“Does Strategic Outsourcing Create Financial Value?” In: Michael Pinedo (ed.) Operational control in asset management: Processes and Costs
By Deepa Mani, Anitesh Barua, Andrew Whinston
SimCorp Strategy Lab | 2010
Citation
Mani, Deepa., Barua, Anitesh., Whinston, Andrew. “Does Strategic Outsourcing Create Financial Value?” In: Michael Pinedo (ed.) Operational control in asset management: Processes and Costs SimCorp Strategy Lab .
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SimCorp Strategy Lab, 2010
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Abstract
As the reach of outsourcing extends to include strategic business functions, a central question for outsourcing managers is whether outsourcing creates value. In contrast to transactional outsourcing, strategic outsourcing is characterized by higher levels of business uncertainty and complex coordination requirements. Consequently, strategic outsourcing involves greater contractual risks and requires greater investments in collaboration with the vendor. Based on the conjecture that clients may be unprepared for these management challenges, we test the hypothesis that there may be negative abnormal returns to strategic outsourcing decisions. Data on the 100 largest outsourcing deals inked between 1996 and 2005 show that while transactional deals experienced positive long-term abnormal returns, complex arrangements witnessed significant long-term value destruction. The negative outcomes are exacerbated by low levels of outsourcing experience and lack of familiarity with the vendor. The results suggest that clients are unprepared for the management challenges of strategic outsourcing. The results have implications for asset managers in extracting value from their own outsourcing decisions, and also for seeking investment opportunities in firms that manage the externalization of their value chains effectively.

Professor Deepa Mani is Professor of Information Systems and the Deputy Dean of Academic Programmes & Digital Learning at the Indian School of Business. Deepa’s research interests are at the intersection of technology, organisation, and society. She has demonstrated significant thought leadership on the business and policy implications of technological innovations and investments. Her research articles have been published in leading academic journals and extensively featured in refereed conference proceedings, edited book chapters, and popular media outlets. Deepa serves as a Senior Editor at Information Systems Research. Deepa’s research has also had widespread impact on business practice and policy. In recognition of her impact, she was awarded the prestigious INFORMS Information Systems Society (ISS) Practical Impacts Award in 2022.

Deepa has been appointed to serve on several expert committees of the Central and State governments to provide guidance on policies for the digital economy, digital interventions in key sectors, and catalyse grassroot impacts using technology. She also extensively coaches organizations, keynotes corporate leadership events, and conducts executive education in the areas of digital business models, digital transformation and technology product management.

Deepa completed her undergraduate education at St. Stephen’s College, Delhi University, Masters in Information Systems from Carnegie Mellon University, Pennsylvania, and her doctorate in Information Systems from the University of Texas, Austin.

Deepa Mani (1)
Deepa Mani