Do You Have a Room for Us in Your IT? An Economic Analysis of Shared IT Services and Implications for IT Industries
Authors: Chen, Min; Pang, Min-Seok; Kumar, Subodha
Journal: MIS Quarterly (2021)
<jats:p>We are witnessing an interesting and unique phenomenon in enterprise information technology (IT) adoption and management in public-sector organizations: shared IT services. Instead of implementing separate IT services, governments come together to pool their IT resources into one single IT service. In this study, we develop a game-theoretic model to analyze the governments’ decision to share IT services and understand how the introduction of shared services transforms the strategic interactions between the governments and the vendor. We study three common regimes used in the adoption of shared IT services: (1) a cost-sharing regime where costs are split proportionally, (2) a profit-center regime where one government charges a surplus-maximization price to the other, and (3) a coordination regime where governments coordinate their decisions to maximize aggregate surplus. Our analyses generate several intriguing findings. First, although charging a surplus-maximizing price seems to be a lucrative option, we find that a government does not always benefit by acting as a profit center. Second, the cost-sharing regime does not always incentivize the shared service adoption despi…