Organizational Readiness for Business Process Outsourcing: A Model of Determinants and Impact on Outsourcing Success Sebastian F. Martin E-Finance Lab Goethe University, Frankfurt, Germany smartin@wiwi.uni-frankfurt.de Daniel Beimborn Chair of Information Systems and Services University of Bamberg, Germany daniel.beimborn@wiai.uni-bamberg.de Mihir A. Parikh MIS Department College of Business Administration University of Central Florida mparikh@bus.ucf.edu Tim Weitzel Chair of Information Systems and Services University of Bamberg, Germany tim.weitzel@wiai.uni-bamberg.de Abstract In innovation adoption literature, the important role of the organizational context as a determinant of information systems (IS) success has long been pointed out. Various factors such as top management support, process formalization, and availability of resources have been shown to contribute to the successful implementation of new information systems. By drawing on relevant insights from IT innovations literature, our conceptual piece of research aims at identifying organizational context factors which are critical for the success of business process outsourcing (BPO) as part of a firm’s overall Business Process Management activities. More specifically, process readiness, IT readiness and business management readiness are proposed to be important dimensions of organizational readiness for BPO. Furthermore, IT business alignment, as a routine-based process of knowledge sharing and creation, is proposed to be a driver of organizational readiness for BPO. 1. Introduction Business Process Management (BPM) is increasingly attracting interests of both practitioners and researchers, as it promises to improve business agility and operational governance by discovering, analyzing, modeling, simulating, optimizing, executing and governing business processes using well-defined methods, policies, metrics, practices, and software tools. Despite its relative recentness, business process outsourcing (BPO) is emerging to be one of the most promising instruments of BPM that optimizes performance in both core and non-core business processes. It aims to develop mutually beneficial interorganizational alliances among firms based on the level of competence in various business processes. The emergence of standardized and open IT platforms in recent years has made such alliances not only operationally feasible but also economically attractive. Nevertheless, until now BPO has received little attention in academic literature [45]. Moreover, descriptive studies found a significant number of BPO deals showing serious problems; a survey [60] conducted in 2004 among Germany’s 500 largest banks on process performance issues, the role of IT, and outsourcing tendencies in the credit business found that among the managers of banks which had already outsourced (parts of) their credit process, practically no one was fully contented with the outcomes of the outsourcing deal. Only 29% of the managers in charge with the specific process stated to be “rather content” with the outcomes of BPO. A subsequent study found that the risk of not achieving expected cost savings from an outsourcing deal (because the underlying business case does not contain all prospective costs) ranged among the top three managerial concerns regarding business process outsourcing (BPO) [62]. Much of the academic literature on outsourcing focuses on the outcomes of outsourcing [15]. The general tenor is that customers can successfully exploit Proceedings of the 41st Hawaii International Conference on System Sciences - 2008 1530-1605/08 $25.00 © 2008 IEEE 1