Information Technology and the Organizational Structure of Modern Business Outsourcing

The organization of modern business has been affected by the development of information technology. Information technology, in particular, affects organizational structure through vertical disintegration and international production sharing. For example, firms outsource information services such as software development and call-center operations, and also computing services. This study considers the outsourcing of information services as being promoted by a drastic reduction of transaction costs, rather than simply by the difference in production costs. This study also focuses on the service attributes that affect the transaction costs of information services, and provides an analytical tool for the firm’s choice of organizational structures. It also discusses the outsourcing decisions of firms by using this tool with examples of several types of outsourcing of information services.