Beimborn Cooperative Sourcing

Simulation Studies and Empirical Data on Outsourcing Coalitions in the Banking Industry
1. Auflage 2008
ISBN: 978-3-8350-5588-9
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 459 Seiten, Web PDF

Reihe: Business and Economics

More and more banks are deciding to merge business activities like payment processing or loans administration by founding joint transaction banks or credit factories. But under which circumstances will banks decide to outsource certain activities? What are the relevant drivers and inhibitors? What is the role of externalities and how can stable coalitions be established? What are the resulting market structure effects of cooperative sourcing activities?

Based on the integration of relevant economic and organizational theories, Daniel Beimborn develops a formal model of cooperative sourcing. The model captures the different drivers and inhibitors like economies of scale, scope and skill, transaction costs, strategic constraints etc. and forms the basis for both game-theoretical analyses and agent-based simulations. Simulations help to handle the numerical complexity and allow for compound analyses of the causes and effects of cooperative sourcing. Empirical data from two large-scale surveys and case studies in the German credit business are used in order to feed the simulation model and to validate the results.

This book is essential reading for researchers and students in the fields of business and information systems. It is also of interest to executives in the area of information systems and outsourcing.

Its originality, its attention to detail, its level of sophistication, its comprehensiveness, its coherence, and its richness makes this an excellent example of what the IS field needs far more of: applied research which ties together the best of what academics can offer with sound practical results.

Prof. Dr. Dr. h. c. Rudy Hirschheim
Baton Rouge, September 8, 2007

Zielgruppe

Research

Autoren/Hrsg.

Beimborn, Daniel

Weitere Mitwirkende

König, Prof. Dr. Wolfgang

Inhaltsverzeichnis

Theoretical Foundation and Related Research.- Cooperative Sourcing in the Banking Industry.- Developing a Formal Model for Cooperative Sourcing.- Analytical and Simulative Studies.- Conclusion.

Leseproben

2.1.3.2 Implications for the Sourcing (S. 49-50)

Decision Applying agency theory to the context of outsourcing requires the transformation of the principal/agent relationship to an outsourcer/sourcing provider relationship (Gellrich et al. 2005). From an AT perspective, the principal has to choose between an inter-firm and an intra-firm agency relationship. AT insights regarding the outsourcing relationship can be distinguished by the following perspectives: Ex ante (or: pre-outsourcing): The selection of an unsuitable vendor has to be avoided. Information about the vendor’s capabilities is only partially available to the potential outsourcer (hidden characteristics), provoking adverse selection (Akerlof 1970).

Ex post: After establishing the sourcing partnership, problems of hidden action or moral hazard and hold-up have to be prevented (Schott 1997). As pointed out earlier, the outsourcer has to choose between implementing an information system (monitoring) and outcome-based contracting (including positive and negative benefits) to insure incentive compatibility. Consequently, outsourcing a business function usually raises agency costs because, in most cases, it is easier to control efforts within the firm than to monitor autonomous business partners (Williamson 1990, 134), due to more easily implementable controlling and incentive instruments (Alchian and Demsetz 1972).

By contrast, sometimes measurement problems and opportunistic behavior exist within a firm, which actually leads to outsourcing (Wang 2002). The problem of hidden characteristics is generally insignificant because many specific investments are necessary in most cases and the market of sourcing providers in a wide range of fields is quite clearly set out (Schott 1997, 187). Investments in outsourcing relationships increase specificity and therefore include signal quality. If a service provider did not have the necessary clout and capability, it would be detrimental for him to undertake a too great business risk. Another way the sourcing provider can (help to) reduce the outsourcer’s risks resulting from hidden characteristics and hidden action is by taking over equity of the outsourcer (Cunningham and Fröschl 1995).

Or, often related to outsourcing deals in the banking industry, the sourcing provider places deposits in the customer bank (Schott 1997). Other bonding activities such as implementing one’s own control and logging systems or using standardized resources (to facilitate an exit option for the outsourcer) are also common in order to raise the outsourcer’s trust in the partnership. As already discussed in the section on TCE, the implementation of interorganizational information systems (IOS) leads to a reduction of coordination costs (p. 45). From an AT perspective, these IOS represent (at least partially) the implementation of monitoring capabilities which can reduce the risk of opportunistic behavior.

Furthermore, the problem of hidden action might be significantly less problematic in the context of cooperative sourcing. Since the insourcing firm provides the same services to the outsourcers as well as to itself, an inherent congruence of interests does already exist. Moreover, since the outsourcer in a cooperative sourcing scenario knows a lot about the outsourced business function, the level of uncertainty will be lower. The formal models based on PAT show that the less risk-averse entity has to bear the risk.

Über Autor(innen)

Dr. Daniel Beimborn promovierte bei Prof. Dr. Wolfgang König am Institut für Wirtschaftsinformatik an der Universität Frankfurt am Main. Er ist als Wissenschaftlicher Assistent von Prof. Dr. Tim Weitzel an der Universität Bamberg tätig.