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The Effect of Bargaining Power on Fixed Price IT Outsourcing Decisions

Title data

Fridgen, Gilbert ; Krapp, Michael ; Müller, Hanna-Vera:
The Effect of Bargaining Power on Fixed Price IT Outsourcing Decisions.
2010
Event: CIST 2010 : Conference on Information Systems and Technology , 06.11.-07.11.2010 , Austin, TX, USA.
(Conference item: Conference , Speech )

Official URL: Volltext

Abstract in another language

Successful IT outsourcing is usually for the benefit of both parties: the outsourcing client and the service provider. With a fixed price contract, the client tries to lower project risks and costs by transferring parts of a project to the service provider at a previously negotiated price. In this paper, we elaborate a model from the client’s perspective to identify a project’s optimal degree of outsourcing, considering both, costs and risks of software development. We then study the effect of bargaining power on this decision. Against the expectation that a powerful service provider demanding a higher price will cause a lower degree of outsourcing, the model shows that bargaining power has no effect on the decision. Instead, the client will choose the outsourcing degree at the maximum price spread between the service provider’s cost and the development cost of the client, no matter how the benefit will be shared among the two parties.

Further data

Item Type: Conference item (Speech)
Refereed: Yes
Keywords: IT-Outsourcing, Risk/Cost Valuation, Game Theory, Decision Theory
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Professorship Business Informations Systems and sustainable IT management
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Professorship Business Informations Systems and sustainable IT management > Professorship Business Informations Systems and sustainable IT management- Univ.-Prof. Dr. Gilbert Fridgen
Research Institutions
Research Institutions > Affiliated Institutes
Research Institutions > Affiliated Institutes > Fraunhofer Project Group Business and Information Systems Engineering
Research Institutions > Affiliated Institutes > FIM Research Center Finance & Information Management
Faculties
Faculties > Faculty of Law, Business and Economics
Result of work at the UBT: No
DDC Subjects: 000 Computer Science, information, general works > 004 Computer science
300 Social sciences > 330 Economics
Date Deposited: 01 Apr 2015 11:03
Last Modified: 31 May 2017 12:35
URI: https://eref.uni-bayreuth.de/id/eprint/7855