An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Jee - Hae Lim
University of Kansas

Abstract: This paper examines the financial benefits of IT outsourcing by 274 firms from the years 1990-2002. After examining the change in financial performance pre- and post- IT outsourcing contracts, and controlling for industry median changes, the study findings indicate that IT outsourcing can increase return on sales and gross profit margin, and reduce cost of goods sold and selling, general, and administrative expenses. The study also finds that service firms announcing IT outsourcing have similar benefits, and can have even greater increases in gross profit margin and return on sales.

Key Words: IT Outsourcing, Firm Performance, Value Chain, Service

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