Abstract

IS outsourcing policies define the criteria that organizations utilize to decide upon the scope and degree of reliance of their IS capabilities upon external sources. Financial considerations and business strategy are the two major determinants of the IS outsourcing decision. Most controversy on outsourcing of IS has been around the issue of increasing performance -generally by reducing costs and improving service. In this context, the study of the interrelationships between IS outsourcing policy, the business and financial strategy considerations and IS productivity, is increasingly relevant for providing a more balanced perspective to the ongoing debate. This paper proposes an integrative conceptual framework for analyzing the above relationships. A structural equation model was created to represent the proposed conceptual framework. The model was operationalized by using factor analysis and stepwise regression analyses. Since the objective of the study was to investigate the influence of financial criteria and business strategy variables on IS performance, the set of companies selected as "the 100 most effective users of information technology" by Computerworld Premier 100 survey (1994) represents an acceptable sample. Data integrity was ensured by extracting all remaining data from the same public sources as those used by the survey. The study has important implications for the new measure of IS productivity, as well as the continued emphasis on primarily macro-level financial measures for determining the effectiveness of

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