Risk Effect Of IT Outsourcing On Firm Performance And Value

Abstract

This study examines the risk effect of IT outsourcing on firm performance and value in different types of contracts categorized by contract value and contract term. We used audited financial data to investigate the impact of IT outsourcing on firms’ performance and value. We examined the performance and value in a sample of 90 publicly traded firms that outsourced their IT activities between 1986 and 2009, over a four-quarter period following the outsourcing announcements. Our findings confirm the trend of shrinking outsourcing contract value and term in reality. The results reveal that short-term and low-weight IT outsourcing contracts improve firms’ performance more than long-term and high-weight contracts.