Does Domberger's theory of ‘The Contracting Organization’ explain why organizations outsource IT and the levels of satisfaction achieved?

Abstract

This paper contributes an interpretation of Domberger's theory of The Contracting Organization for use in an IT outsourcing context, then presents a preliminary test of the validity of that theory using data from an Australian survey of 235 senior IT managers. Our conclusion is that Domberger's theory appears to be a useful lens for understanding IT outsourcing, and that further research using purpose-collected data is therefore warranted. Phrased differently, Domberger's four types of benefit of contracting – namely Specialization, Market Discipline, Flexibility, and Cost Savings – appear to be a good way of summarizing senior IT managers’ explanations of why their organizations chose to outsource IT. The paper also conducts a preliminary test of the extent to which these four factors explain the purchasing organization's satisfaction with IT outsourcing.

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