Paper Info
Title
It Implementation Contract Design: Analytical And Experimental Investigation Of It Value, Learning, And Contract Structure
Abstract
This article analytically and experimentally investigates how firms can best capture the business value of information technology (IT) investments through IT contract design. Using a small sample of outsourcing contracts for enterprise information technology (EIT) projects in several industries-coupled with reviews of contracts used by a major enterprise software maker-the authors determine the common provisions and structural characteristics of EIT contracts. The authors use these characteristics to develop an analytical model of optimal contract design with principal-agent techniques. The model captures a set of key characteristics of EIT contracts, including a staged, multiperiod project structure; learning; probabilistic binary outcomes; variable fee structures; possibly risk-averse agents; and implementation risks. The model characterizes conditions under which multistage contracts enable clients to create and capture greater project value than single-stage projects, and how project staging enables firms to reduce project risks, capture learning benefits, and increase development effort. Finally, the authors use controlled laboratory experiments to complement their analytical approaches and demonstrate robustness of their key findings.
Year
DOI
Venue
2013
10.1287/isre.1120.0448
INFORMATION SYSTEMS RESEARCH
Keywords
Field
DocType
analytical modeling, enterprise systems, economics of IS, management of IS projects, laboratory experiments, business value of IT
Enterprise system,Economics,Business value,Information technology,Enterprise software,Outsourcing,Probabilistic logic,Contract management,Marketing,It value
Journal
Volume
Issue
ISSN
24
3
1047-7047
Citations 
PageRank 
References 
8
0.50
15
Authors
3
Name
Order
Citations
PageRank
D. J. Wu177968.08
Min Ding280.84
Lorin M. Hitt32426223.11