Leveraging Offshore it Outsourcing by Smes Through Online Marketplaces

ERIM Report Series Reference No. ERS-2006-045-LIS

Journal of Information Technology Case and Application, Vol. 8, No. 3

27 Pages Posted: 23 Aug 2006 Last revised: 24 Nov 2013

See all articles by U. L. Radkevitch

U. L. Radkevitch

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

E. van Heck

Erasmus University Rotterdam (EUR) - Department of Technology and Operations Management

O. Koppius

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Abstract

Following their larger counterparts, an increasing number of small firms outsource their IT tasks to lower cost offshore destinations. For small firms, however, offshore outsourcing is a difficult undertaking as it involves high transaction costs. Online marketplaces for IT services, which have recently become available to small firms, make offshore IT outsourcing more accessible and manageable, although differences in the marketplace design result in varying outcomes across the marketplaces. This has consequences for SME's decision as to which online marketplace to use, because different markets may have different types of benefits and costs. This paper sets to analyze some of the similarities and differences between online marketplaces for IT services and their effects for small firms. First, we analyze if and how online marketplaces reduce small firms' transaction costs in offshore IT outsourcing. Second, we examine the effects of market entry barriers on outcomes of online marketplaces and their implications for small firms. The results indicate that online marketplaces for IT services do reduce transaction costs for small firms in offshore outsourcing across ten specific market processes. More surprising, however, is the finding that the lower market entry barriers for suppliers result in lower prices for buyers without compromising other aspects of market performance.

Keywords: Offshore IT Outsourcing, Online Market, Reverse Auction, Process-Stakeholder Analysis

JEL Classification: M, L15, O32, L24

Suggested Citation

Radkevitch, Uladzimir and van Heck, Eric and Koppius, Otto, Leveraging Offshore it Outsourcing by Smes Through Online Marketplaces. ERIM Report Series Reference No. ERS-2006-045-LIS; Journal of Information Technology Case and Application, Vol. 8, No. 3. Available at SSRN: https://ssrn.com/abstract=925987

Uladzimir Radkevitch (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Eric Van Heck

Erasmus University Rotterdam (EUR) - Department of Technology and Operations Management ( email )

RSM Erasmus University
PO Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 2032 (Phone)
+31 10 408 9010 (Fax)

HOME PAGE: http://people.fbk.eur.nl/eheck/personal/

Otto Koppius

Rotterdam School of Management, Erasmus University ( email )

RSM Erasmus University
PO Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 2032 (Phone)
+31 10 408 9010 (Fax)

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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