Patterns in Application Development Sourcing in the Financial Industry

Sourcing, or the question of what a company should carry out in-house and what should be acquired elsewhere, has been discussed for quite some time. This paper addresses the sourcing of application development efforts in the financial industry. Based on a framework for selective sourcing, four cases are investigated and sourcing choices are characterized. Patterns consistent over time can in fact be found in the companies and several factors explaining such patterns are discussed. Load balancing and competence issues are identified as factors implying that company size is an important determinant of companies’ degrees of freedom when making sourcing choices for proprietary solutions. Legacy issues both in terms of traditional IT legacy and softer issues such as people’s experiences are also important. Concerning the choice between standard packages and proprietary solutions, companies tend to apply the same decision rule but evaluate the result differently. One proposed explanation to such differences builds on the distinction between application instances and application roles. Similar applications can play very different roles in different companies from for example business strategy perspectives. Such differing roles can explain different choices for seemingly similar applications.