Information technology outsourcing in emerging markets

Abstract

Information Technology (IT) firms can better differentiate themselves and achieve improved profitability through IT outsourcing business. This can be explained by using Hax and 'Wilde's Delta Model. Several IT firms have successfully achieved these objectives in well-developed countries. However, this thesis argues that developing successful IT outsourcing business in emerging markets cannot be achieved simply by replicating previous experiences in well developed countries, as IT outsourcing is greatly influenced by the cultural factors and the macro environment of the local markets. This thesis discusses the factors through two perspectives. The first encompasses the factors influencing a firm's decision whether or not to outsource its IT functions. Those factors can be categorized into five different concerns: financial, resource, strategic, managerial, and cultural. The second perspective focuses on the eight critical factors for IT outsourcing projects to be successful, four inside and four outside the firm. For emerging markets, we use Michael Porter's Diamond Model to analyze how IT outsourcing business is influenced by the environment in which it is operating. To give an example of an emerging market, we have studied IT outsourcing business in China. We have conducted in-depth interviews locally with a variety of IT firms and corporate customers, and applied once more Michael Porter's Diamond Model to analyze our findings. This thesis identifies the market segments and reviews the critical success factors in each of them, and concludes with recommendations to IT firms on strategies for the IT outsourcing business development in China.