An Empirical Investigation of IS Outsourcing in Japan

Two typical different patterns of Information Systems (IS) outsourcing are considered as the most effective approaches of business strategy. They are conventional outsourcing and quasi-outsourcing. The later generally is often adopted in large-scale organizations in Japan. In most such cases, an IS subsidiary is established by spinning off the firm's own information systems department. However, in recent years, most companies strengthen capital alliances relationship between their IS subsidiary and external vendors, while some companies sell their IS subsidiary for separating it completely from their parent company. On the other hand, there is growing diversification in the arrangement/ management of IS subsidiaries. For instance, some firms force their IS subsidiary to withdraw from external sales business while other firms go further and integrate their IS subsidiary back into their parent company again (i. e., backsourcing). This research employs case study in order to investigate the determinant factors which have strong effect on these IS subsidiary arrangements. In this paper, we first review relevant previous studies on IS outsourcing. And then we introduce case studies of two chemical manufacturing companies in Japan and discuss its implications. Finally, we propose some propositions based on the implications derived from the case studies. This paper therefore provides an empirical perspective of the IS outsourcing in Japan.