Organizational Forms and National Institutions
Edited by Marcela Miozzo and Damian Grimshaw
Chapter 4: Modularity and Innovation in Knowledge Intensive Business Services: IT Outsourcing in Germany and the UK
4. Modularity and innovation in knowledge intensive business services: IT outsourcing in Germany and the UK Marcela Miozzo and Damian Grimshaw INTRODUCTION Although IT outsourcing has been an accepted business practice since the 1980s, it has shown remarkable growth in recent years and has been the engine of growth for the software and computer services sector. Its nature, however, has changed dramatically. IT outsourcing has matured from a commodity service to ‘risk/rewards’ partnerships. In several countries (such as the UK, the USA and Germany), large contracts (‘mega-outsourcing’) have been agreed between a small number of multinational computer services suppliers and large client organizations, including central and local governments and large services and manufacturing ﬁrms. Many of these contracts are seen as having a number of problems, including excess fees, declining services, inability to adapt to changing business and technology needs, loss of power to monopoly suppliers and inability of the clients to manage the interface with the suppliers (Lacity and Hirschheim 1995; Lacity and Willcocks 2001; Willcocks and Fitzgerald 1994a). However, and despite the above problems, large-scale IT outsourcing is still continuing. One of the problems in explaining the continuity of large-scale IT outsourcing is that existing studies apply theoretical approaches which oﬀer limited explanatory power. For example, it is argued that ﬁrms externalize their IT activities because they can either save on costs/risks (the transaction cost perspective) or focus on their core competences (Lacity et al. 1994a). Little attention has been paid to wider changes in production systems....
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