Publisher
Florida Atlantic University
Description
An information system is defined as "a system that uses information technology to capture, transmit, store, retrieve, manipulate, or display information used in one or more business processes" (Alter, 1996, p. 61). The use of information systems (IS) in local governments has dramatically increased and diversified over the past ten years. Because IS expenditures are expected to increase, IS management will be a key issue in city governments. In order to explore IS management and outsourcing in American city governments, three theoretical perspectives and three models are employed. The three theoretical perspectives influencing IS outsourcing are (1) economic factors, (2) diffusion of innovation, and (3) organizational factors. The three models focus on three factors: (1) the percentage of total city budget allocated to total IS expenditure, (2) the percentage of total IS budget allocated to IS outsourcing expenditures, and (3) the percentage of total IS budget allocated to each IS function. In Model 1, the findings show that the population size of city government is inversely related to the total percentage of city budget allocated to total IS expenditures: as the population size of city government increases, the percentage of the total budget of the city government allocated to IS expenditures decreases. In Model 2, three theories to explain decisions regarding IS outsourcing are used. Economic factors influencing IS outsourcing decisions are when: (1) pressure to reduce cost is important, (2) access to cutting-edge technology is important, (3) IS requires a long time for the in-house staff to learn, and, (4) IS facilities are not available. However, city administrators did not express a concern about the loss of control of strategic applications, about being locked into a contract, or even about added costs for business or technology changes when their IS is outsourced. Theories of innovation diffusion includes several factors. The findings show that city IS administrators do learn about IS outsourcing from neighboring governments. Organizational factors that can potentially influence the IS outsourcing decision include the type and population size of city government, available resources, and internal transaction costs. IS outsourcing expenditure as a percentage of total IS expenditure does not vary with the type and size of city government, a finding which requires further investigation. The analysis of different types and sizes of city governments appears in Model 3. When more resources are available to the IS department, the city government is likely to hire IS experts, provide facilities, and engage in a higher rate of insourcing. Internal transaction costs measured by time delays are inversely related to the expenditures on IS outsourcing. In Model 3, IS outsourcing expenditure by function as a percentage of total IS expenditure, three theoretical perspectives are employed to explain this analysis. In the category of economic factors influencing IS outsourcing, asset-non specific IS functions such as data processing/operations and network/telecommunications are outsourced in order to reduce cost while asset-specific IS functions, such as application development/maintenance, are outsourced in order to gain access to cutting-edge technology. With respect to whether theories of innovation diffusion explain the IS outsourcing decision, the findings show that city governments investigate other neighboring governments to determine whether there have been IS outsourcing decisions in the areas of data processing/operations, network/telecommunication, and application development/maintenance. According to the findings, first, small city governments tend to allocate a higher IS outsourcing expenditure as a percentage of total IS expenditure to than do large city governments. Second, large city governments tend to allocate a lower percentage of IS outsourcing expenditure to systems planning/management because large city governments tend to set up this IS function within the organization and, thus, spend money on maintaining this function. Third, the council-manager type of city governments tend to allocate a higher rate of IS outsourcing expenditure to network/telecommunication and application development/maintenance than do the mayor-council type of city governments.