A study on the lock-in risk in IT outsourcing projects: the mechanism and the control system

Cong Guodong

COMPUTER MODELLING & NEW TECHNOLOGIES 2014 18(2) 221-226

School of Business Administration, Zhejiang Gongshang University, Xuezheng Str.18, Hangzhou, P.R.China

This paper, proposes an insight into the mechanism of lock-in risk, which is the primary risk and the greatest concern in managing IT outsourcing projects. Based on Transaction Cost Theory (TCT), it develops an integrated three-layer model to instruct the mechanism of lock-in risk, namely, what will lead to lock-in risk (risk drivers), and what lock-in risk will result in (risk consequences). Four risk drivers such as asset specificity and three risk consequences such as cost escalation are identified and discussed in detail. Meanwhile, it instructs why four kinds of control could mitigate lock-in risk both from the sources and the consequences. Therefore, the effectiveness and reliability is enhanced throughout the risk management process of IT outsourcing projects, particularly for dynamic risk identification, controlling and monitoring.