It Service Outsourcing Based On Principal-agent Incentive Mechanism Research

With the development of information technology, more and more companies need a professional IT service provider who can provide integrated IT service solutions and the co-ordination processes of the IT services to give them more professional IT services in order to improve the management level of the companies and the quality of IT service. Then, the IT outsourcing providers could pay more attention to their core business and enhance the core competitiveness of its market. However, the relationship of Principal-Agent has been formulated between the IT service providers and IT outsourcers due to asymmetric information, the interests of the IT outsourcer will be infringed by the moral hazard that comes from IT service provider’s information superiority. Therefore, the research on the problem of incentive mechanism of IT service provider becomes a hot issue of IT outsourcing field.This paper firstly reviews the related theories to find the entry point of this study and the meaning and purpose of this study are also demonstrated. Then, establishes the reward incentive mechanism of IT services outsourcing within he framework of Principal-Agent theory according to the characteristics of the IT services outsourcing. The multi-task incentive model is constructed based on the establishment of and analysis of symmetric and asymmetric IT service outsourcing incentive model. The author carefully analyzes the relationship of various factors such as the quality, the cost and the innovation capacity and so on, probes the impact of the correlation of the IT services outsourcing’s cost and quality to the incentive contract. The author also designs different incentive intensity for different target for the goal of achieving optimal balance and improving overall performance.This paper has also established a two-stage reputation model combined with the characteristics of the implicit incentive and explicit incentives from the the point of long-term and short-term incentive view. The author concludes that the IT service provider’s effort level is significantly improved and the overall performance is also increased by adopting the reputation mechanism. Finally this article discusses the importance of implicit incentive in the principal-agent theory, then, builds a relatively complete IT service outsourcing incentive system from the establishment of good cooperation relations and the levels of moral incentive.