Communications of the IIMA


Outsourcing has the potential to decrease costs, increase focus, improve productivity, add flexibility and innovation, and increase operating income by taking advantage of another organization’s expertise, innovation, or cheaper labor. However, many managers have admitted that outsourcing initiatives have not fulfilled many of their expectations. Furthermore, studies have reported that more than half of outsourcing relationships fail within the first five years of implementation. This paper introduces a comprehensive theoretical model that combines two models proposed previously by Lee and Kim (1999) and Alborz, Seddon, and Scheepers (2003). Both models include sets of factors believed to influence the quality of the outsourcing partnership and, in turn, influence outsourcing success. This paper also extends these two works by proposing two important missing factors: Process Factors and Cultural Factors. The model presented in this paper should be of interest to both practitioners and researchers. For managers in an organization, the proposed model attempts to reduce the complexity of an outsourcing relationship so that both partners can focus on the most important factors that have the greatest potential to increase the likelihood of success. For IS researchers, this paper provides a new theoretical model grounded upon previous research to offer a more comprehensive framework to guide discussion and future research.