An investigation of the partnering strategies in application service provision: A vendor perspective

Abstract

This research aims to investigate the partnering strategies in Application Service Provision (ASP) from a vendor's perspective. Although some attention was recently given to the ASP model, the main focus of the published academic work was essentially on the customer's side. This research focuses on ASP vendors, and aims at studying the partnering strategies used by these in order to source the different ASP model components. From the studied literature, it was found that the ASP model relies on 4 main infrastructural layers for delivering services: the data storage layer, the server layer, the network layer, and the application layer. Due to the different nature of each of these layers in terms of the required technology, it was concluded that ASP is a complex service, for which the required resources and capabilities are unlikely to be owned by one single company, thus the importance of studying the partnering strategies needed for ASP vendors. Through the use of Transaction Cost Economics (TCE) and the Resource-based View (RBV), predictions were made about the expected sourcing modes (market, integration, or strategic alliance) for each of the ASP layers. The next phase was to study six ASP cases, in which the partnering strategies of each firm for each ASP layer were studied. The main result from this analysis was that the actual outcomes from the case studies did not fully match the predictions that were initially made. A cross-case analysis was then undertaken by reapplying TCE and RBV to the studied cases. In this phase, for each ASP layer in each case study TCE and RBV attributes were investigated, and the drawn conclusions were two fold. First, the initial assumption that the software layer is the core layer of the model, based on which the predictions were made, was rather flawed; it was found that although many ASP vendors draw value from the application layer, several others rely on other ASP layers. Secondly, it was concluded that the two used theories - TCE and R-BV - did not, independently, explain all the actual sourcing modes of the studied ASP vendors, though RBV showed more explanatory power than TCE. Furthermore, it was demonstrated that the combination of TCE and RBV, in the context of this study, offers more explanatory power than if the two theories were used independently. Although this is an important finding in the context of ASP, the implications on IS research is tremendous, where multiple-theory applications are increasingly called for.