Relationship characteristics include 25 independent vari-
ables that examine a rich array of factors about client-
supplier relationships. In all, ITO researchers have exam-
ined relationship characteristics 107 times. The most
frequently examined independent variable is Effective
Knowledge Sharing between the client and supplier firms,
examined 12 times (e.g., Lee, 2001; Rottman and Lacity,
2006). Cultural Distance, the extent to which the members
of two groups differ on one or more cultural dimensions
(e.g., Dibbern et al., 2008) and Trust (e.g., Adler, 2003/2004;
Alami et al., 2008; Lee et al., 2008) were the second most
frequently examined relationship characteristics, each
examined 11 times. As many client firms are in their third
or even fourth generation of outsourcing, we see that ITO
researchers in our sample have studied 10 times the effects
of Prior Client/Supplier Working Relationship on subse-
quent ITO decisions and outcomes (e.g., Benamati and
Rajkumar, 2002).
Client firm characteristics
Many ITO researchers have examined the characteristics in
terms of financial attributes of the client firm, character-
istics of the IS department within the client firm, and
characteristics of the industry in which the client firm
operates. Seventeen variables are in this category and they
have been examined a total of 98 times. The three most
frequently studied client firm characteristics are Client Size
(examined 18 times), Industry (examined 15 times), and
Prior IS Departmental Performance (examined 13 times)
(e.g., Koh et al, 2004; Oh et al., 2006; Goo et al., 2007).
MC Lacity et al
Client firm capabilities
ITO researchers have long understood that client firms
need special capabilities in order to engage successfully
with ITO suppliers (e.g., Feeny and Willcocks, 1998). In this
category, ITO researchers have examined 11 different client
firm capabilities a total of 57 times. The most studied client
capability is the extent to which a client organization is able
to effectively manage outsourcing suppliers (Feeny and
Willcocks, 1998; Willcocks et al., 2007), which we call
Supplier Management Capability. It has been examined 11
times. The client firm’s IS Technical and Methodological
Capability is the next most frequently studied capability,
examined eight times (e.g., Ross and Beath, 2006), followed
by Risk Management Capability (e.g., Kern et al., 2002),
Contract Negotiation Capability (e.g., Ranganathan and
Balaji, 2007), and Cultural Distance Management Capability
(Winkler et al., 2008), each examined seven times.
ITO decision
As a class of independent variables, researchers have studied
eight types of IT decisions a total of 49 times. These eight
types of decisions are: Outsourcing Decision – Make-or-Buy,
Outsourcing Decision – Degree of Outsourcing, Outsour-
cing Decision – Offshoring, Outsourcing – Telecommunica-
tions and Networks, Outsourcing – End-user Support,
Outsourcing – Planning and Management, Outsourcing –
Applications Development and Maintenance, and Out-
sourcing – Systems Operations. When used as an
independent variable, researchers ask ‘How does an ITO
decision affect ITO outcomes?’ Outsourcing Decision –
Make-or-Buy and Degree of Outsourcing are the two most
frequently studied independent variables in this category,
examined 27 times and 12 times respectively (e.g., Allen
et al., 2002; Levina and Ross, 2003).
Contractual governance
Like ITO decisions, we see that contractual governance has
been used as both a dependent and an independent
variable. As a dependent variable, ITO researchers asked
what determines the kind of contract a client chose. When
used as an independent variable, ITO researchers asked
how that choice affected ITO outcomes (e.g., Baldwin et al.,
2001; Barthélemy, 2001). As an independent variable, ITO
researchers have examined contractual governance 45
times, using eight variables associated with ITO contracts,
including level of Contract Detail (examined 14 times),
Contract Type (examined eight times), and Contract
Duration (examined eight times).
Supplier firm capabilities
This broad category of 10 independent variables examines
the capabilities suppliers need to be competitive in the
market (e.g., Feeny et al., 2005). Among the 42 times
supplier capabilities that have been studied, the most
frequently examined were a supplier’s IS Human Resource
Management Capability (examined 11 times) and a
supplier’s IS Technical and Methodological Capability
(examined nine times).
 Review of the IT outsourcing empirical literature
Decision characteristics
Decision characteristics, studied a total of 25 times, include
six independent variables that consider who and how client
firms make ITO decisions (e.g., Chaudhury et al., 1995).
The Evaluation Process was studied eight times, followed by
Top Management Commitment/Support (examined seven
times), and Decision Sponsorship (examined five times)
(e.g., Cross, 1995; Currie, 1998).
ITO outcomes
This category is interesting because it includes research
that studied how the outcomes of one ITO engagement
subsequently affected future ITO decisions and outcomes
(e.g., Whitten and Leidner, 2006; Goo et al., 2007).
However, this category has been studied only 11 times
with six variables.
Environment
Surprisingly little research has been conducted on the
effects of the environment on ITO decisions and outcomes.
As a broad category, only three independent variables have
been studied 11 times (e.g., Gopal et al., 2003; Smith and
McKeen, 2004). These three variables are Supplier Compe-
tition (examined seven times), Legal and Political Un-
certainties (examined three times), and Ethnocentrism
(examined one time).
Influence sources
Influence sources have been examined 10 times overall.
This category includes four independent variables, three of
which are from the theory of Institutional Isomorphism
(DiMaggio and Powell, 1991). Institutional Isomorphism
asks why so many organizations adopt similar practices,
such as IT outsourcing (e.g., Ang and Cummings, 1997).
The theory posits that firms are influenced by three
sources: mimetic, normative, and coercive. The other
variable in this category – Influence-External and Internal
– comes from Innovation Diffusion Theory (Rogers, 1983)
and has been studied three times (e.g., Hu et al., 1997).
Supplier firm characteristics
Overall, supplier firm characteristics have been examined
10 times (e.g., Koh et al., 2004; Kim, 2009). In our sample,
three independent variables capture supplier firm char-
acteristics: Supplier Reputation (examined five times),
Supplier Size (examined four times), and Clear Authority
Structures (examined once).
Thus, in total, our sample includes 36 dependent
variables categorized into two broad categories (ITO
decision and ITO outcome) and 138 independent variables
categorized into 13 broad categories. In the next section we
discuss the relationships we found between independent
and dependent variables.
Findings on relationships between independent and dependent
variables
In this section, we summarize some of the major findings
about the 741 relationships we coded between independent
and dependent variables. These 741 relationships were
coded at the level of the 36 dependent variables and the 138
MC Lacity et al
407
independent variables. At this detailed level, the frequency
with which findings were replicated across studies was
minimal and does not provide a very coherent or
comprehensive picture of ITO research. Because we aimed
to encapsulate the vast empirical literature on ITO –
covering two decades – in a way that is concise, meaningful,
and helpful to researchers, we moved to a higher unit of
analysis. We did this by reporting the 741 findings using
the two broad categories for the dependent variable: ITO
decisions and ITO outcomes (see Appendix C). We retained
the specific independent variables and have sorted them by
frequency within their broader 13 categories. Although we
lose some precision when we aggregate to the broader two
categories of DVs, we gain a better overall understanding of
the determinants of ITO decisions and the determinants of
ITO outcomes.
Findings on the determinants of ITO decisions
Appendix C lists the entire set of 365 relationships between
specific independent variables and the meta-variable ITO
decision. Appendix C answers in detail the question: which
variables have ITO researchers studied most frequently
and what have they found pertaining to the determinants
of IT outsourcing decisions? To facilitate a discussion of
these findings, we created Figure 2 by extracting the best
evidence from Appendix C in terms of multiple examina-
tions of a variable that produced consistent results. In terms
of multiple examinations, we used the decision rule to
extract the relationships that have been examined by ITO
researchers at least five times (Jeyaraj et al., 2006). In terms
of consistent results, we extracted variables in which at least
60% of the evidence was consistent. We selected this
minimum threshold to ensure that more than half the
evidence produced the same findings. But of course, we also
wanted to identify the most robust findings and thus
created a tiered legend. Specifically, we used ‘( þ þ )’ to
indicate that when more than 80% of the times a relation-
ship was examined, the authors found a positively
significant relationship. For example, in Appendix C, Cost
Reduction was examined 40 times, and 36 times (90%) it
was found to motivate positively and significantly an ITO
decision. Therefore we assigned the relationship between
Cost Reduction and ITO decisions the symbol ‘( þ þ )’ in
Figure 2. We used a ‘( þ )’ when 60 to 80% of the evidence
was positively significant. For example, in Appendix C,
Political Reasons was examined seven times and was found
to be a positive motivation five times (71%) and was thus
assigned ‘( þ )’ in Figure 2. Similarly, ‘( )’ indicates
when more than 80% of the evidence was negatively
significant and ‘()’ indicates when 60 to 80% of the
evidence was negatively significant. Obviously, the findings
with more than 80% consistency are more robust than the
findings with between 60 and 80% consistency. These cut-
off points depend on the decision rules we adopted,
but because the data is all available in Appendix C, other
researchers can re-run analyses using different decision
rules.
Overall, Figure 2 is a model of the major determinants of
ITO decisions. The figure captures the 14 independent
variables that have been examined at least five times and
have produced consistent results, organized by the broader
 Review of the IT outsourcing empirical literature
408
MOTIVATIONS TO OUTSOURCE:
• Cost Reduction (++)
• Focus on Core Capabilities (++)
• Access to Skills/Expertise (++)
• Business/Process Improvements (++)
• Technical Reasons (++)
• Political Reasons (+)
• Concern for Security (-)
• Fear of Losing Control (- -)
ITO
DECISIONS
CLIENT FIRM CHARACTERISTICS:
• Prior IS Department Performance (-)
LEGEND:
(++) more than 80% of the evidence is positive and significant
(+) 60% to 80% of the evidence is positive and significant
(- -) more than 80% of the evidence is negative and significant
(-) 60% to 80% of the evidence is negative and significant
Figure 2 Descriptive model of findings on ITO decisions.
categories of independent variables. Only four of the broad
categories – Motivation to Outsource, Transaction Attri-
butes, Client Firm Characteristics, and Influence Sources –
had independent variables that were examined at least five
times and produced consistent results.
Motivation to outsource. ITO researchers have extensively
studied the motivations to outsource IT. Eight specific
motivations were examined at least five times and produced
consistent results. When considering the top five findings in
this category, we see that ITO researchers have found strong
empirical support that what drove most outsourcing
decisions was the desire to reduce costs on what is viewed
as a non-core IT activity better provided by suppliers with
superior skills, expertise, and technical capabilities. The
relationship between the independent variable Cost Reduc-
tion and the dependent variable ITO decision was the most
frequently examined relationship. Of the 40 times the
relationship was studied, ITO researchers found that Cost
Reduction was a motivating factor in making an out-
sourcing decision 36 times (90%) (e.g., Beverakis et al.,
2009). Since the inception of ITO, cost reduction has
remained an important driver for a majority of client firms,
from the earliest studies (e.g., Lacity et al., 1994) to more
recent ones (e.g., Fisher et al., 2008). Only three times did
clients report that cost was not a significant motivation for
outsourcing (e.g., Beaumont and Costa, 2002). The relation-
ship between Focus on Core Capabilities and ITO decision
was the second most frequently examined relationship. Of
the 23 times it was examined, a significant positive
relationship was found 21 times (e.g., Currie and Seltsikas,
2001). Thus, there is strong empirical evidence that client
firms outsource IT to focus on other core activities. The
implication of this finding is that client firms were not
outsourcing IT functions they considered among their core
MC Lacity et al
TRANSACTION ATTRIBUTES:
• Uncertainty (-)
• Critical Role of IS - Transaction (-)
• Transaction Costs (- -)
• Business Risk (-)
INFLUENCE SOURCES:
• Mimetic (+ +)
capabilities (Prahalad and Hamel, 1990). This finding
makes particular sense in light of the third most frequently
studied relationship between Access to Skills/Expertise
(e.g., McLellan et al., 1995). A client’s desire or need to
access supplier(s) skills/expertise was a significant motiva-
tion in outsourcing IT 16 of the 17 times (94%) it was
studied. The next two most frequently examined relation-
ships show that client firms outsource IT when they
desire or need to improve a client’s business or processes
(examined 16 times and significant 15 times (94%)) or
when they seek to gain access to leading edge tech-
nology available through the suppliers and which
may not be available in-house (examined 10 times and
always found to be a significant factor motivating an
ITO decision). Political Reasons, such as when a client
stakeholder used an outsourcing decision to promote a
personal agenda, was examined seven times and found five
times (71%) to be a significant factor motivating out-
sourcing decisions. Political Reasons included the desire to
eliminate a burdensome function, to enhance a career path,
or to maximize personal financial benefits (e.g., Lacity
et al., 1994; Peled, 2001; Hall and Liedtka, 2005; Gonzalez
et al., 2005). The remaining two motivations – Concern for
Security and Fear of Losing Control – were the only
motives that were negatively related to ITO decisions. The
more concern for security, the less likely a client firm
chose outsourcing (e.g., Sobol and Apte, 1995). Similarly,
the more fear of losing control, the less likely a client firm
chose outsourcing (e.g., Patane and Jurison, 1994).
Client firm characteristics. In Figure 2, Prior IS Department
Performance is the only client firm attribute that has been
studied at least five times and has produced consistent
results. When the CIO, CEO, or other senior members
perceived that the IS department had low performance, they
 Review of the IT outsourcing empirical literature
were more likely to outsource IT. This relationship was
examined 12 times and was negatively significant nine
times (e.g., Pinnington and Woolcock, 1995; Beulen and
Ribbers, 2003).
Four other client firm characteristics have been tested at
least five times, but mixed results were found: Client Size,
Industry, Prior Firm Performance, and IS Department
Size (see Appendix C). For example, Client Size has been
examined 15 times as a determinant of outsourcing. Three
studies found that larger clients were more likely to
outsource IT (e.g., Beaumont and Costa, 2002) and five
studies found that smaller clients were more likely to
outsource IT (e.g., Lin et al., 2007). Six studies found no
relationship between client size and decisions to outsource
IT (e.g., Grover et al., 1994).
One client firm characteristic – Information Intensity –
was examined six times and four times it was found to be
not significant (67%). Thus, the evidence suggests that
Information Intensity is not a determinant of outsourcing
and therefore it does not appear in Figure 2.
Transaction attributes. In Figure 2, four independent
variables capturing transaction attributes have been studied
at least five times and produced consistent results. ITO
researchers have found consistent evidence that higher
values of Uncertainty, the Critical Role of IS, Transaction
Costs, and Business Risks led to less outsourcing of IT. TCE
predicts negative relationships between Uncertainty and the
decision to outsource and between Transaction Costs and
decision to outsource, which are both supported in the ITO
context.
We also note that there is an interesting finding
pertaining specifically to TCE. Despite the dominance of
TCE as a theory to study ITO decisions (Dibbern et al.,
2004), the 15 studies on its key construct – Asset Specificity
– produced mixed results (see Appendix C). TCE predicts a
negative relationship between Asset Specificity and out-
sourcing, but this was supported only 4 of the 15 times it
was examined (27%) (e.g., Barthélemy and Geyer, 2005).
Contrary to TCE, ITO researchers found that higher values
for Asset Specificity led to outsourcing IT in six studies
(e.g., Aubert et al., 2004) and five times no relationship was
found (e.g., Nam et al., 1996).
Influence sources. Within the broad category of Influence
Sources, Mimetic influence was the only independent
variable studied at least five times and produced consistent
results (e.g. Jayatilaka, 2002). Influences that arise from the
perception that peer organizations are more successful were
found to positively and significantly affect IT outsourcing
decisions every time it was examined (e.g., Loh and
Venkatraman, 1992; Pinnington and Woolcock, 1995; Ang
and Cummings, 1997; Benamati and Rajkumar, 2002).
Findings on the determinants of ITO outcomes
Appendix C also lists the entire set of 376 relationships
between specific independent variables and the meta-variable
ITO outcome. Appendix C answers in detail the question:
what have ITO researchers studied most frequently and
what have they found pertaining to the determinants of
IT outsourcing outcomes? Figure 3 captures the most
MC Lacity et al
409
important findings and organizes the relationships between
specific independent variables and ITO outcome by the
broader categories for independent variables. To be in-
cluded in Figure 3, an independent variable must have been
examined at least five times (Jeyaraj et al., 2006) and must
have produced consistent evidence. In total, 25 variables
meet these criteria.
Relationship characteristics. Relationships Characteristics
was the most frequently studied set of independent
variables in our sample. Within this broad category, ITO
researchers have examined seven independent variables
pertaining to client/supplier relationships at least five
times. All of these produced consistent results. With the
exception of Cultural Distance, higher values for all these
independent variables – Effective Knowledge Sharing, Trust,
Communication, Partnership View, Prior Client/Supplier
Working Relationship, and Relationship Quality – were
associated with higher values of positive ITO outcomes.
Effective Knowledge Sharing is the degree to which clients
and suppliers are successful in sharing and/or transferring
knowledge. Effective Knowledge Sharing was always
positively associated with better ITO outcomes in the 11
relationships coded (e.g. Oshri et al., 2008). For example, in
a survey of 195 Korean public sector organizations, Lee
(2001) reported a significant positive correlation between
overall knowledge sharing and outsourcing success in terms
of strategic, economic, and technological benefits. Trust is
defined here as the confidence that the behavior of another
will conform to one’s expectations and in the goodwill
of another (Hart and Saunders, 1997; Sabherwal, 1999). Of
the 10 times Trust was empirically examined, it was always
associated with better ITO outcomes or found to matter.
For example, in a survey of 267 project teams belonging
to five major ITO suppliers in Korea, Trust was found to be
a strong determinant of ITO success (Han et al., 2008).
Cultural Distance refers to the extent to which the members
of two distinct groups (such as client and supplier
personnel) differ on one or more cultural dimensions.
Higher values of Cultural Distance were negatively and
significantly related to ITO outcomes seven out of eight
times it was studied empirically. For example, Beaumont
and Costa (2002) report that ITO clients they interviewed
cite ‘cultural match between the service provider and client’
to be one of the factors most associated with successful ITO.
Communication – the degree to which parties are willing to
openly discuss their expectations, progress, capabilities,
strengths, weaknesses, and directions for the future – has
been examined seven times and always been associated
with better ITO outcomes or found to matter (e.g., Klepper,
1995). Partnership View is a client organization’s con-
sideration of suppliers as trusted partners rather than as
opportunistic vendors. In five out of six cases, higher
values of Partnership View were positively associated with
higher values of ITO outcomes. For example, based on 34
interviews, Saunders et al. (1997) observed that clients who
felt that their vendors were strategic partners (i.e., took a
partnership view), as opposed to mere suppliers, reported
their outsourcing arrangements to be highly successful in
economic terms. Prior Client/Supplier Working Relation-
ship had positive effects on subsequent ITO outcomes in
 Review of the IT outsourcing empirical literature
410
RELATIONSHIP CHARACTERISTICS
:
• Effective Knowledge Sharing (++)
• Trust (++)
• Communication (++)
• Partnership View (++)
• Prior Client / Supplier Working Relationship (++)
• Relationship Quality (++)
• Cultural Distance (--)
CLIENT FIRM CAPABILITIES:
• Supplier Management Capability (++)
• Contract Negotiation Capability (++)
• IS Technical and Methodological Capability–Client
(++)
• Cultural Distance Management Capability (+)
• Risk Management Capability –Client (+)
ITO
OUTCOMES
ITO DECISION:
• Outsourcing Decision –Make or Buy (+)
CLIENT FIRM CHARACTERISTICS:
:
• Client Experience with Outsourcing (++)
LEGEND:
(++) more than 80% of the evidence is positive and significant
(+) 60% to 80% of the evidence is positive and significant
(--) more than 80% of the evidence is negative and significant
(-) 60% to 80% of the evidence is negative and significant
Figure 3 Descriptive model of findings on ITO outcomes.
five of the six times it was studied (e.g., Mayer and
Salomon, 2006). Higher values of Relationship Quality were
positively and significantly related to ITO outcomes five out
of five times it was empirically studied. For example, Lee
and Kim (1999) found in a sample of 36 Korean firms that
Partnership Quality (i.e., Relationship Quality) was posi-
tively and significantly correlated with two ITO outcomes:
business success and user perceptions of information
quality.
ITO decision. As previously noted, ITO researchers have
examined the ITO decision as both a dependent and an
independent variable. In this section, we examine the
findings pertaining to ITO decision as an independent
variable that affects ITO outcomes. One specific indepen-
dent variable has been studied at least five times and
produced consistent results: Outsourcing Decision – Make-
or-Buy examined 27 times. Clients reported positive out-
comes from outsourcing IT 63% of the time, negative
outcomes 22% of the time, and no changes in performance
as a consequence of outsourcing IT 15% of the time.
One other ITO decision variable – Outsourcing Decision
– Degree of Outsourcing – was studied at least five times,
but the results were inconsistent (see Appendix C). The
Outsourcing Decision – Degree of Outsourcing is the
amount of outsourcing as indicated by percentage of IS
MC Lacity et al
CONTRACTUAL GOVERNANCE:
• Contract Detail (++)
• Contract Size (++)
• Contract Type (MM)
• Control Mechanisms (MM)
SUPPLIER FIRM CAPABILITIES:
• IS Human Resource Management Capability –
Supplier (++)
• IS Technical and Methodological Capability –
Supplier (++)
• Domain Understanding (++)
TRANSACTION ATTRIBUTES:
• Uncertainty (--)
• Measurement Difficulty (--)
DECISION CHARACTERISTICS:
• Top Management Commitment / Support (++)
• Evaluation Process (MM)
(MM) more than 80% of the evidence suggests variable matters
budget outsourced and/or type and number of IS functions
outsourced. We coded 12 relationships between the Degree
of Outsourcing and different ITO outcomes. The results are
mixed in that three studies found that more outsourcing led
to better outcomes (e.g., Goo et al., 2007), two studies found
that less outsourcing led to better outcomes (e.g., Lacity
and Willcocks, 1998), two studies found no results, and five
studies found that certain categories of outsourcing
mattered more than others. ITO researchers have measured
the Degree of Outsourcing as a continuous variable (e.g., a
change in outsourcing budget in Teng et al., 1995) and as a
categorical variable (e.g., Alvarez-Suescun, 2007). For an
example of the latter, Currie (1998) and Currie and
Willcocks (1998) studied five types of outsourcing: In-
house, Selective Outsourcing, Multiple Supplier Outsour-
cing, Strategic Alliance Sourcing, and Total Outsourcing
and found that a combination of Selective Outsourcing and
Multiple Supplier Outsourcing was a successful strategy at
two case study firms.
Client firm capabilities. Five client firm capabilities have
been examined five or more times and have produced
consistent results. The most frequently studied and most
important client firm capabilities were Supplier Manage-
ment Capability, Cultural Distance Management Cap-
ability, Contract Negotiation Capability, Risk Management
 Review of the IT outsourcing empirical literature
Capability, and IS Technical/Methodological Capability.
Supplier Management Capability is the extent to which a
client organization is able to manage outsourcing suppliers
effectively. This capability was empirically examined 11
times and always found to positively affect ITO outcomes.
For example, Ranganathan and Balaji (2007) identified
‘Global IS Vendor Management’ as one of the four critical
capabilities to ensure successful offshore ITO based on case
studies in 18 companies. Cultural Distance Management
Capability is the ability for organizations to understand,
accept, and adapt to cultural differences (e.g., Winkler
et al., 2008). Examined seven times, it positively and
significantly affected ITO outcomes five times (71%). This
was particularly relevant in the cases of offshore out-
sourcing (e.g., Rao et al., 2006; Willcocks et al., 2007).
Contract Negotiation Capability is defined as the extent to
which an organization is able to effectively bid, select, and
negotiate effective contracts with suppliers. This capability
helps clients and suppliers align expectations and to define
the formal controls that will govern relationships (Feeny
and Willcocks, 1998). Studied seven times, higher values
of Contract Negotiation Capability were always found to
positively affect ITO outcomes. For example, Al-Qirim
(2003) found that ‘inadequate skills in contract negotia-
tions’ was one of the major problems associated with
outsourcing in a sample of 51 small to medium-sized
enterprises in New Zealand. Risk Management Capability is
an organization’s ability to identify, assess, prioritize, and
mitigate outsourcing related risks in order to minimize
their probability and/or impact. Studied five times, Risk
Management Capability was always found to affect ITO
outcomes significantly. For example, Lin et al. (2007), based
on a survey of 69 Australian organizations and two in-depth
case studies, report that proper risk assessment and
management are critical client capabilities to ensure
successful ITO. We define IS Technical/Methodological
Capability as an organization’s level of maturity in terms
of technical or process related standards including the
Capability Maturity Model (CMM), Capability Maturity
Model Integrated (CMMI), and the Information Technology
Infrastructure Library (ITIL). This capability was examined
empirically five times and found to significantly and
positively affect ITO outcomes four times (80%). This is
an important finding because many client firms are
motivated to outsource to access a supplier’s superior
capabilities. But case study research has found that ITO
outcomes are better when both clients and suppliers have
high levels of IS Technical/Methodological Capability. For
example, Rottman and Lacity (2006) found that clients
with very low levels of CMM had a difficult time working
with suppliers with high levels of CMM.
Transaction attributes. Two transaction attributes were
studied at least five times and produced consistent results:
Uncertainty and Measurement Difficulty are negatively and
significantly related to ITO outcomes. Again, these two
independent variables are derived from TCE. Uncertainty is
the degree of unpredictability or volatility of future states as
it relates to the definition of IS requirements, emerging
technologies, and/or environmental factors. Of the 15 times
uncertainty was studied, 12 times (80%) ITO researchers
MC Lacity et al
411
found that uncertainty adversely affected ITO outcomes
(e.g., Barthélemy, 2001). Measurement Difficulty – the
degree of difficulty in measuring performance of exchange
partners under circumstances of joint effort, soft outcomes,
and/or ambiguous links between effort and performance
(Eisenhardt, 1989) – was examined seven times and was
found to adversely affect ITO outcomes six times (86%)
(e.g., Poppo and Zenger, 2002).
One other transaction attribute – Asset Specificity – was
frequently studied but produced inconsistent results (see
Appendix C). Asset Specificity was negatively associated
with ITO outcomes three times (50%) and found to have no
effect three times (50%). For example, Poppo and Zenger
(2002) found that Asset Specificity was negatively and
significantly related to the degree of ITO satisfaction
reported by client firms. However, Kim and Chung (2003)
found no relationship between Asset Specificity and
satisfaction with outsourcing.
Contractual governance. Contractual governance is an-
other major category of the determinants of ITO outcomes
(e.g., Miranda and Kavan, 2005). Contractual governance is
the formal, written contractual agreement between client
and supplier organizations. The most frequently studied
variables that produced consistent results were Contract
Detail, Contract Type, Control Mechanisms, and Contract
Size. Contract Detail is the number or degree of detailed
clauses in the outsourcing contract, such as clauses that
specify prices, service levels, benchmarking, warranties,
and penalties for non-performance. Of the 13 times
Contract Detail was studied, ITO researchers found that
more contract detail was associated with better ITO
outcomes 11 times (85%). For example, Poppo and Zenger
(2002) found that contractual complexity (i.e., contract
detail) was significantly related to ITO outcomes as
measured as cost, quality, and vendor responsiveness.
Contract Type is a term denoting different forms of
contracts used in outsourcing. Examples from the ITO
literature include customized contracts, fixed price con-
tracts, time and materials contracts, fee-for-service con-
tracts, and partnership-based contracts. Of the seven times
Contract Type was empirically examined, it was found to
matter all seven times. ITO researchers used different
categories of contracts across studies. For example, Lacity
and Willcocks (1998) used three categories and found that
clients who signed fee-for-service contracts had higher rates
of success than clients who signed strategic alliances or
loose contracts. Gopal et al. (2003) used two categories and
found that supplier profits were higher for time and
materials contracts than for fixed-priced price contracts.
Control Mechanisms were studied five times and found to
matter four times. Most researchers examined controls as a
categorical variable and studied under which circumstances
different portfolios of controls positively affected ITO
outcomes (e.g., Choudhury and Sabherwal, 2003). Contract
Size is the size of the outsourcing contract, measured as the
total value of the contract in monetary terms. This was
empirically examined five times and four times it was found
that larger contracts were associated with better ITO
outcomes. For example, Rottman and Lacity (2008)
examined the size of 21 offshore outsourcing projects and
 Review of the IT outsourcing empirical literature
412
found that the projects with greater value contracts had
higher project ratings
One independent variable – Contract Duration – was
examined seven times but produced mixed results (see
Appendix C). Contract Duration is defined as the length
of the contract in terms of time. The preponderance of
evidence (57%) suggests that shorter contracts are asso-
ciated with better ITO outcomes, as found in four of the
seven relationships (e.g., Currie, 1998; Baldwin et al., 2001).
But two findings from Domberger et al. (2000) found that
longer term contracts were associated with better outcomes.
Supplier firm capabilities. The most frequently studied and
most important supplier firm capabilities were IS Human
Resource Management Capability, IS Technical and Meth-
odological Capability, and Domain Understanding.
We define IS Human Resource Management Capability as
a supplier’s ability to identify, acquire, develop, and deploy
human resources to achieve both supplier’s and client’s
organizational objectives (e.g., Levina and Ross, 2003).
Examined 10 times, it was found to positively and
significantly affect ITO outcomes nine times. Clients often
engage suppliers because of their superior human resources
in terms of both number and quality of staff. For example,
Koh et al. (2004) found that a supplier’s ‘effective human
capital management’ capability – as evidenced by assigning
high-quality staff to work on client projects and by
minimizing turnover – was linked to clients’ perception
of outsourcing success in terms of satisfaction with the
contract and the desire to retain the outsourcing supplier.
The supplier’s IS Technical/Methodological Capability
was the second most frequently studied capability and it
was always found to affect ITO outcomes positively in the
nine times it was examined. Domain Understanding is the
extent to which a supplier has prior experience and/or
understanding of the client organization’s business and
technical contexts, processes, practices, and requirements
(e.g., Clark et al., 1995; Gopal et al., 2002). This was
empirically examined five times and found to be positively
and significantly associated with better ITO outcomes (e.g.,
Chou et al., 2006).
Client firm characteristics. Under the broad category of
Client Firm Characteristics, only one independent variable
– Client Experience with Outsourcing – was examined five
or more times and produced consistent results. Among
the six times it was examined, ITO researchers found
five times (83%) that a client’s prior level of experience
with outsourcing or offshoring positively and significantly
affected ITO outcomes (e.g., Barthélemy, 2001; Gopal et al.,
2003). For example, Barthélemy (2001) found from a survey
of 50 client firms that ‘experience with IT outsourcing is a
sure way to reduce hidden costs’ (p. 68).
Decision characteristics. Within this broad category, two
independent variables have been examined at least five
times and produced consistent results. Top Management
Commitment/Support and the Evaluation Process positively
affected ITO outcomes. Top Management Commitment/
Support is the extent to which senior executives from
the client organization provide leadership, support, and
MC Lacity et al
commitment to outsourcing. Of the seven times this
variable was examined, it was always found that higher
levels were associated with better ITO outcomes. For
example, in a case study at a UK bank, Baldwin et al.
(2001) found that executive support was a strong factor
in successful outsourcing. Suppliers also benefit when a
client’s top managers support ITO by taking ownership of
ITO projects (Koh et al., 2004). The Evaluation Process is
the client organization’s process for evaluating and select-
ing suppliers. Of the six relationships studied, all six were
significant or mattered (e.g., Baldwin et al., 2001; Kern
et al., 2002; Cullen et al., 2005). For example, Cullen et al.
(2005) identified 54 key outputs from processes that ITO
Practitioners use to manage ITO. Their major contribution
was to link evaluation processes to ITO outcomes. They
conclude that: ‘our major finding is that the more of these
processes an outsourcing organization conducts, and
conducts well, the greater its success, regardless of its
outsourcing objectives’ (p. 229).
Findings on interactions and learning curve effects
Our findings thus far have only examined the direct effects
of an independent variable and dependent variable. ITO
researchers have also considered the interaction among
independent variables in the form of mediating and
moderating relationships (e.g., Ang and Cummings, 1997;
Miranda and Kim, 2006). Because these relationships were
even more varied and complex than the direct effects,
we report findings from the level of the categories of
variables. We report on two important interactive effects:
(1) the interaction between ITO decision and Contractual
Governance and (2) the interaction between Contractual
Governance and Relational Governance.
The term ‘interaction’ between ITO decision and Con-
tractual Governance usually assumes both variables are
independent, but the evidence is that clients who do not
make ITO decisions and Contractual Governance choices
independently had better ITO outcomes. Rather, clients
who match the ITO decision with Contractual Governance
experience better ITO outcomes. For example, DiRomualdo
and Gurbaxani (1998) found that clients need to match the
type of ITO decision (business improvement, IS improve-
ment, or commercialization) with the right kind of contract.
Lee et al. (2004) identified three profiles that match the
Degree of Outsourcing, Contract Detail, and Contract
Duration. They found that clients who match selective
outsourcing (Degree of Outsourcing) with detailed
contracts (Contract Detail) and medium-term contracts
(Contract Duration) had higher levels of cost savings.
Furthermore, clients who match total outsourcing (Degree
of Outsourcing) with unspecified contracts (Contract
Detail) and long-term contracts (Contract Duration) had
higher levels of technical benefits.
Researchers have also found significant interactions
between Contractual Governance and Relational Govern-
ance. Several important papers found that the interaction
between Contractual and Relational Governance is positive,
and thus Contractual and Relational Governance serve
as complements rather than as substitutes (Saunders
et al., 1997; Sabherwal, 1999; Poppo and Zenger, 2002;
Wu+llenweber et al., 2008; Goo et al., 2009). For example,
 Review of the IT outsourcing empirical literature
Goo et al. (2009) found that when higher values of two
aspects of Contractual Governance (foundational charac-
teristics and governance characteristics) were coupled with
higher values of three aspects of Relational Governance
(relational norms, harmonious conflict resolution, and
mutual dependence), the interactions created higher values
of trust and commitment (their ITO outcome variables).
However, they did find one exception. Contracts that
specified high levels of change clauses actually interacted
with relational governance in a negative way, leading to
lower levels of trust and commitment.
A client’s experience with ITO creates feedback loops and
fosters organizational learning (Sabherwal, 1999; Seddon,
2001; Carmel and Agarwal, 2002; Gopal et al., 2003; Levina
and Ross, 2003; Whitten and Leidner, 2006; Fisher et al.,
2008; Dedrick et al., 2010). ITO researchers have found that
positive ITO outcomes fuelled higher levels of trust, built
stronger client and supplier capabilities, and determined
the kinds of ITO decisions and ITO contracts clients made
moving forward (Sabherwal, 1999; Seddon, 2001; Gopal
et al., 2003; Levina and Ross, 2003). Conversely, negative
ITO outcomes fuelled greater need for controls, monitoring
mechanisms, tougher contracts, and determined the kinds
of ITO decisions clients made moving forward (Sabherwal,
1999; Choudhury and Sabherwal, 2003). These effects
highlight the limitations of TCE in deeply understanding
ITO. TCE only looks at the transaction as the unit of
analysis and therefore does not consider how past ITO
decisions affect future ITO decisions, contracts, relation-
ships, and capabilities.
The findings section has answered the first of our two
research questions: What has the empirical academic
literature found about ITO decisions and outcomes? But
there is still much to explore. In this next section, we
answer the second research question: What are the gaps in
knowledge to consider in future ITO research?
Future paths of research
The second aim of this paper was to help direct future ITO
research by identifying gaps in knowledge and emerging
trends to study. We begin this section with a review of the
progress made in ITO research since Dibbern et al. (2004).
They identified the gaps in knowledge as of 2000. Much
progress has indeed been made, but academic research is
still needed in many areas as outsourcing continues to go
global, as client firms continue to experiment with new
sourcing models like open sourcing (e.g., Agerfalk and
Fitzgerald, 2008), and as suppliers continue to offer new
types of outsourcing services (e.g., Hirschheim et al., 2002),
including the potential inherent in what has now been
termed cloud computing. There are a number of recent
articles that have also addressed future paths of research.
In this section, we review these known, existing gaps and
identify additional lines of inquiry suggested by this current
review of the ITO literature.
In reviewing the 164 articles for this paper, we are struck
particularly by the response of ITO researchers to address
the gaps in knowledge identified in Dibbern et al. (2004).
Dibbern et al. (2004) identified five gaps in knowledge,
arguing that the field needs (1) a better understanding of
the dependent variable of ITO success, (2) more research
MC Lacity et al
413
taken from the vendor perspective, (3) more research that
looks at client-supplier relationships, (4) more research on
how outsourcing changes over time, and (5) a need for
comparative studies, such as differences and similarities
between public and private sectors. ITO researchers have
made considerable progress on most of these previously
identified gaps. First, ITO researchers have adopted a richer
set of dependent variables beyond general outsourcing
satisfaction. As Table 4 indicates, ITO researchers have
used 36 dependent variables to explore ITO decisions and
ITO outcomes at many levels (organizational, IS function,
transaction level, and project level). Second, we now have
more papers that examine the vendor perspective (e.g.,
Taylor, 2007). In our entire sample of 164 papers, 11 papers
included supplier participants and 28 papers included
client and supplier participants, representing 24% of
the sample. Third, Table 6 showed that ITO researchers
have studied independent variables associated with client-
supplier relationships 107 times. Fourth, we have also seen
progress made concerning the evolution of outsourcing
over time and how outcomes from one sourcing decision
affect subsequent sourcing decisions (e.g., Kishore et al.,
2004; Whitten and Leidner, 2006; Willcocks and Reynolds,
2007; Olsson et al., 2008; Jayatilaka and Hirschheim,
2009; Dedrick et al., 2010). Only the last point – the need
for more comparative studies – still seems to require a
deeper understanding. But rather than compare across
industry sectors (such as public vs private) as suggested by
Dibbern et al. (2004), we explain below why we think it is
now more fruitful to compare across countries and
cultures.
Three recent papers have addressed gaps in knowledge
and have suggested future paths of research (Busi and
McIvor, 2008; Lacity et al., 2008b and Oshri et al., 2009).
Busi and McIvor (2008) published a research agenda for
outsourcing-related studies. They addressed issues related
to theoretical appropriation of 10 popular reference theory
disciplines and the need for more original theory develop-
ment, more action research, and longitudinal research.
We indeed agree with their assessment that researchers
are ready to develop our own indigenous theory of ITO,
as discussed further below. Busi and McIvor (2008:
193–194) also identified 10 research priorities, including
the effects of servicization, service design, operations
management techniques, jobs mobility, corporate social
responsibility, firm performance and performance mea-
surement, contract adaptability, and trust on outsourcing
and by outsourcing.
Lacity et al. (2008b) identified trends in outsourcing
about the size and growth of ITO and BPO markets, about
suppliers located around the world, and about particular
sourcing models. The authors also identified five persistent,
prickly gaps in knowledge that need more study. They
argued that we still only have anecdotal answers to the
following five questions:
1. How can back offices truly be aligned with the
business?
2. How can suppliers’ incentives truly be aligned with their
clients’ needs?
3. How can clients transfer knowledge to suppliers while at
the same time protect intellectual property?
 Review of the IT outsourcing empirical literature
414
4. How can clients retain enough knowledge when
engaging in large-scale outsourcing?
5. How can clients and suppliers sustain the early
enthusiasm of budding relationships for the long
term?
Oshri et al. (2009) argued that most clients will multi-
source to many countries. They examined some of the
major global trends in BRIC (Brazil, Russia, India, and
China) as well as non-BRIC countries. They identified
a number of current trends, including bundled services,
best-shoring, multi-sourcing, and BPO. They also devoted
considerable attention to trends in captive centers and
discussed three strategies client firms pursue: the hybrid,
shared, and divested.
In addition to these gaps and trends, our review suggests
additional areas of research that are currently under-
studied.
More studies of strategic IT outsourcing decisions
When considering the top five motives for outsourcing, we
saw that ITO researchers frequently studied and found
strong empirical support to substantiate that what drove
most outsourcing decisions was the desire to reduce costs
on what was viewed as a non-core IT activity or a poor
performing IS department which could be better provided
by suppliers with superior skills, expertise, and technology.
Juxtaposed against these findings are the many arguments
that outsourcing is a strategic initiative that enables client
innovation through value networks (Quinn and Hilmer,
1994; McFarlan and Nolan, 1995; Linder, 2004; Willcocks,
2010). There are two possible explanations. First, we can
assume that our body of research is representative of the
market and thus the preponderance of ITO decisions was
driven by tactical motives to reduce costs, to outsource IT
functions considered to be non-core, and that client firms
did indeed think suppliers had better skills or expertise.
We might conclude that the strategic exploitation of IT
outsourcing was a minority pursuit (Lacity et al., 2009). A
second explanation is that academic ITO research has not
been representative. Clearly, ITO researchers have under-
examined the more strategic drivers of outsourcing. Among
the list of 20 motives for outsourcing, strategic motives
have only been examined a few times. Specifically,
Commercial Exploitation was studied twice in relation to
Outsourcing Decision, and both times it was found to be
a positive and significant motivation for outsourcing
(DiRomualdo and Gurbaxani, 1998; Kishore et al., 2004).
Access to Global Markets was examined three times and
was always found to be a positive and significant
motivation for outsourcing (Sobol and Apte, 1995; Rao
et al., 2006; Beverakis et al., 2009). Innovation (examined
once) was found by Quinn (2000) to be positive and
significant. Although there is less evidence that outsourcing
is a strategic practice, the little evidence we do have suggests
that client firms do indeed see outsourcing as a strategic
initiative. We believe we need more studies on the
strategic motives and uses of IT outsourcing.
More studies of strategic IT outsourcing outcomes
We also believe that ITO researchers need to study strategic
outsourcing decisions longitudinally to understand the
MC Lacity et al
extent to which client firms achieve strategic objectives and
to identify which processes and practices differentiate
successful from unsuccessful outcomes. For example,
DiRomualdo and Gurbaxani (1998) reported on the
strategic motives of several companies early in their deals.
But in the longer term, the outsourcing engagements failed
to deliver the expected benefits for Xerox, J.P. Morgan,
Swiss Bank, and Delta Airlines. This suggests that realizing
the strategic intent of IT outsourcing is exceedingly difficult
and requires a high degree of managerial attention, for
which we need more research.
More studies on the dynamic interactions between outsourcing
and firm capabilities
Some of the more interesting, yet still understudied work, is
looking at the dynamic effects of outsourcing and client
and supplier firm capabilities (e.g., Levina and Ross, 2003;
Willcocks et al., 2007; Jarvenpaa and Mao, 2008; Yakhelf,
2009; DeDrick et al., 2010). These authors have begun to
discover how capabilities are built over multiple genera-
tions of outsourcing and multi-sourcing. Much of the work
is based on rich and in-depth case studies, and replication
would give us more confident answers to these questions:
As client firms continue to outsource IT, which capabilities
erode over time? Which capabilities get stronger? From
the supplier perspective, we need to better understand the
evolution of capabilities. Which capabilities are most
important for new suppliers in emerging markets? How
can maturing suppliers leverage the evolution of their
capabilities to target higher-end work and attract bigger
deals?
More studies on the effects of environment
We were quite surprised to find so little research conducted
on environmental variables. Only one environmental
variable had been studied at least five times – supplier
competition. The presence of strong supplier competition
had been generally found to lead to favorable ITO outcomes
– at least from the client’s perspective (e.g., Lacity and
Hirschheim, 1993; Fisher et al., 2008). Other variables that
seem interesting, yet understudied, include ethnocentrism
(studied once) and legal and environmental uncertainties
(studied four times). Ethnocentrism may influence a client’s
preference to source, using domestic rather than non-
domestic suppliers. Gefen and Carmel (2008) had one
interesting test of this idea. They analyzed 263,000 bids
from 31,000 providers from 70 countries on the website
Rent-A-Coder.com. They hypothesized that clients would
prefer to hire a programmer from their own country.
Across all their data, their hypothesis was supported.
However, when they analyzed only the subset of American
clients, they found that American clients preferred to
outsource to Canadian programmers. Legal and environ-
mental uncertainties also seem to be worthy of more study.
In our sample, these variables were studied in relation to
the selection of an offshore destination, but legal and
political uncertainties in domestic markets may also drive
sourcing decisions. Consider, for example, the public’s anti-
offshoring views in countries like the United States and the
United Kingdom (e.g., Hirschheim et al., 2007; Lacity and
Rudramuniyaiah, 2009). How does public perception affect
 Review of the IT outsourcing empirical literature
sourcing decisions within client locations and how will
suppliers adapt? The anti-offshoring sentiment may be
influencing US-based corporations – particularly recipients
of some of the $800 billion American Recovery and
Reinvestment Act made available from 2009 – to consider
sourcing jobs closer to home. Furthermore, HIPAA
regulations and many government contracts require that
outsourced work be done onshore. Thus, we believe that
environmental variables such as Ethnocentrism, Legal and
Political Uncertainties, and Public Opinion warrant more
study.
More studies on configurational and portfolio approaches to
outsourcing
The preponderance of the empirical literature has studied
the direct effects of independent variables on ITO decisions
and ITO outcomes. Some of the most interesting work
in ITO considers how organizations match multiple factors
in configurations that maximize their chances of success.
For example, matching strategic intent with contractual
governance, matching transaction attributes with contrac-
tual governance, or matching IT’s value proposition, IT’s
asset position, relational asset position, and relational
capabilities with ITO decisions (e.g. DiRomualdo and
Gurbaxani, 1998; Lee et al., 2004; Fink, 2010). Configura-
tions primarily address an outsourcing transaction. But
increasingly, practitioners are dealing with portfolios of
existing outsourcing contracts and continually re-engaging,
disengaging, or experimenting with new sourcing models
and suppliers. Program management offices do not make
ITO decisions in isolation, but relative to their prior
experiences, current goals, future expectations, and needs
to manage risks across a portfolio of contracts and
suppliers.
More studies on alternative destinations besides India
ITO researchers have done a significant amount of work on
offshore outsourcing, particularly on outsourcing IT from
Western clients to Indian suppliers (e.g., Oshri et al., 2007;
Dibbern et al., 2008; Rottman and Lacity, 2008). Within our
sample, 77% of papers dealing with offshore outsourcing
studied Indian suppliers. In comparison to India, we have
relatively few studies on outsourcing IT to suppliers based
in other countries. Practices that were found to be robust in
the Western client-Indian supplier context, such as the use
of onshore liaisons, may not work well in other countries
(e.g., Gopal et al., 2002; Rottman and Lacity, 2006). Perhaps,
for example, expatriates (client employees on supplier sites)
will be more effective as suggested by Timlon and Åkerman
(2010) in the case of outsourcing research and develop-
ment from a Western client to a Chinese-based captive
center. China seems particularly interesting to study further
because the Chinese government has assigned a high
priority to science and technology as its future growth
sectors (Qu and Brocklehurst, 2003). A slogan frequently
used in the Chinese media is ‘From Made in China to China
Service’ (Rottman and Hao, 2008). The Chinese government
is supporting this vision with the establishment of research
and technology parks, favorable tax incentives, grants to
help Chinese firms achieve certifications in CMMI and ISO
20,000, investments in infrastructure and English-language
MC Lacity et al
415
education, and promotion of ITO and BPO services. In
2010, the Chinese government committed to certify 1.2
million workers as Certified Outsourcing Professionals
through training by the International Association of
Outsourcing Professionals. Other countries are also seeking
to foster vibrant outsourcing industries, including Chile,
Ghana, and Egypt, but these countries have not yet been
widely studied. Thus – comparative studies of practices
across countries and cultures are still a gap in knowledge
(Dibbern et al., 2004).
Continue to study emerging models and trends
The global ITO market in 2010 looks substantially different
than it did 20 years ago when a few large US-based
suppliers like EDS, IBM, and CSC dominated the market. In
addition to the explosion of suppliers located around the
world, we also see the emergence of many different
sourcing models. ITO practitioners seek academic con-
tributions on emerging sourcing models and look to us to
help understand the extent to which emerging models are
merely hyped labels vs legitimate, value-added services.
For example, practitioners are scrambling to understand
cloud computing. The extent to which cloud computing is
incrementally or radically different from ASP and the best
practices to successfully source through ‘the cloud’
certainly warrant more academic research. We see the
bundling of ITO with BPO services as clients seek to
leverage relationships with existing suppliers. Shared
services and captive centers are also important, yet
neglected areas of insourcing research. Many niche markets
are also worthy of study, including rural outsourcing,
freelance outsourcing, and knowledge process outsourcing.
Seek to inform reference discipline theories as much as we seek
to be informed
Within the IS discipline in general and within ITO in
particular, a number of scholars have criticized our reliance
on reference disciplines (e.g., Lyytinen and King, 2004; Busi
and McIvor, 2008; Niederman et al., 2008). Within ITO, we
have appropriated at least 20 theories from reference
disciplines (Lacity and Willcocks, 2009). Certainly when
ITO research began two decades ago, the importation of
reference theories allowed us to focus productive inquiry
on constructs likely to be important within the ITO context.
We have also seen good work that imports and integrates
multiple reference disciplines (e.g., Cheon et al., 1995;
Vitharana and Dharwadkar, 2007). But as our research has
matured, we argue that ITO researchers have an opportu-
nity to inform theories from reference disciplines as well as
to be informed by them. If ITO researchers can better
understand what is distinctive about IT and perhaps other
services, then we have a great opportunity to extend
theories born from manufacturing and other functional
areas.
To illustrate this point, consider TCE. TCE has been the
most frequently appropriated theory to study IT out-
sourcing (Klein, 2002; Dibbern et al., 2004). In this review,
we found that many hypotheses derived from TCE have
received strong empirical support in the ITO context,
including External Production Cost Advantage, Transaction
Costs, Uncertainty, and Measurement Difficulty. We seem
 Review of the IT outsourcing empirical literature
416
to have generated enough evidence across multiple
studies to at least understand the effects of these
independent variables within the ITO context. However,
Asset Specificity, the bedrock independent variable of TCE,
has empirically produced mixed results in not only ITO but
in other service applications of the theory (e.g., Bowen and
Jones, 1986; Carter and Hodgson, 2006; Macher and
Richman, 2008). Of course, there may be many explana-
tions for this seemingly paltry support. The usual suspect
is ‘poor’ measures. Another possible explanation for the
mixed results is that we need to understand better the
interaction between Asset Specificity and other TCE
variables. For example, Williamson notes that high Asset
Specificity interacts with Transaction Frequency and can
be offset by appropriate contracting (Williamson, 1991). In
our sample, Transaction Frequency was only examined
twice in relation to ITO decision and three times in relation
to ITO outcomes (e.g., Lacity and Willcocks, 1995;
Loebbecke and Huyskens, 2006). But a more compelling
explanation may come from ground-breaking research that
questions the underlying logic of TCE in the ITO context.
An exceptional illustration of this notion may be found in
Dibbern et al. (2008). The authors found empirical support
that higher levels of Required Client-Specific Knowledge
(a transaction attribute similar to asset specificity) would
increase Client Extra Costs (an ITO outcome). This seems
to support TCE. However, their rich qualitative data gave
them a different understanding of this finding: The client’s
excess costs were caused more by the need for extensive
knowledge transfer than by the need to safeguard against
vendor opportunism. Thus, we might infer that in the ITO
context, asset specificity is significant because it requires
more knowledge transfer, not because it creates moral
hazards. This is quite an opportunity to inform TCE.
Develop indigenous ITO theories
We agree with Busi and McIvor (2008)’s argument that
we need to develop our own outsourcing theories.
Christensen (2006) argues that there are two major stages
of theory development: the descriptive phase and the
normative phase. We believe this paper makes an
important contribution toward the development of two
descriptive theories of ITO. The descriptive phase of theory
development has three steps: (1) observation and descrip-
tion of constructs (such as we did in Appendix A),
(2) categorization of constructs (such as we did in Tables 4
and 5), and (3) statements of correlations between
constructs (such as we did in Appendix C). Correlations
that are repeated and confirmed result in a descriptive
theory. In this paper, we have labeled Figures 2 and 3
descriptive models of ITO rather than theories of ITO. We
still need a better understanding of the mixed results
(which Christensen calls anomalies), more replications of
interaction and feedback effects, and the testing of
important constructs that are under-studied and thus not
present in the models. The models, however, are a good
start because they are based on data and data are at the
foundation of any good theory development (Strauss and
Corbin, 1997; Glaser and Strauss, 1999; Christensen, 2006;
Lyytinen, 2009). The models of the ITO decisions and ITO
outcomes are based on the best evidence we have to date.
MC Lacity et al
Additional research suggested above (such as studying
strategic ITO decisions and outcomes) may help transform
the models into descriptive theories. Beyond descriptive
theories of ITO, researchers are challenged to develop
normative theories. Christensen (2006) argued that the
transition from a descriptive theory to a normative theory
requires that statements of correlation become statements
of causality. A statement of causality ‘enables researchers to
assert what action managers ought to take to get the results
they need’ (p. 42). This next phase to creating a normative
theory of ITO is certainly an ambitious and worthwhile
pursuit.
Discussion
In this section, we discuss what might be called research
‘dead ends’ and how these can be made productive. In using
our findings with ‘mixed results’ to suggest future research,
we do not necessarily think that every finding that resulted
in mixed results requires more research. Sometimes
researchers do not find patterns because there are simply
no patterns to find. (Unlike Asset Specificity which is a key
construct to a major theory, other variables are not critical
constructs of appropriated theories.) Therefore, we suggest
that researchers may experience marginal returns if
they further study the effects of some ‘mixed results.’ In
particular, we think this may be the case with the effects
of Client Size, IS Department Size, and Industry on ITO
decisions, and the effect of Contract Duration on ITO
outcomes.
In Appendix C, two client size characteristics that were
examined at least five times produced mixed results:
Client Size and IS Department Size. We therefore do not
have a clear profile of the size of clients that tend to
outsource IT. We may draw one of two conclusions from
this data. First, no client size profile exists. Second, a client
size profile exists but we have not yet carried out enough
research to develop a clear understanding of it. We believe
the first conclusion is more likely. Some studies find larger
clients outsource more, some studies find smaller clients
outsource more, and some find no significance of size
whatsoever. Across both these size variables, studied 22
times, no pattern is found, perhaps because there is simply
no pattern to uncover. In the case of ITO, perhaps, size does
not matter.
Does industry matter?
In Appendix C, two variables pertaining to a client firm’s
industry have been widely tested: Information Intensity and
Industry. Information Intensity was studied six times and
found to be insignificant four times (67%). In addition, of
the 13 times different industries have been studied, seven
times (53%) no significant relationship was found. Granted,
47% of the findings indicate that some industries were
more likely to outsource IT than others, but because
researchers have used so many different industry classifica-
tions, there is no clear list of particular industries to report.
Overall, we would not advise ITO researchers to spend
many resources investigating the relationship of industry to
client propensity to outsource.
Contract Duration has been empirically examined seven
times, and produced mixed results. The preponderance of
 Review of the IT outsourcing empirical literature
evidence (57%) suggests that shorter contracts are asso-
ciated with better ITO outcomes. The two findings from
Domberger et al. (2000) found that longer term contracts
were associated with better outcomes. But Domberger’s
average contract size was only 1.76 years; thus a two-year
contract in this study would be considered a long-term
contract, but a two-year contract in other studies would
be considered a short-term contract (e.g., Lacity and
Willcocks, 1998). Taking all the evidence into consideration,
there seems good reason to suggest that ITO contracts in the
three-to-five-year range experience successful ITO outcomes
more frequently than contracts with a greater than five
years duration.
Limitations of research
All research has limitations, and we therefore recognize the
following limitations of this review. First, we cannot
guarantee that we found every ITO article published in a
refereed journal. We apologize in advance if we have missed
any important work by colleagues. Second, we recognize
that we could have made errors in coding. When we verified
codes with a sample of the original authors, we did need to
change one relationship from an ‘M’ to a ‘ þ 1’ and correct
one data entry error, which indicates that our codes are not
perfect. We do believe, however, that the preponderance of
the 741 findings is reliable because three people indepen-
dently coded the results and also because a sample of
authors confirmed 78 of 80 findings. Third, the relation-
ships in both models only capture direct effects, not
interactive effects or dynamic effects. There were simply
not enough replications to add these promising additions to
the models, and therefore we have suggested additional
research in these areas. Fourth, the review method is not as
statistically rigorous as a meta-analysis. We were keen to
include the rich base of qualitative research. We did not
want to eliminate 80 of the 164 papers.
Conclusion
In the face of over 20 years of ITO practice, academic
researchers have produced a very large body of reliable,
objective research findings that grant real insights into
fundamental questions about the value of IT outsourcing,
and why and how it has been conducted. Simply put,
nowhere else does there exist such a body of rigorously
arrived at, longitudinally based, comprehensive findings on
IT outsourcing. In analyzing this research for answers, we
believe we have contributed significantly to an under-
standing of the outsourcing phenomenon, for both
academics and practitioners alike. Our review of this
research aimed to answer two major questions: What has
the empirical academic literature found about ITO deci-
sions and outcomes? What are the gaps in knowledge to
consider in future ITO research? We believe we have
sufficiently answered each question.
Pertaining to the determinants of ITO decisions, we have
consistent evidence as to what motivates ITO decisions.
Clients consider outsourcing IT to reduce costs, to focus
on core capabilities other than the IT activity chosen for
outsourcing, and to inject client firms with supplier resources
such as skills, expertise, and superior technology to improve
client IT performance. Concerning transaction attributes, we
MC Lacity et al
417
have good evidence that clients are less likely to outsource
IT activities that have high levels of uncertainty, criticality,
business risks, and transaction costs. We have at least one
source of influence, the mimetic desire to copy peer firms that
has consistent evidence. Pertaining to the determinants of
ITO outcomes, overall we know that both contractual and
relational governance are important, that both clients and
suppliers need strong complementary capabilities to make
relationships successful, and that certain types of transactions
and decisions affect ITO outcomes. We also note that ITO
researchers have found important interactions and feedback
loops among variables.
Despite the extensive body of existing ITO research, the
field continues to rapidly evolve and therefore remains a
rich field of inquiry. We have suggested areas of future
research based on under-studied yet promising variables,
interactions, and configurations. We summarized gaps
identified by other authors and emerging trends in practice
that may warrant further study. We also discussed how
ITO researchers can inform theories from reference
disciplines and develop descriptive and normative theories
indigenous to the ITO context.
On conservative estimates, looking across a range of
reports and studies, global IT outsourcing revenues
probably exceeded $270 billion in 2010. With BPO revenues
exceeding $165 billion in the same year, and offshore
outsourcing representing more than $65 billion of these
combined revenue figures (Willcocks et al., 2010), it is very
clear that, with its 20-year history, outsourcing of IT and
business services is moving into becoming an almost
routine part of management, representing in many major
corporations and government agencies the greater percen-
tage of their IT expenditure. Moreover, all projections
we have looked at or made suggest continued growth over
the next five years (2010–2015). Our own synthesis of the
reports from Gartner, Everest, NASSCOM, and IDC
suggests that ITO global growth will be in the range of
5–8% per annum, with BPO rising by 8–12% per annum,
and, subsumed within these, offshore outsourcing growing
at an even faster annual rate.
Given this global size and growth of outsourcing, our
work here has considerable value in indicating the factors
and practices that are related to outsourcing success and
disappointment, and the areas that deserve further,
constant, rigorous research attention. There is another
reason why such research work will continue to be valuable.
We mentioned above that outsourcing had become an
‘almost’ routine part of management. In fact, our review of
20 years of research establishes the common denominator
that, for management and operational staff, outsourcing is
far from easy. There is no quick fix; not in periods of
growth nor in periods of economic decline. Outsourcing
itself is not a panacea, but represents a different way of
managing. Much depends on experiential learning and
sheer hard work by clients and suppliers alike on a daily
basis. Our own work on management practice (Lacity and
Willcocks, 2009) suggests that back office executives must
climb a significant learning curve and build key in-house
capabilities in order to successfully exploit outsourcing
opportunities. They need to accept that outsourcing is not
about giving up management but managing in a different
way. We also find suppliers continually having to re-address
 Review of the IT outsourcing empirical literature
418
their capabilities, their market offerings, and competitive
forces. In the face of these difficulties, outsourcing will
remain a fascinating and growing area for research for
many years to come. It also provides a notable area where
academic researchers and the distinctive qualities they
bring to bear can continue to provide rich insight and
guidelines in an emerging, expanding, but still much
muddied field of organizational operation.
Note
1 As of this writing, Dibbern et al. (2004) is also the most cited
review, cited 437 times according to Harzing’s Publish or Perish.
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About the authors
Mary C Lacity is a Professor of Information Systems and an
International Business Fellow at the University of Missouri-
St. Louis. She has published 12 books, most recently China’s
Emerging Outsourcing Capabilities (Palgrave, 2010; co-
editors Leslie Willcocks and Yingquin Zheng); Information
Systems Outsourcing: Theory and Practice (Palgrave, 2009;
coauthor: Leslie P. Willcocks); and Offshore Outsourcing of
IT Work (Palgrave, 2008; coauthor Joe Rottman). Over 50 of
her publications have appeared in the Harvard Business
Review, Sloan Management Review, MIS Quarterly, IEEE
Computer, Communications of the ACM, and many other
academic and practitioner outlets. She is Senior Editor of
the Journal of Information Technology, Co-editor of the
Palgrave Series: Work, Technology, and Globalization and
on the Editorial Boards for MIS Quarterly Executive,
Journal of Strategic Information Systems, Strategic Out-
sourcing: An International Journal, and Journal of the
Association for Information Systems (JAIS). She is Program
Co-chair for ICIS 2010.
Shaji Khan is a Doctoral Candidate of Business Adminis-
tration with Information Systems (IS) emphasis at the
College of Business, University of Missouri-St. Louis. He
currently holds a Masters in Computer Science, a Bachelors
in Commerce, and Bachelors in Arts degrees. His research
interests include Information Technology (IT) outsourcing,
innovation and entrepreneurship in IT sourcing, collective
mindfulness and its impact on IS performance, knowledge
sharing and transfer, and user involvement and IS success.
He is also active in Entrepreneurship research with current
focus on ethics and entrepreneurship, nascent entrepre-
neurs, and entrepreneur behaviors. His work has appeared
in the Journal of Information Technology, the Journal of
Strategic Information Systems, and the International
Journal of Entrepreneurship and Innovation, and he has
presented several papers at academic conferences such as
Americas Conference on Information Systems (AMCIS),
Academy of Management Annual Meetings (AOM), and
Babson-Nankai International Entrepreneurship Research
Conference. He also has extensive IS-related industry
experience, working in positions such as senior systems
analyst, web developer, and IS manager and still maintains
an active interest in his entrepreneurial IT venture.
Aihua Yan is a Doctoral student in Information Systems at
the University of Missouri-St. Louis. She holds dual
Bachelor’s degrees in Management Information Systems
and in Computer Science from the University of Science
and Technology of China. She started her career in human
resource management and project management before
joining the doctoral program. Her research interests
include global outsourcing, organizational IT adoption,
system development management, and data mining. She
has published in the conference proceedings of AMCIS.
Leslie P Willcocks is Professor of Technology, Work and
Globalization at the London School of Economics and
Political Science, head of the Information Systems and
Innovation Group and director of The Outsourcing Unit
there. He is known for his work on global sourcing,
information management, IT evaluation, e-business, orga-
MC Lacity et al
nizational transformation as well as for his practitioner
contributions to many corporations and government
agencies. He holds visiting chairs at Erasmus, Melbourne,
and Sydney universities and is an Associate Fellow at
Templeton, University of Oxford. He has been Editor-in-
Chief of the Journal of Information Technology for the last
20 years, and is joint series editor, with Mary C. Lacity, of
the Palgrave book series Technology, Work and Globaliza-
tion. He has co-authored 31 books, including most recently
Major Currents in Information Systems (Sage, London 2008,
with Allen Lee), and Global Sourcing of Business and IT
Services (Palgrave, London, 2006, with Mary C. Lacity). He
has published over 180 refereed papers in journals such as
Harvard Business Review, Sloan Management Review, MIS
Quarterly, MISQ Executive, Journal of Management Studies,
Communications of the ACM, and Journal of Strategic
Information Systems.
Appendix A
Master codes
1. Absorptive Capacity – Client: A client organization’s
ability to scan, acquire, assimilate, and exploit
valuable knowledge (Cohen and Levinthal, 1990;
Lee, 2001; Lin et al., 2007).
2. Absorptive Capacity – Supplier: A supplier organization’s
ability to scan, acquire, assimilate, and exploit valuable
knowledge (Cohen and Levinthal, 1990; Lee, 2001).
3. Access to Expertise/Skills: A client organization’s
desire or need to access supplier skills/expertise
(e.g., Lacity et al., 1994; Clark et al., 1995).
4. Access to Global Markets: A client organization’s
desire or need to gain access to global markets by
outsourcing to suppliers in those markets (e.g., Sobol
and Apte, 1995; Rao et al., 2006).
5. Alignment of IS and Business Strategy: The fit or
congruence between a firm’s business strategy and its
outsourcing strategy (McLellan et al., 1995; Lee, 2006).
6. Asset Specificity: The degree to which an asset can be
redeployed to alternative uses and by alternative users
without sacrifice of productive value (Williamson,
1976, 1991).
7. Benefits and Risk Sharing: Degree of articulation and
agreement on the benefits and risk sharing between
partners engaged in an outsourcing arrangement
(e.g., Lee and Kim, 1999).
8. Business Risk: The probability that an action will
adversely affect an organization (Wikipedia).
9. Business Strategic Type: An organization’s strategy to
address three fundamental business problems –
entrepreneurial, engineering, and administrative.
Categorized under the Miles and Snow typology as
Defenders, Prospectors, Analyzers, and Reactors
(Miles and Snow, 1978; Teng et al., 1995; Aubert
et al., 2008, 2004).
10. Business/Process Performance Improvements: A client
organization’s desire or need to engage a supplier to
help improve a client’s business, processes, or
capabilities (DiRomualdo and Gurbaxani, 1998).
 Review of the IT outsourcing empirical literature
11. Career Development of IS Employees: A client
organization’s desire or need to provide better career
opportunities for IT employees (e.g., Apte et al.,
1997).
12. Centralization of IS Department: The degree to which
the IS department’s decision-making is concentrated
within a particular group or location (Sobol and Apte,
1995; Wikipedia).
13. Change Catalyst: A client organization’s desire or
need to use outsourcing to bring about large-scale
changes in the organization (e.g., Linder, 2004).
14. CIO – CEO Proximity: The reporting level of the CIO
vis-à-vis the CEO (e.g., Arnett and Jones, 1994).
15. Clear Authority Structures: A supplier’s obligation to
the client firm in terms of delineating the decision-
making rights and reporting structures for an out-
sourcing engagement, in terms of the roles and
responsibilities of all parties involved (Koh et al.,
2004).
16. Client Experience with Outsourcing: A client organi-
zation’s level of experience with outsourcing or
offshoring (e.g., Gopal et al., 2003).
17. Client Management Capability: The extent to which a
supplier organization is able to effectively manage
client relationships (e.g., Levina and Ross, 2003).
18. Client Outsourcing Readiness: The extent to which
a client organization is prepared to engage an
outsourcing supplier by having realistic expectations
and a clear understanding of internal costs and
services compared to outsourced costs and services
(e.g., Cullen et al., 2005; Iacovou and Nakatsu, 2008).
19. Client Relationship Management Capability: A sup-
plier firm’s capability to effectively manage its
relationships with client firms (e.g., Levina and Ross,
2003).
20. Client Size: The size of a client organization usually
measured as total assets, sales, and/or number of
employees (e.g., Koh et al, 2004).
21. Client User Involvement/Participation: The degree to
which users in the client organization participate in
outsourcing (e.g., Iacovou and Nakatsu, 2008).
22. Client-specific Knowledge Required: The degree to
which a unit of work requires a significant amount
of understanding/knowledge about unique client
systems, processes, or procedures (e.g., Nam et al.,
1996; Aubert et al., 2004; Dibbern et al., 2008).
23. Client-Supplier Interface Design: The planned struc-
ture on where, when, and how client and supplier
employees work, interact, and communicate (e.g.,
Rottman and Lacity, 2006).
24. Commercial Exploitation: A client organization’s
desire or need to partner with a supplier to
commercially exploit existing client assets or to form
a new enterprise (e.g., DiRomualdo and Gurbaxani,
1998; Agarwal et al., 2006).
25. Commitment: The degree to which partners pledge to
continue the relationship (e.g., Lee and Kim, 1999;
Bhargava and Sundaresan, 2004).
26. Communication: The degree to which parties are
willing to openly discuss their expectations, direc-
tions for the future, their capabilities, and/or their
strengths and weaknesses (e.g., Klepper, 1995).
MC Lacity et al
423
27. Concern for Security/Intellectual Property: A client
organization’s concerns about security of informa-
tion, transborder data flow issues, and protection of
intellectual property (e.g., Khalfan, 2004; Walden,
2005; Rao et al., 2006).
28. Conflict: Degree of incompatibility of activities,
resources, and goals between partners (e.g., Lee and
Kim, 1999).
29. Contract Detail: The number or degree of detailed
clauses in the outsourcing contract, such as clauses
that specify prices, service levels, benchmarking,
warranties, and penalties for non-performance (e.g.,
Pinnington and Woolcock, 1995; Poppo and Zenger,
2002).
30. Contract Duration: The duration of the contract in
terms of time (e.g., Lacity and Willcocks, 1998).
31. Contract Flexibility: The degree to which a contract
specifies contingencies and enables parties to change
contractual terms (e.g., Kern et al., 2002).
32. Contract Negotiation Capability: The extent to which
a client organization is able to effectively bid, select,
and negotiate effective contracts with suppliers (e.g.,
Feeny and Willcocks, 1998).
33. Contract Recency: Contract date as either the year the
contract was signed or years lapsed (e.g., Lacity and
Willcocks, 1998).
34. Contract Size: The size of the outsourcing contract
usually measured as the total value of the contract in
monetary terms (e.g., Oh et al., 2006; Rottman and
Lacity, 2008).
35. Contract Type: A term denoting different forms of
contracts used in outsourcing. Examples include
customized, fixed priced, time and materials, fee
for service, and partnership based contracts (e.g.,
McFarlan and Nolan, 1995; Poppo and Zenger, 2002;
Ross and Beath, 2006).
36. Control Mechanisms: Certain means or devices a
controller uses to promote desired behavior by
the controlee (e.g., Kirsch, 1997; Choudhury and
Sabherwal, 2003).
37. Cooperation: The degree to which client and supplier
employees are willing to work together in common
pursuit (e.g., Dibbern et al., 2008).
38. Cost Predictability: A client organization’s desire or
need to use outsourcing to better predict IS costs
(e.g., Sobol and Apte, 1995).
39. Cost Reduction: A client organization’s need or desire
to use outsourcing to reduce or control IS costs (e.g.,
Barthelemy and Geyer, 2004).
40. Country: The nationality of the client or supplier
organization (e.g., Barthélemy and Geyer, 2005).
41. Critical Role of IS – Organization: The degree to
which a client organization views IS as a critical
enabler of business success (e.g. Teng et al., 1995;
Saunders et al., 1997; Straub et al., 2008).
42. Critical Role of IS – Transaction: The degree to
which a client organization views an IS transaction
as a critical enabler of business success (e.g., Teng
et al., 1995; Saunders et al., 1997; Straub et al.,
2008).
43. Cultural Distance: The extent to which the members
of two distinct groups (such as client and supplier
 Review of the IT outsourcing empirical literature
424
organizations) differ on one or more cultural dimen-
sions (e.g., Dibbern et al., 2008).
44. Cultural Distance Management: The extent to which
client and supplier organizations understand, accept,
and adapt to cultural differences (e.g., Winkler et al.,
2008).
45. Culture: Shared values, beliefs, practices, and assump-
tions that characterize a group (Allen et al., 2002;
Roberts and Wasti, 2002).
46. Decision Sponsorship: The stakeholders involved in an
outsourcing decision (e.g., Lacity and Willcocks,
1998).
47. Demonstratability: The extent to which a supplier
organization articulates outcomes in a convincing
way to the client (e.g., Oza et al., 2006).
48. Domain Understanding: The extent to which a
supplier has prior experience and/or understanding
of the client organization’s business and technical
contexts, processes, practices, and requirements
(e.g., Clark et al., 1995; Gopal et al., 2002).
49. Effective Knowledge Sharing: The degree to which
clients and suppliers are successful in sharing and
transferring knowledge (e.g., Lee, 2001; Murray et al.,
2009).
50. Engagement of Multiple Suppliers: The situation in
which a client organization engages more than one
supplier or when one supplier subcontracts client
work (e.g., Currie, 1998).
51. Ethnocentricism: The tendency to believe that one’s
own race or ethnic group is the most important
and that some or all aspects of its culture are superior
to those of other groups (e.g., Van den Berghe, 1981;
Wikipedia).
52. Evaluation Process: The client organization’s process
for evaluating and selecting suppliers (e.g., Cullen
et al., 2005).
53. External Production Cost Advantage: The degree to
which a supplier is perceived to have an advantage
over a client organization in production cost econo-
mies (e.g., Williamson, 1991; Koh et al, 2004).
54. Fear of Losing Control: A client organization’s
concerns that outsourcing may result in loss of
control over IT (e.g., Patane and Jurison, 1994;
Collins and Millen, 1995).
55. Financial Leverage: The degree to which a business
utilizes debt rather than equity to fund its operations
(e.g., Hall and Liedtka, 2005).
56. Financial Slack: Financial resources an organization
possesses in excess of what is required to maintain
the organization (e.g., Koh et al, 2004; Hall and
Liedtka, 2005).
57. Flexibility Enablement: A client organization’s desire
or need to outsource to increase the flexibility of the
use and allocation of resources (e.g., Slaughter and
Ang, 1996).
58. Focus on Core Capabilities: A client organization’s
desire or need to outsource in order to focus on its
core capabilities (e.g., Lacity et al., 1994; Linder, 2004).
59. Frequency of Project Status Meetings: The regularity
with which project status meetings between the
client and the supplier take place (e.g., Gopal et al.,
2002).
MC Lacity et al
60. Future Business Potential: A supplier’s perception of
the possibility of obtaining future contracts from a
client (e.g., Gopal et al., 2003).
61. Geographic Distance: The physical distance between
two locations (e.g., Dibbern et al., 2008).
62. Head Count Reduction: A client organization’s need
or desire to use outsourcing to reduce the number of
staff (e.g., De Loof, 1995).
63. Industry: The primary industry classification of a
client organization; common classifications include
service vs manufacturing, private vs public, bank-
ing vs others, etc. (e.g., Loh and Venkatraman, 1992;
Grover et al., 1994; Barthélemy and Geyer, 2004).
64. Influences – Coercive: Influences that result from
both formal and informal pressures exerted on an
organization by other organizations upon which they
are dependent (e.g., DiMaggio and Powell, 1991; Ang
and Cummings, 1997).
65. Influences – External and Internal: The combination
of external media, supplier pressure, and internal
communications at the personal level among man-
agers of companies (e.g., Collins and Millen, 1995;
Pinnington and Woolcock, 1995; Hu et al., 1997).
66. Influences – Mimetic: Influences that arise from the
perception that peer organizations are more success-
ful; by modeling themselves based on peer organiza-
tions, the mimicking organization aims to achieve
similar results (e.g., DiMaggio and Powell 1991; Ang
and Cummings 1997).
67. Influences – Normative: Influences arising from
norms of professionalism, including formal education
and professional and trade associations (e.g., DiMag-
gio and Powell, 1991).
68. Information Intensity: An indicator of whether a
client organization is IT intensive; as measured, for
example, by IS Budget as percentage of Sales (e.g.,
Grover et al., 1994).
69. Initial Trust: One party’s willingness to believe the
other party based on the economic and cognitive cues
that the other party would fulfill the commitment and
behave in a predictable way (e.g., Lee et al., 2008).
70. Innovation: A client organization’s desire or need to
use outsourcing as an engine for innovation (e.g.,
Quinn, 2000).
71. IS Change Management Capability: The extent to
which a client organization effectively manages
change (e.g., Ranganathan and Balaji, 2007).
72. IS Chargeback Structure: The extent to which a client
organization charges users for IS services, usually
categorized as either a cost center or profit center
(Barthélemy and Geyer, 2005).
73. IS Department Performance: CIO’s, CEO’s, or organi-
zational members’ perceptions of the IS function’s
performance or competence (e.g., Arnett and Jones,
1994).
74. IS Department Power: The level of influence of the IS
department on the organization (e.g., Nam et al.,
1996; Dibbern and Heinzl, 2002).
75. IS Department Size: The size of an IS department
usually measured as total IS budget, number of
functions, and/or number of employees (e.g., Barthél-
emy and Geyer, 2005)
 Review of the IT outsourcing empirical literature
76. IS Human Resource Management Capability – Client:
A client organization’s ability to identify, acquire,
develop, and deploy human resources to achieve its
organizational objectives (e.g., Levina and Ross, 2003;
Ranganathan and Balaji, 2007).
77. IS Human Resource Management Capability – Sup-
plier: A supplier organization’s ability to identify,
acquire, develop, and deploy human resources to
achieve both supplier’s and client’s organizational
objectives (e.g., Levina and Ross, 2003).
78. IS Technical and Methodological Capability – Client:
A client organization’s level of maturity in terms of
technical or process-related standards including
the Capability Maturity Model (CMM), Capability
Maturity Model Integrated (CMMI), and the Informa-
tion Technology Infrastructure Library (ITIL) and
best practices such as component reuse (e.g.,
Davenport, 2005, Rottman and Lacity, 2006; Kotlarsky
et al., 2007).
79. IS Technical and Methodological Capability – Supplier:
A supplier organization’s level of maturity in
terms of technical or process-related standards
including the Capability Maturity Model (CMM),
Capability Maturity Model Integrated (CMMI), and
the Information Technology Infrastructure Library
(ITIL) and best practices such as component reuse
(e.g., Levina and Ross, 2003).
80. IT Management Competence: Senior executives’
perceptions of the IT manager’s competence (e.g.,
Willcocks and Plant, 2003).
81. Legal and Political Uncertainties: The extent to which
a county’s legal and political environments are
uncertain, unstable, or unfamiliar (e.g., Smith and
McKeen, 2004).
82. Length of Relationship: The number of years a client
and a supplier organization has worked together
(e.g., Lee and Kim, 1999; Gopal et al., 2003).
83. Maintenance Efforts: The effort required to maintain
an information system; measured, for example, by the
number of system maintainers assigned to mainte-
nance tasks (e.g., Park and Kim, 2005).
84. Managing Client Expectations: The extent to which a
supplier fosters realistic client expectations, avoids
over-promising, and informs clients about changes
in project status in a timely manner (e.g., Oza and
Hall, 2005; Taylor, 2006).
85. Measurement Difficulty: The degree of difficulty in
measuring performance of exchange partners in
circumstances of joint effort, soft outcomes, and/or
ambiguous links between effort and performance
(e.g., Eisenhardt, 1989).
86. Mutual Dependency: The degree to which a client
and supplier organization depend on each other (e.g.,
Lee and Kim, 1999).
87. Mutual Understanding: Degree of understanding of
behaviors, goals, and policies between partners (e.g.,
Lee and Kim, 1999).
88. Need to Generate Cash: A client organization’s desire
or need to generate cash through the sale of IT assets
to the supplier (Smith et al., 1998).
89. Norms: Established expectations of behavior (e.g.,
Macneil, 1983; Kern and Blois, 2002).
MC Lacity et al
425
90. Number of Liaisons: The number of people who serve
as intermediaries between client and supplier orga-
nizations (e.g., Gopal et al., 2002).
91. Opportunism: ‘Self-interest seeking with guile’ or
‘Making of false or empty, that is self-disbelieved,
threats and promises’ (Williamson, 1976, 1991).
92. Outsourcing – Applications Development and
Maintenance: The outsourcing of new application
development and/or the support and maintenance
of existing applications (e.g., Grover et al., 1996).
93. Outsourcing – End-user support: The outsourcing of
activities pertaining to end-user support such as
help/service desk (e.g., Grover et al., 1996).
94. Outsourcing – Planning and Management: Outsour-
cing of activities involving IS planning and manage-
ment (e.g., Grover et al., 1996).
95. Outsourcing – Systems Operations: Outsourcing of
activities pertaining to systems operations such as
data centers (e.g., Grover et al., 1996).
96. Outsourcing – Telecommunications and Networks:
Outsourcing of activities associated with telecommu-
nications and networks (e.g., Grover et al., 1996).
97. Outsourcing Decision – Degree of Outsourcing: The
amount of outsourcing as indicated by percentage
of IS budget outsourced and/or type and number of
IS functions outsourced (e.g., Lacity and Willcocks,
1998).
98. Outsourcing Decision – Make or Buy: The funda-
mental make or buy decision (e.g., Williamson, 1991)
in which a client organization decides to keep IT
in-house or decides to engage an outsourcing
supplier, measured as a binary variable.
99. Outsourcing Decision – Offshoring: A client organiza-
tion’s decision to engage an offshore supplier (e.g.,
Rao et al., 2006; Mirani, 2007).
100. Outsourcing Outcomes – Business Performance –
Client: The degree to which a client organization
reports business performance improvements as a
result of an outsourcing decision, such as stock
price performance, return on assets, expenses, and
profits (e.g., Agarwal et al., 2006; Mojsilovic et al.,
2007).
101. Outsourcing Outcomes – Business Performance –
Supplier: The degree to which a supplier organization
reports business performance improvements as a
result of an outsourcing decision, such as stock price
performance, return on assets, expenses, and profits
(e.g., Gopal et al., 2003; Madison et al., 2006).
102. Outsourcing Outcomes – IS Performance: The degree
to which a client organization reports IS performance
improvements as a consequence of outsourcing, such
as reports of costs savings realized (e.g., Lacity and
Willcocks, 1998; Dibbern et al., 2008).
103. Outsourcing Outcomes – Project Performance: Reports
on project outcomes in terms of costs, quality, and/or
time for outsourced projects (e.g., Gopal et al., 2002).
104. Outsourcing Outcomes – Project Performance – Off-
shore: Reports on project outcomes in terms of costs,
quality, and/or time for projects outsourced offshore
(e.g., Rottman and Lacity, 2008).
105. Outsourcing Outcomes – SET Satisfaction: A client
organization’s perceived degree of satisfaction with
 Review of the IT outsourcing empirical literature
426
outsourcing across strategic, economic, and technical
(SET) dimensions (e.g., Grover et al., 1996).
106. Outsourcing Outcomes – Success: A client organiza-
tion’s general perceptions of success and satisfaction
with outsourcing (e.g., Levina and Ross, 2003).
107. Outsourcing Outcomes – Success – Offshore: A client
organization’s general perceptions of success and
satisfaction with offshore outsourcing (e.g., Winkler
et al., 2008).
108. Partnership View: A client organization’s considera-
tion of suppliers as trusted partners rather than
as opportunistic vendors (e.g., Saunders et al., 1997;
Kishore et al., 2003).
109. Persistence of Expectations: ‘The tendency for prior
beliefs and expectations to persevere, even in the face
of new data or when the data that generated those
beliefs are no longer valid’ (Ho et al., 2003).
110. Political Reasons: A client stakeholder’s desire or
need to use an outsourcing decision to promote
personal agendas such as eliminating a burdensome
function, enhancing their career, or maximizing
personal financial benefits (e.g., Lacity et al., 1994;
Hall and Liedtka, 2005).
111. Prior Client/Supplier Working Relationship: The
situation in which the client and supplier organiza-
tions have worked together in the past (e.g., Lee and
Kim, 1999; Gopal et al., 2003).
112. Prior Firm Performance: Firm performance usually
measured as net profits, return on assets, expenses,
earnings per share, and/or stock price prior to an
outsourcing decision. (e.g., Hall and Liedtka, 2005).
113. Process Performance: The level of performance of a
process, such as process costs, operational efficiency,
quality, or level of customer satisfaction (e.g., Down-
ing et al., 2003).
114. Product Quality: The quality of the end product
delivered as part of an outsourcing/offshoring
arrangement (e.g., Whitten and Leidner, 2006).
115. Project Execution Swiftness: The speed with which a
project was carried out and deployed (e.g., Agarwal
et al., 2006).
116. Project Scoping Accuracy: A supplier firm capability
to estimate the contract scope accurately (not
underbid or overbid) (Koh et al., 2004).
117. Prompt Payment: A client’s prompt payment to
suppliers (e.g., Ho et al., 2003).
118. Rapid Delivery: A client organization’s desire or need
to engage in outsourcing in order to speed up project
delivery (e.g., Khan and Fitzgerald, 2004).
119. Relational Governance: The unwritten, worker-based
mechanisms designed to influence inter-organiza-
tional behavior (Macneil, 1980; e.g., Poppo and
Zenger, 2002).
120. Relationship Flexibility: The willingness of client and
supplier organizations to adapt the relationship to
changing circumstances (e.g., Klepper, 1995; Haried
and Ramamurthy, 2009).
121. Relationship Quality: The quality of the relationship
between a client and supplier (e.g., Lee, 2001; Whitten
and Leidner, 2006).
122. Relationship Specific Investment: Specific investments
made over time which discourage opportunism,
MC Lacity et al
reinforce signals of the client firms, and create
extendedness of the relationships (e.g., Goo et al., 2007).
123. Risk Management Capability – Client: A client
organization’s practice of identifying, rating, and
mitigating potential risks associated with outsourcing
(e.g., Smith and McKeen, 2004).
124. Risk Management Capability – Supplier: A supplier
organization’s practice of identifying, rating, and
mitigating potential risks associated with outsourcing
(e.g., Smith and McKeen, 2004).
125. Scalability: The ability to scale volume of service up
or down based on demand (e.g., Ross and Beath,
2006).
126. Service Quality: The quality of a service, frequently
measured as a client’s perception of a satisfactory
service performance by the supplier (e.g., Park and
Kim, 2005).
127. Social Capital: The sum of the actual and potential
resources embedded within, available through, and
derived from the network of relationships possessed
by an individual or social unit (Nahapiet and
Ghoshal, 1998; Rottman, 2008).
128. Stakeholder Buy-in: Gaining commitment and sup-
port from all parties involved in outsourcing-related
decisions (e.g., Seddon, 2001).
129. Supplier Competition: The presence of multiple,
reputable and trustworthy IT service providers which
can provide a range of choices for the clients (e.g.,
Ang and Cummings, 1997).
130. Supplier Employee Performance: The client’s percep-
tion of the performance of individual supplier employ-
ees (e.g., Grover et al., 1996; Winkler et al., 2008).
131. Supplier Management Capability: The extent to which
a client organization is able to effectively manage
outsourcing suppliers (e.g., Feeny and Willcocks,
1998; Willcocks et al., 2007).
132. Supplier Profitability: The profit possible for a supplier
on an outsourcing contract (Kern et al., 2002).
133. Supplier Reputation: The public’s perception of a
supplier’s capabilities based on past performance
and financial status (e.g., Levina and Ross, 2003).
134. Supplier Size: The size of a supplier organization
usually measured as total assets, sales, and/or number
of employees (e.g., Oh et al., 2006).
135. Supplier’s Core Competencies: A supplier’s set of
capabilities that enables it to gain a competitive
advantage over rivals (e.g., Klepper, 1995; Feeny et al.,
2005).
136. Switching Costs: The costs incurred when a client
organization changes from one supplier or market-
place to another (e.g., Whitten and Leidner, 2006).
137. Task Complexity: The degree to which a task requires
compound steps, the control of many variables,
and/or where cause and effect are subtle and dynamic
(e.g., Gopal et al., 2002).
138. Task Interdependence: The level of integration and
coupling among tasks (e.g., Mirani, 2007).
139. Task Structure: The degree of clarity and structure
pertaining to tasks (e.g., Mirani, 2007).
140. Technical Knowledge Required: The degree to which a
unit of work requires a significant amount of under-
standing/knowledge about unique, specialized, or
 Review of the IT outsourcing empirical literature
advanced technologies (e.g., Nelson et al., 1996;
Aubert et al., 2004).
141. Technical Reasons: A client organization’s desire or
need to engage in an outsourcing relationship in
order to gain access to leading edge technology
available through the suppliers and which may not be
available in-house (e.g., Altinkemer et al., 1994; Sobol
and Apte, 1995).
142. Time Zone Differences: The difference in local times
between two locations as measured in hours (e.g.,
Gokhale, 2007).
143. Top Management Commitment/Support: The extent to
which senior executives provide leadership, support,
and commitment to outsourcing/offshoring (e.g., Lee
and Kim, 1999; Seddon, 2001).
144. Transaction Costs: The effort, time, and costs
incurred in searching, creating, negotiating,
monitoring, and enforcing a service contract between
buyers and suppliers (Williamson, 1991; Koh et al,
2004).
MC Lacity et al
427
145. Transaction Frequency: The number of times a client
organization initiates a transaction, typically categor-
ized as either occasional or frequent (Williamson,
1991).
146. Transaction Homogeneity: The degree to which the
bundle of IT products and services are homogenous
(e.g., Seddon, 2001).
147. Transaction Size: The size of a transaction in terms of
dollar value or effort (e.g., Gopal et al., 2003).
148. Transition Management Capability: The extent to which
a client organization effectively transitions services to
outsourcing suppliers or integrates client services with
supplier services (e.g., Cullen et al., 2005).
149. Trust: The confidence in the other party’s benevo-
lence (e.g., Dibbern et al., 2008).
150. Uncertainty: The degree of unpredictability or vola-
tility of future states as it relates to the definition of IS
requirements, emerging technologies, and/or envir-
onmental factors (Williamson, 1991; e.g., Poppo and
Zenger, 2002; Aubert et al., 2004).
 Review of the IT outsourcing empirical literature MC Lacity et al
428

Appendix B

Email template to authors to verify codes

Dear [AUTHOR],

We hope this email finds you well.

We coded the entire body of empirical (both quantitative and qualitative) IT Outsourcing literature from 1992 to 2010. To
ensure the accuracy of our codes, we are randomly selecting a subset of the 164 articles we coded for review by authors. You
were selected!

We are hoping that you will validate how we coded some or all of the relationships in your paper:

[STUDY REFERENCE]

We have a master coding list of 150 variables used in ITO research. We mapped the variables you used in your paper to our
master coding list so we could more easily summarize findings across studies. We were hoping you would indicate the
extent to which you think our coding of your study is reasonable.

We also coded the findings between independent and dependent variables. The coding scheme assigns four possible values
to the relationship between independent and dependent variables: ‘ þ 1,’ ‘1,’ ‘0,’ and ‘M.’ We coded a ‘ þ 1’ for positive
relationships, ‘1’ for negative relationships, an ‘M’ for a relationship mattered, and ‘0’ for relationships that were studied
but not empirically significant. A more thorough explanation of the codes is included below.

Below you will find what we have coded for your paper at a high level and the relevant descriptions of our master variables
below the table. Please tell us the extent to which you agree with our coding for each of the findings from your study listed
in the table below. Please use the 7-point Likert Scale on the right-hand column of the table.

Your checks will go long way toward our initiative and will be much appreciated. Please don’t hesitate to contact
us if you have questions. We are hoping you will be able to respond within one week’s time.

Thank you!

Coding table, descriptions of variables, and detailed explanation (if needed) of coding scheme follow.

Our Descriptions of our Master Variable Names: [Here descriptions of relevant independent and dependent variables for a
study were provided].

[Explanation of Codes Followed]

Study: [Study reference] YOUR OPINION ABOUT HOW

WE CODED YOUR STUDY
[Our names] reasonably coded
the findings from my study:
Please type in a number
based on the scale below]
# IV as in We coded REL. DV as in We coded Strongly Strongly
your study your IV as: your study your DV as: disagree agree
1234567
1 y y y y y []
2 y y y y y []
3 y y y y y []
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Appendix C

Relationships between independent variables and ITO decisions and ITO outcomes
This appendix shows the relationships between independent variables and the two broad categories of dependent variables
(ITO decisions and ITO outcomes). For each relationship, a ‘1’ indicates a positive and significant relationship; ‘1’
indicates a negative and significant relationship; ‘0’ indicates a not-significant relationship; ‘M’ indicates the independent
variable mattered when operationalized as a categorical variable (see Table 3 for detailed explanations). The relationships
that were examined at least five times are boxed. The relationships that were examined at least five times and met the
criteria for consistent results as described in the text are marked with an ‘*’.

Category ITO decisions ITO outcomes Total

frequency
Independent variable 0 1 1 M TOT 0 1 1 M Tot

Motivation to outsource
Cost Reduction 3 36 1 40* 1 1 1 3 43
Focus on Core Capabilities 2 21 23* 1 1 2 25
Access to Expertise/Skills 1 16 17* 1 1 18
Business/Process Performance 15 1 16* 16
Improvements
Technical Reasons 10 10* 10
Political Reasons 5 1 1 7* 7
Concern for Security/Intellectual 1 4 5* 1 1 6
Property
Fear of Losing Control 5 5* 5
Flexibility Enablement 4 4 4
Commercial Exploitation 1 1 1 3 1 1 4
Change Catalyst 4 4 4
Access to Global Markets 3 3 3
Scalability 3 3 3
Rapid Delivery 2 2 2
Alignment of IS and Business Strategy 1 1 1 1 2
Career Development of IS Employees 1 1 2 2
Cost Predictability 2 2 2
Need to Generate Cash 2 2 2
Head Count Reduction 2 2 2
Innovation 1 1 1
Motivation to outsource total 8 129 11 4 152 3 3 3 9 161

Transaction attributes
Uncertainty 2 1 7 1 11* 2 1 12 15* 26
Asset Specificity 5 6 4 15 3 3 6 21
Measurement Difficulty 1 1 2 4 1 6 7* 11
Transaction Costs 9 9* 2 2 11
Critical Role of IS – Transaction 3 6 9* 9
Business Risk 1 4 5* 5
External Production Cost Advantage 3 3 1 1 2 5
Transaction Size 2 2 1 1 2 4
Task Complexity 1 1 1 2 3 4
Transaction Frequency 2 2 1 1 3
Task Interdependence 2 2 1 1 3
Client-specific Knowledge Required 1 1 2 1 1 3
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Category ITO decisions ITO outcomes Total

frequency
Independent variable 0 1 1 M TOT 0 1 1 M Tot

Technical Knowledge Required 2 2 1 1 3

Opportunism 1 1 1 1 2 3
Transaction Homogeneity 1 1 1 1 2
Task Structure 1 1 1
Switching Costs 1 1 1
Transaction attributes total 14 17 38 2 71 10 6 28 44 115

Relationship characteristics
Effective Knowledge Sharing 1 1 11 11* 12
Cultural Distance 1 2 3 7 1 8* 11
Trust 1 1 8 2 10* 11
Prior Client/Supplier 1 2 1 4 5 1 6* 10
Working Relationship
Communication 2 2 6 1 7* 9
Relationship Quality 1 1 5 5* 6
Partnership View 1 5 6* 6
Relationship Flexibility 1 1 3 1 4 5
Geographic Distance 1 1 2 1 2 3 5
Client-Supplier Interface Design 1 3 4 4
Commitment 4 4 4
Number of Liaisons 2 1 3 3
Benefits and Risk Sharing 1 1 2 2 3
Mutual Understanding 3 3 3
Social Capital 1 1 1 1 2
Frequency of Project Status Meetings 1 1 2 2
Conflict 1 1 2 2
Norms 2 2 2
Relationship Specific Investment 1 1 1
Time Zone Differences 1 1 1
Future Business Potential 1 1 1
Persistence of Expectations 1 1 1
Cooperation 1 1 1
Relational Governance 1 1 1
Mutual Dependency 1 1 1
Relationship characteristics total 1 8 4 4 17 3 64 14 9 90 107

Client firm characteristics

Client Size 6 3 5 1 15 2 1 3 18
Industry 7 4 2 13 2 2 15
Prior IS Department Performance 2 9 1 12* 1 1 13
Prior Firm Performance 3 1 5 9 1 1 10
IS Department Size 2 4 1 7 1 1 2 9
Client Experience with Outsourcing 1 1 1 5 6* 7
Information Intensity 4 1 1 6* 6
Critical Role of IS – Organization 1 1 1 2 1 4 5
Financial Leverage 2 2 1 1 3
Centralization of IS department 1 1 2 2
IS Department Power 1 1 2 2
Business Strategic Type 1 1 2 2
Financial Slack 1 1 2 2
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Category ITO decisions ITO outcomes Total

frequency
Independent variable 0 1 1 M TOT 0 1 1 M Tot

Country 1 1 1
Culture 1 1 1
CIO – CEO Proximity 1 1 1
IS Chargeback Structure 1 1 1
Client firm characteristics total 28 17 27 6 78 5 12 1 2 20 98

Client firm capabilities

Supplier Management Capability 11 11* 11
IS Technical and Methodological 1 1 1 3 1 4 5* 8
Capability – Client
Risk Management Capability – Client 1 1 2 3 2 5* 7
Contract Negotiation Capability 7 7* 7
Cultural Distance Management 1 5 1 7* 7
Capability
IT Management Competence 3 3 2 2 5
Client Outsourcing Readiness 3 3 3
IS Change Management Capability 3 3 3
Absorptive Capacity – Client 2 2 2
Transition Management Capability 2 2 2
IS Human Resource Management 1 1 1 1 2
Capability – Client
Client firm capabilities total 2 5 2 9 2 43 1 2 48 57

ITO decision
Outsourcing Decision - Make-or-Buy 4 17 6 27* 27
Outsourcing Decision – Degree of 2 3 2 5 12 12
Outsourcing
Outsourcing Decision – Offshoring 1 3 4 4
Outsourcing – Telecommunications 2 2 2
and Networks
Outsourcing – End-user support 1 1 1
Outsourcing – Planning and 1 1 1
Management
Outsourcing – Applications 1 1 1
Development and Maintenance
Outsourcing – Systems Operations 1 1 1
ITO decision total 10 26 8 5 49 49

Contractual governance
Contract Detail 1 1 1 11 1 13* 14
Contract Type 1 1 7 7* 8
Contract Duration 1 1 2 4 1 7 8
Control Mechanisms 1 4 5* 5
Contract Size 4 1 5* 5
Contract Flexibility 3 3 3
Prompt Payment 1 1 1
Contract Recency 1 1 1
Contractual governance total 1 1 1 3 1 23 6 12 42 45
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Category ITO decisions ITO outcomes Total

frequency
Independent variable 0 1 1 M TOT 0 1 1 M Tot

Supplier firm capabilities

IS Human Resource Management 1 1 1 9 10* 11
Capability – Supplier
IS Technical and Methodological 9 9* 9
Capability – Supplier
Domain Understanding 2 2 5 5* 7
Managing Client Expectations 4 4 4
Risk Management Capability – 2 1 3 3
Supplier
Supplier’s Core Competencies 1 1 1 1 2 3
Client Management Capability 2 2 2
Project Scoping Accuracy 1 1 1
Absorptive Capacity – Supplier 1 1 1
Demonstratability 1 1 1
Supplier firm capabilities total 4 4 2 33 1 2 38 42

Decision characteristics
Evaluation Process 1 1 2 1 5 6* 8
Top Management Commitment/ 7 7* 7
Support
Decision Sponsorship 2 1 3 2 2 5
Engagement of Multiple Suppliers 2 1 3 3
Client User Participation 1 1 1
Stakeholder Buy-in 1 1 1
Decision characteristics total 3 2 5 11 9 20 25

ITO outcomes
Service Quality 1 1 2 2 3
Supplier Employee Performance 2 2 2
Product Quality 2 2 2
Outsourcing Outcomes – Success 1 1 1 1 2
Supplier Profitability 1 1 1
Project Execution Swiftness 1 1 1
ITO outcomes total 4 4 1 6 7 11

Environment
Supplier Competition 1 2 1 4 3 3 7
Legal and Political Uncertainties 1 1 2 1 1 3
Ethnocentricism 1 1 1
Environment total 1 3 2 1 7 3 1 4 11

Influence sources
Influences – Mimetic 5 5* 5
Influences – External and Internal 2 1 3 3
Influences – Normative 1 1 1
Influences – Coercive 1 1 1
Influence sources total 9 1 10 10
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Category ITO decisions ITO outcomes Total

frequency
Independent variable 0 1 1 M TOT 0 1 1 M Tot

Supplier firm characteristics

Supplier Reputation 3 3 2 2 5
Supplier Size 1 1 2 2 2 4
Clear Authority Structures 1 1 1
Supplier firm characteristics total 1 3 1 5 5 5 10
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