A Governance Mechanisms Framework for Multisourcing in Business Groups

A Governance Mechanisms Framework for Multisourcing in Business Groups

Thomas Ph. Herz (University of St. Gallen, Switzerland), Florian Hamel (University of St. Gallen, Switzerland), Falk Uebernickel (University of St. Gallen, Switzerland) and Walter Brenner (University of St. Gallen, Switzerland)
Copyright: © 2011 |Pages: 15
DOI: 10.4018/jitbag.2011070103
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Abstract

Many large corporations are adopting multisourcing strategies. Multisourcing is described as the blending of services from multiple company-internal and external suppliers in the pursuit of business goals. To date, governance-related aspects in terms of multisourcing have been scarcely covered in the academic literature. With this research study, the authors examine how business groups utilize governance mechanisms in a multi-sourced IT environment. This article contributes to the body of knowledge in three ways. First, it describes established IT governance mechanisms; second, it presents insights into three real-life examples of IT governance mechanisms at leading international insurance companies; and third, it extends current literature toward multisourcing in a group context by proposing and applying a framework of IT governance mechanisms targeting the different relationships of multisourcing in business groups. In addition, this research is useful for corporations facing similar challenges.
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1. Introduction

Multisourcing has been identified by both practitioner-related and scholarly literature as an emerging key strategy in today`s IT outsourcing endeavors of many large corporations (e.g., Bapna, Barua, Mani, & Mehra, 2010; Cohen & Young, 2006; Janischowsky & Schonenbach, 2009; Levina & Su, 2008; Oshri, Kotlarsky, Rottman, & Willcocks, 2009). Cohen and Young describe multisourcing as the blending of services from multiple company-internal and external suppliers (Cohen & Young, 2006). The major part of current studies addresses dyadic IT outsourcing relationships; however, linear extensions of those are not sufficient to capture the details of multisourcing (Bapna et al., 2010).

Moreover, governance-related aspects in the context of implementing a sourcing decision (Dibbern, Goles, Hirschheim, & Jayatilaka, 2004) have scarcely been covered despite their great relevance (Busi & McIvor, 2008; Clark, Zmud, & McCray, 1995; Davis, 1996; Dibbern et al., 2004; Gottschalk & Solli-Sæther, 2005; Klepper, 1995; McFarlan & Nolan, 1995; Weimer & Seuring, 2009; Willcocks & Choi, 1995) and the extensive research that has been conducted in general on IT governance (e.g., De Haes & Van Grembergen, 2009; Henderson & Venkatraman, 1993; ITGI, 2007; Loh & Venkatraman, 1992; Sambamurthy & Zmud, 1999; Weill & Ross, 2004). This study builds upon those findings and aims to extend current literature toward multisourcing in business groups.

Preliminary expert interviews with senior IT management consultants have indicated that governance aspects in multisourcing are of great practical relevance. Serving as an example, one interviewee stated:

In our clients’ frequently multi-sourced IT function, governance is of high relevance, yet the clients struggle to identify the right levers to implement.

With this research study, we intend to broaden understanding of how business groups implement governance mechanisms in a multi-sourced IT environment. Therefore, we have defined one comprehensive research question:

  • [RQ] How do business groups apply governance mechanisms in multisourcing?

  • This question has been further specified into two detailed sub-research questions:

  • [RQ.1] What are relevant IT governance mechanisms based on the current body of knowledge?

  • [RQ.2] Which mechanisms could a multisourcing governance framework in a business group encompass?

To answer these research questions, we conducted both a qualitative in-depth single case study and a qualitative multiple case study to investigate multisourcing relationships at leading international insurance groups providing primary insurance, re-insurance, banking and asset management services. We have chosen this industry because financial services providers such as banks and insurance companies are in the forefront of outsourcing and offshoring both IT and business processes (Levina & Su, 2008).

This article aims to contribute to research on IT outsourcing in general and IT governance mechanisms in a multisourcing context specifically, and is structured as follows. Section 2 outlines the research methodology. Section 3 provides an overview of fundamental terms and related research. Section 4 considers the single case of a leading insurance group. Section 5 reveals the main case study findings and discusses our proposal toward a framework of IT governance mechanisms. In Section 6 we apply the proposed framework in a multiple case study in the insurance industry, and in Section 7 we highlight the lessons learned before we conclude in Section 8.

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