The Make-or-Buy Decision in ICT Services: Empirical Evidence from Luxembourg

In this paper, we seek to analyse the main drivers of firms’ choice in terms of outsourcing and/or offshoring of Information and Communication Technologies (ICT) services. As globalisation is a new way firms choose to organize their activities, a broad literature focuses on the outsourcing and the offshoring of activities (Grossman and Helpman, 2005; Marin and Verdier, 2003). Even if a lot of papers consider the outsourcing of materials (Antras and Helpman, 2004; Hubbard and Baker, 2003), firms resort more and more to the outsourcing of business services. Indeed, technological changes favour the compatibility and tradability of many services across the world (Goodman and Steadman, 2002; Abramovsky, Griffith, and Sako, 2004). Consequently, a lot of firms outsource, for example, their call centre or invoice and payroll services. As information systems (IS) outsourcing is a growing phenomenon, we choose to focus on in this study. The ICT services studied covers three types of ICT services the firm can use in its production process. In accordance with Arnett and Jones (1994), these ICT activities can be classified into: hardware, software and “comprehensive management activities”. The latter concerns e-business, database, website and ICT systems administration.