Resource co-specialization in outsourcing of enterprise systems software

Purpose: Enterprise systems are commonly implemented by firms through outsourcing arrangements with software vendors. However, deriving benefits from these implementations has proved to be a challenge, and a great deal of variation has been observed in the extent of value generated for client and vendor firms. This research examines the role of co-specialization as a strategy to make the most out of outsourced enterprise systems. The authors develop hypotheses relating resource co-specialization with two indicators of success for implementation of enterprise software: (1) exchange success and (2) firm growth. Design/methodology/approach: The hypotheses are tested using a unique panel data set of 175 firms adopting Advanced Planning and Scheduling (APS) software, a type of enterprise system used for managing manufacturing and logistics. The authors identify organizational factors that support co-specialization and then examine how co-specialization is associated with enterprise software implementation success, controlling for the endogenous choice to co-specialize. Findings: The empirical results suggest that resource co-specialization is positively associated with implementation success and that the two resource co-specialization pathways that are examined complement each other in providing performance benefits. Originality/value: This paper contributes to the research literature on outsourcing. The study also provides a new empirical test using a unique data set of 175 firms adopting APS Software.