An analysis of management efficiency of Korean IT service firms

Abstract

The Korean information technology (IT) services industry faces a number of structural problems, including oversupply and excessive competition. In turn, IT service firms themselves have been concerned about the structural problems in their industry, and some firms have attempted to overcome these problems. Existing studies based on Data Envelopment Analysis (DEA) mainly measure software projects and maintenance efficiency. The current paper analyzes the management efficiency of IT service firms in Korea, especially System Integration, using input-oriented DEA. It is shown that IT service firms in Korea have thus far focused on scale-oriented management activity rather than profit orientation, and the main cause of firm inefficiency lies in scale inefficiency. It is concluded that inputs need to be expanded, or that firm scales need to be adjusted, in order to enhance profitability.