The antecedents of information systems outsourcing

Outsourcing affects thousands of companies and employees every year. Recent studies indicate that worldwide outsourcing market size is estimated to rise from US$ 21.3 billion in 1997 to US$ 59.6 billion by 2005, with a 16.3 percent annual growth rate. Consequently, outsourcing has recently become a fundamental issue in management of information systems. Researchers propose several reasons why a firm outsource its IS functions which includes reducing costs, generating cash, focusing on core competencies, and gaining access' to technical expertise. This paper addresses three theoretical perspectives, namely absorptive capacity, IS maturity, and organizational modularity, in enhancing our prospective understanding of the determinants of outsourcing practices. These perspectives are put together to provide a foundation to guide future outsourcing research and that can be applied to explain the determinants of IS outsourcing in an organization's IS management.