Organizational Factors Affecting IS Outsourcing Success in Taiwanese Hospitals

Introduction

Hospitals have often considered information systems (IS) outsourcing as a way to build sustainable competitive advantage, mitigate business risks, and free up resources for core business operations. Hospitals undertake IS outsourcing to, for example, save costs, concentrate on other activities or core activities, improve services and productivity, and contract out the maintenance of existing systems (Bhakoo et al., 2012; Hsiao et al., 2009; Karimi et al., 2012; Lin et al., 2007a; Mayson &Fleshner, 2009; Menachemi et al., 2007; Tit, 2009). This is because the setup of an IS service is usually an expensive exercise and is not something that a single organization or hospital can do it alone. Moreover, it is claimed that IS outsourcing contractors can achieve economies of scale and specialization because their only business is information processing. For instance, IS outsourcing contractors can purchase equipment more cheaply, and allocate fixed cost more favorably. The potential for cost savings has led many organizations to enter into various types of contracts with IS outsourcing contractors. Furthermore, IS outsourcing contractors have usually possessed more technical know-hows and skilled personnel to solve their clients’ problems than an independent organization (Lin et al., 2007b; Liu et al., 2008; Low &Chen, 2012; Moschuris & Kondylis, 2006; Roberts, 2001). This can be translated into substantial cost savings for outsourcing hospitals (Diana, 2009; Hsaio et al., 2009).

However, IS outsourcing process is an inherently uncertain and complex organizational task because it must deal with not only technological and social issues but also organizational aspects (e.g. information processing) that, by and large, are usually outside of the project team’s control (Lin et al., 2008a). For example, strong top management support can help organizations in establishing vertical IS instead of processing information through the existing hierarchical channels and this will improve the information processing capacity of organization and, in turn, is likely to lead to IS outsourcing success (Ramezan, 2011; Standing et al., 2006). Moreover, IS expertise within the organization can have a significant impact on IS outsourcing success. IS expertise can be described as the extent to which an organization has diffused key IS into its base foundation for supporting business applications, including platform technologies such as hardware and operating systems, network and telecommunications technologies, and databases, and a variety of shared services (Armstrong & Sambamurthy, 1999; Lin et al., 2007c). The level of organizational IS expertise forms a cornerstone for increasing organizational capabilities and is often suggested as a tool to improve IS outsourcing success (Fairbank et al., 2006; Liu et al., 2012).