Outsourcing in UK banking

Despite а mounting proof in support of transaction cost explanations, а completeness of these has been questioned (Eisenhardt and Brown 1992). In fact, а fundamental critique of transaction cost analysis is that it focuses solely on efficient organizational boundaries and ignores other factors. Consequently, transaction cost analysis isolates or atomizes organizational economic actions when such actions should be construed more appropriately as publicly embedded in ongoing networks of relationships with internal and external institutional constituents (Ang and Cummings 1997; Granovetter 1992; Hesterly et al. 1990).

With an under socialized conception of economic actions, production and transaction cost analyses then could overemphasize efficiency concerns and ignore other non-efficiency organizational goals for example legitimating, approval, and power. Besides approaching а research of IS outsourcing through other substantive dimensions, researchers should also explore а use of alternative methods.

Though appropriate to а research questions being explored in this research, а banking model clearly limits а generalizability of results, as outsourcing becomes pervasive across industries and develops longer decision-making histories in these organizations, future researchers will want to gather samples that extend а external validity to all industries. Perhaps а most severe limitation of а research is а cross-sectional nature of а research. Degree of outsourcing could influence perceptions of transaction costs as well as а opposite effect.

Furthermore, though а key informant was а senior manager, there are always methodological limitations associated with gathering data from а single source. There are certain points to be kept in mind when interpreting а results of this research. This research has focused exclusively on а BFI in Uk. So, а results might not be representative of other industries or across countries. This is of special importance if one takes а inherent reference framework of outsourcing and а associated risks and responsibilities into account, as required by tight national regulation.

А national character might change in years to come, when а international supervisory body for а banking system (а Bank for International Settlements) lastly releases its recommendations for outsourcing in financial services (BIS 2004b) to be incorporated into national regulations. Furthermore, а digital character of а banking and finance industry acts as а driver for outsourcing. Applying а findings of this research to other industries might introduce additional risks or change hazard magnitudes due to increased staff operations. Therefore, our findings are only directly applicable to а BFI in UK.

Further Research After analyzing а perceived hazard of BPO in greater detail а comparable approach to а perceived benefits of BPO seems promising. А combination of а findings of both measures and their influence on managers' attitudes might add to а understanding of а outsourcing decision. Furthermore, а development of innovative hazard-sharing approaches seems to be а relevant area for additional research, especially taking into account а advances of а Bank for International Settlement regarding а sanctions for operational hazard in а banking system (BIS 2004a).

А transfer of hazard in accordance with а transfer of а hazard-carrying business processes from bank to service provider is а main field for further research with great potential for а academic and practitioner community. Conclusion Supply and demand forces place in perspective а interesting conflict of а reluctant organization striving to maintain its independence from others while knowing that it must assent to inter organizational ties to procure а resources it needs (Lacity, et al. , 1995).

Outsourcing poses challenges for both user organizations and service providers: in estimating а "true" costs and savings of outsourcing; in managing power dependencies in а exchange; and in balancing а opportunities offered by open boundaries and free-flowing information against а need to protect а organization's unique capabilities. This research is а first attempt to compare а relative effects of production and transaction costs on managerial outsourcing decisions in а IT context.