Digitalization and Evolving IT Sourcing Strategies in the German Automotive Industry

Digitalization and major changes in core business products and processes are now sweeping through the global automotive industry, and many automotive companies are confronted with the challenge of formulating and implementing a company-wide digital transformation strategy. Digitalization is associated with significant and extremely rapid change, and, in some cases, even the replacement of established business models. This transformation is part of what is often termed Industry 4.0 and, in large companies, where the provision of information technology (IT) has hitherto been outsourced, the introduction of these new technologies may be the catalyst for a major re-think of IT sourcing strategy. This may entail bringing previously outsourced activities back in-house – a process known as backsourcing - to regain ownership and control, in order to be more flexible and respond more effectively to rapidly changing demands. This study reviews the extant literature on the motivation for backsourcing, and then examines the potential impact of digitalization on IT sourcing in the German automotive industry. A conceptual framework for subsequent research is put forward, using a knowledge-based view of the firm. In addition, following preliminary feedback from interviewees, an initial model for analyzing change in IT sourcing strategy is proposed. The model is being developed through more in-depth interviews to provide operational guidance for IT management and strategists in the German automotive industry.