We study how a firm’s sourcing flexibility affects the value it obtains from its IT investments, and propose that the existing literature has, by ignoring external actors, taken too narrow a focus and understudied the richness of the concept in two ways. We argue that a firm’s IT sourcing flexibility is restricted by the level of industry concentration among the suppliers of its key information systems. At the same time, increased vendor concentration decreases the variety of applications being used among firms, thus simplifying integration across organizational boundaries. Thus, the short-term beneficial network effects of standardized technologies may be winnowed away over the long term by the high switching costs resulting from the oligopolistic nature of the vendor market. We suggest that IS practitioners and researchers should not ignore the impact of vendors when analyzing the risk of introducing new technology.
Singh, Harminder, "Precarious Balance:The External Dimension of IT Flexibility" (2006). MWAIS 2006 Proceedings. 15.