Iowa Case

4240 Words17 Pages
Risk Analysis of IT Outsourcing Case Study on Public Companies risks can be described by using Agency theory and Transaction Cost theory [3], [4]. They identified various types of risks which are additional costs, service debasement, disputes and litigation. Without a thorough comprehension of how to manage these risks, any benefits achieved could be offset by significant losses. Therefore, risks must be measured, understood and then mitigated to ascertain that organizations will meet their IT outsourcing goals. Organizations that perform risk analysis and correctly manage risks associated with IT outsourcing will be able to anticipate and alleviate issues associated with IT outsourcing [3]. Established literatures in IT…show more content…
Opportunism is expected to occur in relationships where there is an agent (or vendor) and a principal (or client). Vendors adopt opportunistic behavior for its own benefit whenever the chance arises [2]. Moral, social norms, the risk of prosecution and damage of reputation mitigate the risk of opportunism to a certain extent but cannot prevent all opportunistic behaviors [5]. Opportunism mainly constitutes three manifestations, which are moral hazard, adverse selection and imperfect commitment [6]. Moral hazard occurs when it is not possible for the client to scrutinize an IT outsourcing vendor’s behavior without incurring additional costs. In cases where the client cannot detect poor performance, the IT outsource vendor can blame poor performance on factors beyond its control. Adverse selection occurs when the client cannot inspect the IT outsourcing vendor’s characteristics. If the client fails to deal with adverse selection, the client will face difficulty in choosing a suitable vendor. Lastly, imperfect Manuscript received January 9, 2013; revised April 10, 2013. Financial support for this research paper is provided by National Broadcasting and Telecommunications Commission, Bangkok, Thailand. T. Ongwattanasirikul is wih Siemens Group, Bangkok, Thailand (e-mail: S.Malisuwan and N. K. Madan are with National Broadcasting and (e-mail: Telecommunications Commission Bangkok, Thailand
Open Document