Determinants of Client Intention of Software Outsourcing Vendors: A Model from Taiwan's Financial Industry

Luor, Ted Tainyi, Lu, Hsi-Peng, Tao, Yu-Hui, Lin, Tom M. Y., Tung, Chi-Hsiang, Journal of Academy of Business and Economics

ABSTRACT

While many studies have focused on information software (IS) outsourcing, little is known about the determinants influencing clients' decision on IS outsourcing vendors. This article explores the relationships among client beliefs, factors, and intention, which determine their associations with IS outsourcing vendors in the financial industry--a relatively conventional industry with a preference for rule-regulated and structured activities. Ten factors influencing the decision of outsourcing vendors are first classified into four belief groups; then a simple model explaining client intention and preferences with respect to outsourcing is presented using the Correlation Analysis. Interviews with participants are also conducted to collate information during the classification process. By systematically discussing factors and attempting to bridge the gap between theory and practice, this article presents certain useful findings to theorize the association between IS clients and vendors for Taiwan's financial industry.

Keywords: information system, outsourcing, security, belief, trust

1. INTRODUCTION

The volume and range of services being outsourced have notably increased in recent years (Gonzalez, Gasco, and Llopis, 2006). In fact, the study of outsourcing has progressively increased since its early start in the 1960s (Gonzalez et al., 2006). In practice, many companies have been choosing IS outsourcing in response to complicated information systems (IS) and various internal requirements. In literature, many studies focused on IS or Information Technology (IT) outsourcing provide fruitful references for suppliers to formulate their methodologies and strategies for successful IS implementations (Yusufa et al., 2004). A successful IS outsourcing relationship can help outsourcing clients to achieve benefits such as cost-savings, increased flexibility, better quality services, and acquisition of new technology. However, there is little theoretically sound and formal knowledge about the determinants that influence a clients' decision on IS outsourcing vendors. Therefore, it would be a perfect supplement to the existing literature and IS outsourcing suppliers for providing a formal model uncovering the determinants influencing the client's intention to use an IS outsourcing vendor.

The banking and thrift industries are undergoing a technological metamorphosis (Zhu, Scheuermann, and Babineaux, 2004). This venture has attracted considerable attention and speculation in both the financial and IT communities. In addition, in 2003, expenditures for outsourcing information services totaled USD$500 million, a 14% increase over the previous year. In terms of the types of outsourcing jobs, the services engaged were still mainly software development and maintenance, which accounted for 55.03% of all services (Taylor and Todd, 1995). This paper studies the IS outsourcing factors in the financial industry--a relatively conventional industry with a preference for rule-regulated and structured activities.

The financial industry is an information-intensive industry in which information technology (IT) is becoming increasingly important. Take Taiwan for example. The financial institutions are facing dual competitive pressure in the areas of service quality and administrative efficiency (DGBAS, 2007). Taiwan has also been rated as having a high-performance orientation--the degree to which a society encourages and rewards group members for performance improvement and excellence (Javidan and House, 2001). In 2003, a total of USD$4.2 billion was expended on ITs in the nation, indicating a 25.33% increase over the previous year and accounting for 1.3% of the GDP. In terms of the ratio of information expenditure to total capital, the financial industry, including the banking and insurance industry, ranked as the second largest buyer of ITs (accounting for 16.57% of the total amount), after the manufacturing industry (20.51%). The function and role of IT in an organization are assisting in streamlining business processes via IT, creating a competitive edge through strategic developments, underpinning/enhancing strategic business goals, and maximizing operational efficiencies (Peppard and Ward, 1999). Therefore, Taiwan's financial industry is an ideal place to investigate the relationships among the variables of IS outsourcing and develop a model for impacting clients' decision on …

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Publication information: Article title: Determinants of Client Intention of Software Outsourcing Vendors: A Model from Taiwan's Financial Industry. Contributors: Luor, Ted Tainyi - Author, Lu, Hsi-Peng - Author, Tao, Yu-Hui - Author, Lin, Tom M. Y. - Author, Tung, Chi-Hsiang - Author. Journal title: Journal of Academy of Business and Economics. Volume: 8. Issue: 2 Publication date: February 2008. Page number: 159+. © 2008 International Academy of Business and Economics. COPYRIGHT 2008 Gale Group.

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