IOIS Risks

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Differences exist among the inter-organizational partnerships that lead to varying levels of information access. The more information shared, the higher the risk of opportunism. Allowing sensitive corporate information outside the inner firewall, such as for an extranet, requires additional security software and skilled information watchdogs to protect these resources. A firm must consider the quality, quantity, and type of information that will be shared with exchange partners and should not take the decision to join an IOIS lightly.

The strength and the nature of the partnership influence the level of IOIS access. “Casual” or one-time partnerships may lead to an IOIS providing limited information. For example, Federal Express’ extranet enables customers to track their shipped parcels (Senn, 1998). Customers, who are business partners, access only their parcel information and, thus, do not gain access to sensitive company information. Conversely, stronger partner relationships often involve sharing more sensitive information. For instance, partnerships that involve strategic alliances with a long-term commitment often provide increased access to partner information.

In other situations, partnerships may be based on strong alliances, but one or both of the partners could switch, with little cost, to another partnership. For example, Covisint provides a B2B market where suppliers and designers exchange product schedules, order information; computer-aided design (CAD) files for product design, purchase orders, and other financial information (Applegate et al., 2002). The suppliers and buyers must coordinate their technologies with Covisint to facilitate a seamless exchange of information. Also, because a standard approach is used for the B2B virtual market, buyers and suppliers have low technical switching costs and can easily create new partnerships with other market members.

The low switching costs of the modern IOIS potentially reduce the incentives for open collaboration. Open collaboration requires some level of discussion of proprietary information. Potentially, the business partner could obtain an organization’s proprietary information and use this information opportunistically with another business partner to the harm of the organization. To mitigate this risk, organizations must understand the motivations of the business partners and weigh the risks of trusting these partners in collaboration when using an IOIS.

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