Managerial cost mitigation tactics in offshore IT projects

Abstract

Purpose

The purpose of this paper is to enhance our understanding of managerial decision‐making process regarding offshore sourcing of information technology (IT) projects. The study explored the relationship between transaction cost economics and maturity levels of a firm's offshore sourcing activities. Transactions costs theory and firms' offshore sourcing maturity levels provided the framework for studying the decision process.

Design/methodology/approach

The present study is a qualitative empirical investigation of the underlying decision process to offshore IT projects. The study is based on interviews of executives in fifteen large to medium size companies.

Findings

The data suggest that transaction cost mitigation approaches used by a firm vary based on the size of the company as well as the maturity level of the firm's offshore sourcing activities.

Research limitations/implications

The present study is based on interviews of IT executives in fifteen firms. Case studies and confirmatory studies can provide further insights.

Practical implications

Offshore sourcing maturity can influence cost mitigation tactics used by managers.

Originality/value

This is the first study to explore the relationship between transactions cost economics and offshore sourcing maturity of a firm. Future studies can extend the findings to deepen our knowledge of offshore sourcing challenges.

Citation

Sayeed, L. (2008), "Managerial cost mitigation tactics in offshore IT projects", Industrial Management & Data Systems, Vol. 108 No. 9, pp. 1219-1233. https://doi.org/10.1108/02635570810914900