Perception of value of IT infrastructure outsourcing announcements: An event study with Brazilian companies

Abstract

In the strategy literature, outsourcing Information Technology (IT), especially the IT infrastructure is not considered competitive because of the standardization of this technology. By being fully available to any company literature states that this type of outsourcing should not be able to generate value differential among organizations. On the other hand, outsourcing may allow the potential release of the organization’s resources in order to concentrate on its core activities, which can lead to greater efficiency of resource allocation, and the economic literature addresses this possibility. To test which of these explanations is prevalent in the case of Brazilian companies that outsource IT infrastructure, this study carried out an analysis of the impact on the perception of the market value of companies that have announced this type of contract between January 1st, 2001 and August 31st, 2010 using the technique of event studies. The results showed evidence that the outsourcing of such technology by publicly traded companies in Brazil is perceived by the market as a source of value, increasing the expectation of future profits, which reflects positively on their market value. Managerial implications are discussed and proposals for future studies are presented.

Key words: outsourcing, information technology, IT infrastructure, market value, event study.