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Abstract

This study provides evidence of differential productivity impacts between the outsourcing of ongoing IT operations and the outsourcing of IT design and build activities. Additionally, this study finds differential productivity impacts between manufacturing and service sectors. Evidence shows that a large portion of IT budgets are dedicated to ongoing operations, yet ongoing operations is seldom researched. This study differentiates the impact of spending IT outsourcing related to ongoing IT operations versus spending on IT outsourcing to build new systems. Using industry-level data from 25 service industries and 19 manufacturing industries for the years 1998 to 2004 I examine the impact on outsourcing ongoing operations from the design of new systems and I compare the effects in manufacturing and services. This study shows that outsourcing IT design services positively contributes to productivity, while outsourcing IT operations does not. Furthermore, this study shows that the positive impact of IT design is greater for manufacturing industries.

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