IT Backsourcing: Is it the Solution to Innovation?

Abstract

This research paper explores a relatively unknown field, the notion of backsourcing in the context of innovation. It explores the relationship between the services supplied by IT vendors and the demand of firms in the financial services sector for innovation-driven business solutions to lead them out of recession and provides reasons for what motivates the backsourcing decision and suggests best practices for backsourcing. The likely future effects of a shift to more backsourcing are also examined.

A range of managerial economics, strategic, management and innovation theories are applied to the backsourcing phenomena in the context of innovation, including Total Innovation Management (TIM), Porter’s generic value chain and Hanson and Birkinshaw’s innovation value chain.

This paper is of particular interest to those responsible for innovation, IT sourcing decisions and vendors of IT services.

Keywords: Backsourcing, insourcing, outsourcing, innovation, value chains, IT

JEL Classification: D23, F16, J22, J24, L14, M14, M15, M54, O31, O32