Journal of Management Information Systems

Volume 26 Number 4 2010 pp. 5-12

Special Issue: Information Systems in Services

Bardhan, Indranil R, Demirkan, Haluk, Kannan, P K, and Kauffman, Robert J

Journal of Management Information Systems

Indranil R. Bardhan is an Associate Professor of Management Information Systems and Accounting and Information Management at the University of Texas at Dallas. His research interests are in the areas of information technology valuation, business impact of information systems on supply chain and firm performance, and health care informatics. His research has been published in leading journals, including Information Systems Research, Journal of Management Information Systems, MIS Quarterly, Operations Research, Manufacturing & Service Operations Management, Production and Operations Management, European Journal of Operational Research, Annals of Operations Research, Journal of Productivity Analysis, and Journal of the Operations Research Society of Japan. He has ten years of management consulting experience and has advised Fortune 500 executives on information technology strategy and systems implementation.

Haluk Demirkan is a Clinical Associate Professor of Information Systems and a Research Faculty member of the Center for Services Leadership at the W.P. Carey School of Business at Arizona State University. He has a Ph.D. in Information Systems and Operations Management from the University of Florida. His research in service science and service-oriented management and technology solutions has included recent industry-sponsored research projects with American Express, Intel, IBM, Micro­Strategy, and Teradata. His research appears in a number of journals, including Journal of the AIS, European Journal of Operational Research, IEEE Transactions on Systems, Man, and Cybernetics, Electronic Commerce Research and Applications, Information Systems Frontiers, Communications of the ACM, Information Systems and E‑Business Management, International Journal of Services Science, and other leading journals. He has 15 years of consulting experience in the areas of service-oriented solutions, information supply chain, business intelligence, and strategic business engineering with Fortune 100 companies. He is the recent recipient of the IBM Faculty Award for a research project titled "Design Science for Self-Service Systems."

P.K. Kannan is a Professor of Marketing in the Robert H. Smith School of Business at the University of Maryland. He is the Director for the Center of Excellence in Service. His research focuses on new product/service development, design and pricing of digital products and product lines, marketing and product development on the Internet, e‑service, and customer loyalty. He has received several grants from the National Science Foundation, Mellon Foundation, Science Applications International Corporation, and PricewaterhouseCoopers. His work has been published in Marketing Science, Management Science, Journal of Marketing Research, International Journal of Electronic Commerce, and Communications of the ACM. His research won the John Little Best Paper Award (2008) and the INFORMS Society for Marketing Science Practice Prize Award (2007). He serves on the editorial boards of Marketing Science, Journal of Marketing, Journal of the Academy of Marketing Science, International Journal of Electronic Commerce, and Journal of Service Research.

Robert J. Kauffmanis the W.P. Carey Chair in IS at the W.P. Carey School of Business, Arizona State University, where he holds appointments in IS, Finance, Supply Chain, and the School of Computing and Informatics. He has served on the faculty at New York University, University of Minnesota, and University of Rochester. His research interests span the economics of IS, competitive strategy and technology, IT value, pricing, supply chain management, and theory development and empirical methods. He has published in many leading journals and won outstanding research awards from the IEEE, Association for Information Systems, INFORMS, International Conference on Electronic Commerce, and Hawaii International Conference on System Sciences in the past five years.

This special issue explores the high-level theme of "information systems (IS) in services." This theme considers the effects of the new information technology (IT)--enabled service orientation on individuals and customers, organizational structures and modern enterprises, and markets and industries. It also represents an effort to formulate some of the basic tenets of a new managerial discipline---service science---from the perspective of the IS academic discipline, in collaboration with colleagues from marketing and supply chain management, and with input from organization and behavioral approaches and economics and management science approaches to research. It further provides a basis for evaluating relevant technical and managerial approaches to service-oriented architecture (SOA) and infrastructure, business processes and organizational workflows, and firm strategy and tactics. The deployment of IS and technology by firms increasingly determines their competitiveness in the service economy. In this milieu, there is a corresponding need to apply robust research findings in the appropriate managerial and organizational contexts on services innovation, quality, architecture, and design and delivery, as well as the customer satisfaction and business value that results. Services innovations affect people in their multiple roles as providers, co-producers, intermediaries, and consumers of services.

IT-based services delivery systems span multiple business functions, enterprises, and geographies, resulting in new levels of complexity. They are difficult to evaluate, implement, and manage successfully. Managers, meanwhile, are faced with developing effective service-sourcing strategies. The complexities and brittleness of current organizational information architectures and infrastructures provide a new impetus for the emerging services-oriented paradigm. The commoditization of hardware and processes and on-demand and utility computing characterize today’s economy. Matched with the convergence of IT innovations and the move to global e‑commerce, these developments prompt senior managers and academic researchers to rethink how IT can change organizational capabilities in competitive markets based on some of the new technical, organizational, market, and economic vantage points.

This special issue opens with "An Interdisciplinary Perspective on IT Services Management and Service Science," by Indranil Bardhan, Haluk Demirkan, P.K. Kannan, Robert J. Kauffman, and Ryan Sougstad. The authors contribute a stakeholder framework for analysis and offer a comprehensive survey of the growing body of literature in five different areas where different perspectives, theories, and methods for service sciences are especially salient. Those areas include IS and computer science, economics, finance, marketing, and operations and supply chain management. The authors assess the current state of knowledge as a basis for their argument that many of the issues that are treated are appropriate for further research within the IS discipline. Their unique insight is to recognize that the business and technical problems that appear to be the most important can be conceptualized in terms of the stakeholders that are most affected, including producing and consuming firms, business intermediaries, and monitoring organizations. The authors also offer a set of suggested research directions related to the interdisciplinary areas that they explore and rich discussions of their high relevance for IS researchers.

The papers that follow this survey successfully contribute to the IS in services domain of knowledge in several important respects. These include IT services, IT services outsourcing, software-as-a-service (SaaS), services operations, and marketing services in cross-functional business activities. The papers we have selected apply a wide array of research methods, including analytical modeling, surveys, interviews, simulation, and design science. Let’s now consider the papers themselves.

The authors of the second paper of this special issue, Mitzi M. Montoya, Anne P. Massey, and Vijay Khatri, contribute new ideas and findings on the importance that an IT services provider needs to place on building trust between employees and customers in the services delivery chain. The paper, "Connecting IT Services Operations to Services Marketing Practices," is primarily a work of theoretical and empirical analysis. The authors focus on several key mechanisms in the operational environment of IT services delivery. They relate to the training of employees and customers who participate in trial programs for IT services and to the social influence effects that important participants have in IT services implementation projects in engendering the trust of others associated with the project. The authors report on an empirical case study of a bank holding company’s banking units’ implementation of a large-scale system that was supported by its captive internal IS organization. This is an interesting context for research---the acquisition of IT services from within an organization---that permits the authors to effectively demonstrate the important role that trust in the service provider plays in the postimplementation success of IT services.

The third paper is "Multitask Agency, Modular Architecture, and Task Disaggregation in SaaS," by Anjana Susarla, Anitesh Barua, and Andrew B. Whinston. Over the past five years, SaaS has emerged as a leading trend that is transforming the marketscape for IT services in the U.S. economy. In the 1990s, Andy Whinston posited that there was a coming baseline change in approaches to software development. In particular, he argued that we should be on the lookout for an emerging market for modular "software objects" that would ease the costs and improve the quality of software support for organizational business processes. History now shows this prediction was both prescient and on target.

In this context, the derivative issue of contracts for IT services---and not just the capabilities to deliver software objects in the form of SaaS---is now of paramount importance. Susarla, Barua, and Whinston empirically analyze the tie-in between value-maximizing service design with task disaggregation and the choice of SaaS contract performance incentives in the presence of the agency problem of costly verifiability. They further note the importance of the presence of knowledge inter­dependencies between the SaaS vendor and the SaaS service user. In many contract settings, verifiability of vendor effort comes only at an unacceptable level of costs, and so it is imperative that effective contract design be considered up front in the process. This will help to ensure that the ensuing benefits can be properly incentivized and the economic value can be fully appropriated by the contract participants. An interesting observation in this research by the authors is that modularity in the interfaces of the SaaS vendor, along with vendor--client knowledge interdependence, increases the motivation for a client to prefer contracts in which the vendor’s incentives are not all fixed. The authors’ research suggests that the design of the infrastructure that supports IT services is as important a consideration as the details of the contracts themselves in determining how to structure value-maximizing SaaS relationships.

The fourth paper, titled "Coordination Strategies in an SaaS Supply Chain," by Haluk Demirkan, Hsing Kenneth Cheng, and Subhajyoti Bandyopadhyay, is the second paper on the important topic of SaaS. The authors investigate the coordination complexity between an application service provider (ASP) that provides SaaS capabilities and an application infrastructure provider (AIP) that offers the hardware capabilities of the SaaS infrastructure. This coordination creates a setup that is typical of the distributed supply chains of logistics networks. The authors examine performance under four different coordination strategies involving information sharing between the ASP and the AIP. Their analysis results indicate that coordination between the ASP and the AIP can result in an outcome with the same overall surplus as can be achieved by a social planner. The realities of the market often result in tension between an ASP and an AIP though: realistically, only one of them is likely to have significant market power. The authors’ analytical and simulation results indicate that the firm that is in a more advantageous position to coordinate the IT-driven supply chain also will have the incentive to do so. The results suggest that it is possible to create the right incentives so that the economically efficient outcome is also a Nash equilibrium. These findings have implications for the coordination strategies of providers that deliver software services over the Internet. Our expectation is that they will be instructive for producers of more complex cloud computing--based services, too.

The fifth paper of this special issue is "Understanding the Economic Potential of Service-Oriented Architecture," by Benjamin Mueller, Goetz Viering, Christine Legner, and Gerold Riempp. The authors examine a question that is beginning to feel like one that we have been searching for answers to for a long time: What is the business value of SOA? Much of the literature that we have read to date on this subject has been primarily situated in computer science, and not the IS literature. The computer scientists argue that the benefits and potential economic value are there for the taking, if only organizations would focus greater effort on learning about how to properly implement them. The authors anchor their perspective on the business value of SOA in the literature on individual and organization value, including the technology acceptance model, the resource-based view, and process-level impact assessment, among others. They propose five dimensions for SOA value: operational, managerial, strategic, IT infrastructure, and organizational. To obtain insights on the validity of this proposed set of value dimensions, the authors collected archival case study data on 164 instances of SOA implementations, involving 141 organizations and 32 different industries. The authors confirm through their archival case study data that organizations find that SOA has the capacity to create benefits as a style of IT architecture, as well as through improvements to operational processes and interorganizational systems with business partners, but that other critical factors need to be in place before such potential value can be appropriated by organizations.

Indeed, the performance of IT services in organizations is a major issue for senior managers who agree to commit their firms, as well as for the people who are involved in managing the relationships. Vandana Ramachandran and Anandasivam Gopal, the authors of "Managers’ Judgments of Performance in IT Services Outsourcing," discuss why there may be perceptual biases and systematic misuse of information that is often used to form opinions about the performance of outsourced projects. This is a critical area for investigation, since perceptions about the performance of one project often provide the basis for how senior management approaches other project opportunities in the firm. The authors’ work involves an empirical test using a rich data set of 85 projects and responses from knowledgeable project managers. For these projects, the authors distinguished between "diagnostic inputs," which are the typical quantitative and financial measures, and "nondiagnostic inputs," which deal with perceptions of risk and delivery, to assess software development performance. Input bias, according to the findings of the authors, is affected by what managers perceive about the nondiagnostic inputs, as well as the types of IT services contracts that are involved. This creates the possibility that such subjective evaluations may swamp more objective quantitative evaluations in their views of project success.

The seventh paper of the special issue is titled "A Service Science Perspective on Strategic Choice, IT, and Performance in U.S. Banking" and is authored by Paul P. Tallon. Consumer intimacy strategies pursued by large corporations are increasingly essential to their effectiveness in market competition. In this research, Tallon assesses the differences between large and small financial institutions in terms of their use of IT in their business operations, customer service, and relationship management activities between 2003 and 2007. He reports that small banks focus more on customer service orientation, while large banks tend to stress operational excellence overall to a greater extent. He also notes that there is a gradual strategy transition under way in the banking industry. This trend emphasizes consumer intimacy in financial services, but at the cost of lack of full alignment with spending on IT for operations. Empirical research of this sort provides a vision for leadership in service science that will help financial services firms---large and small---to make the most of their investments in IT.

The next paper, by Jae Choi, Derek L. Nazareth, and Hemant K. Jain, is "Implementing Service-Oriented Architecture in Organizations." The research develops a new type of decision support tool to help organizations to make strategic decisions on the adoption and implementation of SOA solutions. The authors use system dynamics modeling to capture industry-level SOA diffusion, as well as the firm-level effects of SOA implementation on strategic agility. The authors’ model captures the complexities, dynamics, and range of decision-making options, which include organization and industry readiness and SOA implementation effectiveness. The proposed model also gives managers the ability to explore various decision options. The authors further report that in a stable environment traditional IT architecture performs relatively well. As a result, under these conditions at least, the advantages of SOA-based infrastructure are not nearly as prominent as the claims of industry vendors would have us think. In more volatile business environments, the same is not true though. The authors report that the necessity of undertaking substantial modifications of existing IS applications point to the cost-saving advantages of SOA in volatile environments. Moreover, there is an "agility gap" that exists between business processes and the systems that are supposed to support them. SOA-based infrastructure seems to do more to minimize that gap and ensure the agility of the firm. The authors provide a unique decision-making model to showcase the results of a series of simulations that explore different industry and organizational conditions that illustrate the role of SOA implementation and its effectiveness in helping firms to realize business value from their investments.

IT services pricing and the sharing of relevant information between service vendors and their clients is another issue that falls in the domain of IS and services. Sagnika Sen, T.S. Raghu, and Ajay Vinze explore these issues in "Demand Information Sharing in Heterogeneous IT Services Environments." The paper emphasizes the issue of demand variations that affect perceptions of the value of an IT services agreement. In this research, the authors develop a simulation model that supports the evaluation of whether the sharing of demand volatility information between the client and the IT services vendor is valuable. A key insight of the research is that when exchanges of demand information occur, the nature of the relationship between the vendor and the client will change, much like we have seen in buyer--supplier relationships in supply chain management in the operations management literature. One effect, for example, is that information sharing may influence how the vendor will choose to allocate its resources in support of IT service-level agreements. A second effect, and one that is the focal point of the new contribution to service science knowledge in this work, is that the vendor’s pricing strategy will need to change to support the highest level of economic welfare to accrue to the parties to the contract. The simulation work in this research comes around variations in the levels of information granularity and information accuracy related to demand volatility. On the basis of their findings, the authors point out the importance of incentivizing vendor--client collaboration as a means to release the full business value that can lead to gains in such interfirm IT services relationships.

The final paper of this special issue examines the issue of how service-level agreement contracts should be designed to appropriately compensate IT services providers for the risk they must bear when they make agreements with clients to permit them to flexibly withdraw from the service relationship at an unspecified future date. It is entitled "Should We Go Our Own Way? Backsourcing Flexibility in IT Services Contracts" and is written by Michel Benaroch, Qizhi Dai, and Robert J. Kauffman. The authors utilize the theory of real options and implement a model involving contingent claims analysis to show how to build value-optimal contracting arrangements that balance the interests of the services vendor, who risks a loss from unutilized services capacity, and the services client. The client’s primary concern is the prospect of continuing to pay for IT services that are no longer necessary, or whose contracted price is too high in a market where service providers’ costs are drifting downward over time. The emphasis of this theory-building analytical modeling research is to understand situations for IT services contracting that are subject to client-side demand volatility for the services supplied. The primary results of the research show how managers should think conceptually about IS services contracts with provisions for backsourcing. It emphasizes that managers need to recognize that there are embedded put and call options whose value trajectories and optimal exercise timing can be determined based on the available real-world data. The authors propose the concept of a "demand trigger value" for the IT services client that will help to determine when to backsource, based on observed historical demand volatility and the structure of the contract’s fees for IT services usage. Similar to the research presented by Susarla, Barua, and Whinston in this special issue, we also see here that there is reason to believe that long-term, fixed-price contracts will probably not be value maximizing for any of the contract participants, given the complexity and dynamic nature of the real-world setting in which the services are executed.

This special issue of the Journal of Management Information Systems attracted state-of-the-art research submissions that investigate new design and management ideas related to IT services and the service-oriented paradigm. A key criterion in the review process was a recognizable contribution to theory. We also stressed the importance of managerial relevance and the implications of the research. This is because the service-oriented paradigm already offers strong perspectives, theories, and methods. So to bring this scholarly discourse into the IS discipline more fully, we needed to ensure that the selected papers meet the recognized standards for scholarly research and make contributions to management practice. The final versions of the papers that are published in this special issue were selected from among 116 original submissions after a rigorous, four-round review process.

Additional research and new submissions on the topics that these papers have discussed are welcome for review and publication at the Journal of Management Information Systems. With this special issue we have attempted to drive new stakes in the ground to give our readers some guidance about appropriate topics and issues, theories and perspectives, and methods and approaches to research on IS in services. From the growth of interest that we are seeing across the issues and disciplines that these papers represent, our expectation is that future research has the potential to deliver even more insightful and managerially relevant work. We expect that it will demonstrate the engaged scholarship of university researchers in collaboration with industry practitioners on business problems in service science that are of the highest priority to the multiple stakeholders that are involved.

We extend our thanks to the anonymous reviewers of these papers, as well as our advisory board for their support of this special issue on a fertile and emerging research area. They put in a lot of time and effort to help us shape the research for publication, and their ideas, suggestions, and critiques are central to the success of the final products. We thank the Editor-in-Chief, Vladimir Zwass, for his encouragement and guidance on this special issue project. We further acknowledge the commitment that the authors of the papers in this special issue made to produce high-quality work on an expedited schedule for development. Their cooperation and willingness to cheerfully accept and implement the review teams’ suggestions were warmly welcomed by us, and made it possible for our work together to be successful. Finally, we hope that the published contents of the special issue will encourage the authors whose papers did not make it into the special issue to continue their research and to find even greater impetus for making new contributions to knowledge in service science through some of the examples of the research that they find here.