Dar Manarang

The Relationship Between Transaction Costs and Savings in Offshoring Information Technology by Large U.s. Companies: a Doctoral Research on It Outsourcing Dar Manarang

This book is an exact copy of Dr. Manarang's doctoral dissertation at the University of Phoenix. The purpose of this quantitative, descriptive, correlational study was to examine if a relationship exists between transaction costs and the total savings of an offshore strategy over a two-year period following the offshoring of information technology projects by large U. S. companies. Chief information officers of U. S. Fortune 1000 companies were surveyed using a 20-question Web-based survey. The data suggested 57% of the companies with over one-year offshoring experience were doing so for strategic reasons rather than just for cost savings. The second finding was that only 34% of the respondents have offshored any IT activities for at least one year. The third finding confirmed earlier research that the four most common IT software activities offshored were coding, testing, maintenance (bug fixing), and design. The data indicated that despite large transaction costs in the first two years of launch, a majority of the respondents realized positive net total savings during these two years. Based on the results on the payback period and the total savings from an offshore strategy, the economics of offshoring appear to be attractive. However, corporate leaders and other decision makers need to weigh these favorable economic results against the risks involved in an offshore strategy and the impact such strategy would have on the interests of the other stakeholders of the company.