Information technology (IT) offshoring is an increasingly important strategic tool for firms. Although offshoring activities have led to significant cost savings in many cases, a critical concern is that as IT work moves offshore the deep, experiential knowledge will also move offshore. This knowledge loss may leave the domestic firm with a smaller pool of candidates vying for upper-level management jobs, leading to a future disruption in the management supply chain. In this dissertation three models are developed to investigate how the offshoring of IT activities may affect the domestic firm's knowledge level and as a result the costs of IT work.In the first model the impact of critical model parameters on the offshoring costs is investigated under the assumption that the offshoring rate is fixed. Although short-lived offshoring projects may generate substantial cost savings, long-lived offshoring projects may cause a disruption in the management supply chain, resulting in substantial cost increases. Under some conditions the domestic firm may be locked into an agreement where the backshoring decision becomes economically infeasible.In the second model, the domestic firm is allowed to make the offshoring rate decision. In this case the domestic firm may "steal" learning-by-doing knowledge from the foreign firm with a very low offshoring rate when the knowledge transfer rate is assumed to be constant. This "discontinuity" in knowledge transfer results in a "bang-bang" solution for the offshoring rate. Depending on the level of the disruption in the management supply chain the domestic firm should choose either very small offshoring or full offshoring. In response, it may be in the foreign firm's interest to contract a minimum offshoring rate. The impacts of assuming the knowledge transfer rate as a proportionally increasing function of the offshoring rate is also examined. In this case the middle range offshoring rates are viable solutions for the domestic firm.In the last model, the impact of allowing the domestic firm the real option to alter the offshoring rate is examined. This flexibility provides value in the mid ranges of the disruption of the management supply chain.

IT outsourcing has been studied by many scholars throughout the world in much detail. The People’s Republic of China, as one of the leading IT outsourcing markets in the world, nonetheless, is still considered as a developing market. Not many IT outsourcing studies have set their focus on China. Although there are summary overviews, few studies have sought to answer why China should be studied or what should foreign companies be aware of before searching for any Chinese service providers. Through a literature review of conducted research, this study aims to provide an overview of the challenges of IT outsourcing to China by answering the following research question: How does extant research portray the fundamental challenges of outsourcing IT to China? In sum, this study concludes that there are three main challenges including guanxi/relationship, legal risks, workforce/professional skills in outsourcing IT to China, offering insights as to why and how foreign companies need to understand and face these challenges before outsourcing IT to China.

Along with globalization, offshoring strategy has been attractive to more and more IT companies and regarded as an industry changer as tremendous benefits can be enabled from this strategy. However, considering the potential risks and uncertainties, offshoring can also be risky and even lead to failure or huge loss because of the inefficiency and obstacles in collaboration among offshoring teams. To be able to guarantee better collaboration for IT offshoring, both related theories about offshoring and results from the empirical study have been combined and analyzed. As for the methodology applied in the study, a case company Sigma IT & Management is mainly investigated for phenomenon exploration as this company has a long-term IT offshoring strategic partner in Ukraine. Qualitative data is valued greatly in obtaining a deeper knowledge of various opinions and views from the representatives out of the offshoring team. As an exploratory-interpretive study, it primarily uses interviews with text analysis for results generation. The conclusion of this study to IT offshoring collaboration is twofold. Firstly from the functional perspective, it fills the shortage of supportive checklist for project managers to guarantee a better offshoring collaboration, as well as the proper methods in evaluating interaction barriers among offshoring teams. Secondly from the individual perspective, this thesis study is concluded with a table of success factors to improve the bi-direction communication and the collaboration efficiency for offshoring teams.