Articles

2010

Gewald, H. (2010)

The perceived benefits of business process outsourcing: An empirical study of the German banking industry

In: Strategic Outsourcing; Vol 3; Issue 2; 89-105

Category: Publications in scientific journals [Find it]

Reference No.: 2010-1549

2009

Gewald, H.; Dibbern, J. (2009)

Risks and Benefits of Business Process Outsourcing: A Study of Transaction Services in the German Banking Industry

In: Information & Management 46(4), 249-257

Category: Publications in scientific journals [Find it]

Abstract

We developed a model of the adoption of business process outsourcing (BPO) based on risk-benefit analysis. The model was tested in the German Banking Industry in four areas of transaction processing. Our results showed that, in general, perceived BPO benefits have a substantially stronger impact on intention to increase the level of BPO than perceived risks. However, the experience that banks have with the BPO process, [whether already decided on BPO (Pro), still in the pre-decision phase (Neutral), or opted against BPO (Contra)], moderated the impact of factors affecting the perceived risks and benefits of BPO. Banks that opted for BPO were mostly driven by a desire to focus on their core business while considering financial risks. Banks in the neutral position had the most balanced view of risks and benefits, mainly financial and performance ones, and also focusing on the core business and increased business process performance. Those banks that decided against BPO mostly focused on benefits though the perceived risks were mostly formed by strategic and performance risks rather than financial ones. The results point out the path dependencies of the BPO decision.

Reference No.: 2009-1269

2007

Gewald, H.; Franke, J. (2007)

The Risks of Business Process Outsourcing: A Two-Fold Assessment in the German Banking Industry

In: International Journal of Electronic Finance (IJEF) Vol. 1(4), pp. 420-441

Category: Publications in scientific journals [Password Protected Download] (Please contact the author)

Abstract

This paper tackles the question of whether the risks inherent in Business Process Outsourcing (BPO) differ significantly from the risks of Information Technology Outsourcing (ITO) and subsequently investigates which are the most salient risks inherent in BPO. By applying structured expert interviews and a quantitative survey among Germany's 200 largest banks, it turns out that the risk categories relevant to ITO and BPO are fundamentally the same, but differ in magnitude. Digging deeper into the risks associated with BPO, and using Perceived Risk Theory as a theoretical framework, we found that financial risks are most important to decision makers, followed by strategic and performance risks.

Reference No.: 2007-377

Gewald, H.; Gellrich, T. (2007)

The Impact of Perceived Risk on the Capital Market's Reaction to Outsourcing Announcements

In: Information Technology and Management, Vol. 8, No.4 pp. 279-296; Springer

Category: Publications in scientific journals [Find it]

Abstract

Outsourcing is a widely accepted option in strategic management, which, like every business venture, bears op-portunities and risks. Supplementing the popular area of research on the merits of outsourcing, this paper exam-ines how stockholders rate corporate sourcing decisions with regard to the risk they associate with this transac-tion. Using event study methodology and multivariate cross-sectional OLS-regression, we analyze a sample of 182 outsourcing transactions in the global financial services industry between 1998 and 2004 in order to inves-tigate the risk-specific drivers of excess returns to shareholders. The analysis studies the impact of risk-specific independent variables, including transaction size, length, outsourced business functionality, and experience with outsourcing. Our findings indicate that risk-mitigating strategies have significant explanatory power, indicating that the capital market's reaction to an outsourcing announcement might at least partly be forecast. Results show a positive correlation between market reaction and business process outsourcing by financial services compa-nies. We also find strong evidence indicating that capital markets react positively to relatively large transactions compared to the market capitalization of the outsourcing firm. For service providers our results show that tradi-tional IT-related sourcing projects or the insourcing of administrative processes have a significant positive cor-relation with market reaction.

Reference No.: 2007-376

2006

Wüllenweber, K.; Gewald, H.; Franke, J.; Weitzel, T.; König, W. (2006)

Business Process Outsourcing: Eine Nutzen- und Risikoanalyse in der deutschen Bankenbranche

In: Books on Demand; Norderstedt

Category: Book

Reference No.: 2006-506

Gewald, H.; Wüllenweber, K.; Weitzel, T. (2006)

The Influence of Perceived Risks on Banking Managers' Intention to Outsource Business Processes - A Study of the German Banking and Finance Industry

In: Journal of Electronic Commerce Research (JECR); Volume 7, Number 2, pp. 78-96

Category: Publications in scientific journals [Find it]

Abstract

Information Technology (IT) is a key productive factor in the banking and finance industry (BFI) as almost the entire production and delivery of services can in principle be digitized. Driven by cost pressure and new competitors, outsourcing IT together with the relevant business processes is a promising way to focus on core competencies and to restructure the corporate value chain.

While there is a rich literature on the risks and benefits of IT outsourcing, little is known about the next step of business process outsourcing (BPO) and especially the associated risks. Our main hypothesis is that the perceived risks associated with BPO strongly influence the intention of managers to outsource business processes. Based on an empirical survey of BFI managers covering 90% of the cumulated German BFI balance sheet, it is shown that

• perceived risk does indeed have a significant impact on managers' attitudes towards BPO and that these attitudes strongly influence the outsourcing decision.
• Financial risks turn out to be a major risk facet, exerting pressure on banks which decide solely in terms of potential cost savings.
• In addition, the high importance of performance risk requires banks to invest in sophisticated vendor management.
  

Reference No.: 2006-124

Gewald, H.; Yetton, P. (2006)

Pre- and Post-Adopters' Perceptions of the Benefits of Business Process Outsourcing

In: Working Paper

Category: Miscellaneous

Abstract

Technology adoption theory explains individual attitudes towards IT-based innovations within an organization. Here, we extend that model to explain attitudes in the German banking industry towards business process outsourcing (BPO). The theoretical development includes a shift from an intra-organization, hierarchy-based influence model to an inter-organization, market-based model. A survey of 218 managers in 126 banks shows that attitudes towards BPO are a function of managers' experience of BPO. The implications for theory and practice are examined.

Reference No.: 2006-121

Franke, J.; Gewald, H. (2006)

Does Experience Matter? Source of Outsourcing Experience and its Impact on Outsourcing Attitude - Empirical Evidence from the German Banking Industry

In: 12th Americas Conference on Information Systems; Acapulco, Mexico

Category: Proceedings

Abstract

Previous studies indicate that prior experience of the outsourcer has an impact on the actual outsourcing evaluation. However, the question where this experience derives from remains unanswered. In an empirical analysis with Germany's 200 largest banks it is empirically shown that the level of experience indeed has a significant impact on senior management's attitude towards outsourcing. Furthermore, the analysis of the data reveals that close personal contact with prior outsourcing projects has the highest impact on management's level of experience. Interestingly, no significant impact is observed for indirect sources like former outsourcing experiences within the firm (intra-corporate knowledge), communication with peers and colleagues or the consultation of related business literature and newspapers. This research adds to the understanding of the influential factors which form senior management's cognitive position towards outsourcing. It calls for outsourcing service providers to thoroughly investigate and anticipate the personal history of their negotiating partner. Hers or his level of hands-on outsourcing experience clearly dominates the attitude formation towards outsourcing.

Reference No.: 2006-115

Gewald, H.; Yetton, P. (2006)

Differences in Benefit Perception According to Alternative Statuses of Business Process Outsourcing Adoption

In: Twelfth Americas Conference on Information Systems; Acapulco, Mexico

Category: Proceedings

Abstract

Technology adoption theories propose that experience plays a major role in adopting or rejecting a new technology. This study analyses how the benefits of Business Process Outsourcing (BPO) as a major technological innovation are perceived differently, according to the BPO adoption status of the corporation. A survey with Germany's 200 largest banks has been conducted (response rate: 36.8%) to gather information on senior management's benefit perceptions. The responses were segregated onto three groups, according to adoption status thus level of experience: Pre-adopters, adopters and non-adopters. All groups show distinctively different benefit perceptions. Cost savings for example are a benefit only seen by managers who not yet outsourced a business process. Experienced managers on the contrary see the major cost benefit in higher programmability of expenses. By applying technology adoption theories, this paper offers empirically grounded insights into senior management's benefit perceptions as an important antecedent of the actual outsourcing decision. This provides valuable contributions to theory and practice.

Reference No.: 2006-101

Gewald, H.; Lammers, M. (2006)

The Strategic Sourcing Decision - An Extension of the Classical Make or Buy Decision -

In: 7th Annual Global Information Technology Management Conference (GITMA); Orlando, Florida, USA

Category: Proceedings [Password Protected Download] (Please contact the author)

Reference No.: 2006-24

Gewald, H.; Helbig, K. (2006)

A Governance Model for Managing Outsourcing Partnerships

In: 39th Hawaii International Conference on Systems Sciences; Kauai, Hawaii, USA

Category: Proceedings [Password Protected Download] (Please contact the author)

Abstract

An outsourcing engagement is usually a long lasting and complex transaction which bears a considerable amount of risk. A well recognized way to mitigate the risk arising from the shift of responsibilities between outsourcer and service provider is the constitution of a joint governance structure. Although the need for governance has long been acknowledged in practice and academia, papers discussing an actual governance model are scarce. This work describes the governance model as deployed by one of the largest outsourcing service providers worldwide. The fundamental need for governance principles and strategic directions are discussed, as well as the necessary organizational structures, joint processes and relationship management functions. This paper offers insights into the practical answers to theoretically and empirically derived challenges and aims to foster discussions amongst scholars and practitioners on the important topic how to effectively govern an outsourcing relationship.

Reference No.: 2006-11

Hinz, D.; Gewald, H. (2006)

The Next Wave in IT Infrastructure Risk Management - A Causal Modeling Approach with Bayesian Belief Networks

In: 2006 IRMA International Conference; Washington

Category: Proceedings

Abstract

The management of risks associated with information technology (IT) infrastructure becomes increasingly important, as companies may face severe negative outcomes in case of failures. This paper proposes a new approach to manage IT infrastructure risks even in highly dynamic environments. Currently, IT infrastructure and its risks are managed based on historical loss data, which allows very precise forecasts for potential risks in stable environments. However, for the increasing number of firms facing dynamic environments like outsourcing or merger scenarios, historical data is not an adequate estimator for future events. Therefore, the next wave in IT infrastructure risk management has to employ more adaptive strate-gies. Based on an ongoing case study with two leading IT consultancies and an international service enterprise, this paper demonstrates, how causal modeling with Bayesian Belief Networks enables the prediction and, most important, the proactive management of IT infrastructure risks.

Reference No.: 2006-5

2005

Wüllenweber, K.; Gewald, H.; Franke, J.; Weitzel, T.; König, W. (2005)

Auslagerung von Geschäftsprozessen - Nutzen und Risiken

In: Forschungsbericht; E-Finance Lab, Frankfurt am Main

Category: Miscellaneous

Reference No.: 2005-332

Gewald, H.; Dibbern, J. (2005)

The Influential Role of Perceived Risks versus Perceived Benefits in the Acceptance of Business Process Outsourcing: Empirical Evidence from the German Banking Industry

In: Working Paper

Category: Working papers

Abstract

Business process outsourcing (BPO) has been suggested as one of the biggest areas of growth in the outsourcing market. Nevertheless, many organizations are still reluctant to outsource business processes that are part of their core business. In order to help overcome this divergence between expectations and reality, we systematically analyze the factors that form an organization’s attitude towards BPO as well as their intention to adopt BPO. We develop a BPO adoption model which is based on the argument that BPO poses both risks and benefits and that decision makers need to balance both before adopting BPO. The model is tested based on data that was collected in the German Banking Industry. Altogether 218 data points on the perceptions of business managers in the four areas of transaction processing (credits, securities, domestic payments, and foreign exchange/money market) were available for model testing via Partial Least Squares. The results show that the intention to outsource these IT-intensive business processes is strongly influenced by the manager’s attitude towards BPO. Other non-rational factors play a minor role. Only peer influences in the banking industry were found to significantly influence intentions. Around 77 percent of the variations in attitude are explained by perceived risks and perceived benefits. The perceived benefits have a much stronger influence on BPO acceptance than risks. This indicates that risks may be somewhat underrepresented in the adoption process. Moreover, it is instructive to note that the ability to focus on core competencies is the strongest advantage for BPO, followed by quality improvements and cost transparency. Interestingly, anticipated cost reductions have less influence than the previous three factors, and access to better resources plays no role in attitude formation. On the other hand, overall BPO risks are clearly dominated by financial risks. Strategic risks are also important and, to a lesser extent, performance risks, while psychosocial risks and privacy risks are not significant predictors. These findings support the recommendation that providers of BPO services should emphasize risk mitigation proposals in their offerings.

Reference No.: 2005-9

Gewald, H.; Gellrich, T. (2005)

The Impact of Perceived Risk on the Capital Market's Reaction on Outsourcing Announcements

In: 9th Pacific Asia Conference on Information Systems; Bangkok, Thailand

Category: Proceedings [Password Protected Download] (Please contact the author)

Abstract

Outsourcing has become a widely accepted option in strategic management which, as every business venture, bears chances and risks. Supplementing the popular area of research on the merits of outsourcing, this paper examines how stockholders rate the corporate sourcing decision with regard to the perceived risk they associate with this transaction. Using event study methodology and multivariate cross-sectional OLS-regression, we analyze a sample of 182 outsourcing transactions of the global financial services industry between 1998 and 2004 in order to investigate the risk-specific drivers of excess returns to shareholders. The analysis studies the impact of risk-specific independent variables which include the transaction size, length, outsourced business functionality, and experience with outsourcing. Our findings indicate that risk-mitigating strategies have significant explanatory power, indicating that capital market’s reaction to an outsourcing announcement might at least partly be forecasted. Results show a positive correlation of market reaction and business process outsourcing of financial services companies. We also find strong evidence indicating that capital markets react positively towards relative large transactions compared to the market capitalization of the outsourcing firm. For service providers our results show that traditional IT-related sourcing projects or insourcing of administrative processes has a significant positive correlation with market reaction.

Reference No.: 2005-114

Gewald, H. (2005)

The Influence of Perceived Risk and Perceived Usefulness on Manager's Attitude Towards Business Process Outsourcing

In: Proceedings of the Eleventh Americas Conference on Information Systems; Omaha, NE, USA

Category: Proceedings

Abstract

Although the financial services industry is a large buyer of outsourcing services, it still lags behind other industries especially regarding business process outsourcing (BPO). This research in progress asks why. The main hypothesis is that subjectively perceived risk is decisive for senior management's attitude towards BPO. A causal model will be developed, derived from Perceived Risk Theory and a review of the literature on the usefulness of outsourcing. Using the model, the influence of different risk and utility facets on the attitude towards BPO is assessed. The next research step will be an empirical test of the model.

Reference No.: 2005-101

Gewald, H.; Franke, J. (2005)

A Comparison of the Risks in Information Technology Outsourcing and Business Process Outsourcing

In: Proceedings of the Eleventh Americas Conference on Information Systems; Omaha, NE, USA

Category: Proceedings [Password Protected Download] (Please contact the author)

Reference No.: 2005-100

Gellrich, T.; Gewald, H. (2005)

Sourcing, Risk and the Financial Market

In: Proceedings of the 13th European Conference on Information Systems; Regensburg

Category: Proceedings

Abstract

Outsourcing has become a commonly accepted alternative of strategic management. But how do stockholders rate the corporate decision to divest parts of the former business? We study the stock market reaction of outsourcing announcements of the global financial services industry, using event study methodology and multivariate cross-sectional regression analysis. We analyze a sample of 162 outsourcing transactions between 1997 and 2004 in order to investigate the drivers of excess returns to shareholders of outsourcers and insourcers in the global financial services industry. The analysis studies the impact of independent variables, the driving factors. Our findings indicate that many of these factors have significant explanatory power, indicating that capital market’s reaction to an outsourcing announcement might at least partly be forecasted. Partnering with experienced service-providers significantly benefits the outsourcer. Evidence indicates that insourcers significantly benefit from large deals and transactions relating to traditional IT processes.

Reference No.: 2005-70

Gewald, H.; Lammers, M. (2005)

What is Core?

In: Proceedings of the San Diego International Systems Conference; San Diego, CA, USA

Category: Proceedings [Password Protected Download] (Please contact the author)

Reference No.: 2005-40

Gellrich, T.; Gewald, H. (2005)

Sourcing Risk and the Capital Market's Perspective

In: Proceedings of the 6th Annual Global Information Technology Management Conference; Anchorage, Alaska, USA

Category: Proceedings [Password Protected Download] (Please contact the author)

Reference No.: 2005-39

2004

Gellrich, T.; Gewald, H. (2004)

Sourcing Risk and the Capital Market's Perspective

In: Working Paper

Category: Miscellaneous

Abstract

Long Version of GITMA Paper

Reference No.: 2004-184

Gewald, H.; Hinz, D. (2004)

A Framework for Classifying the Operational Risks of Outsourcing

In: Proceedings of the Eighth Pacific-Asia Conference on Information System (PACIS); Shanghai

Category: Proceedings [Password Protected Download] (Please contact the author)

Abstract

Operational risk and outsourcing are two major topics on today's agenda of top executives, especially in the banking industry. This paper introduces a framework to classify operational risk in outsourcing in a way that generates quantifiable output for measurement purposes. The authors developed a matrix system that deploys a catalogue of sources of risk and a mu-tually exclusive yet exhaustive system of measurable impact areas. It is shown that this framework adds to the understanding of operational risk as its application enhances trans-parency through the transformation of often vague risk descriptions to quantifiable risk indi-cators. An overview of the current IS literature on risks in outsourcing combined with a criti-cal assessments of deficiencies for transparent risk classification serves as a input for the classification process.

Reference No.: 2004-68