Outsourcing

Are There Contagion Effects in IT and Business Process Outsourcing?

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Executive Summary

The authors model the diffusion of IT outsourcing via announcements about IT outsourcing deals. They estimate a log-normal diffusion curve to test whether IT outsourcing follows a pure diffusion process or there are contagion effects involved. The methodology permits one to study the consequences of outsourcing events, especially mega-deals with IT contract amounts that exceeded US$ 1 billion. Mega-deals act, they theorize, as precipitating events that create a strong basis for contagion effects and are likely to affect decision-making by other firms in an industry. Then, they evaluate the role of different communication channels in the diffusion process of IT outsourcing by testing for the fit of the mixed influence model at the industry level.

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