Contracts and Partnerships in the Outsourcing of IT

This paper reports on a recent research study conceming the outsourcing of information technology activities in the United Kingdom. The study involved a large survey and a set of detailed case studies based on large and medium sized organizations. In particular the issues of contracts and partnerships are examined, which is identified as one of the key elements in successful outsourcing. The authors show the variety of approaches and perceptions that exist concerning these issues, and conclude that &ere Is much misunderstanding, particularly in relation to partnership. The paper concludes by creating a framework for helping to identify and examine the interrelationship between contractual arrangements, the required degree of contractual definition, and the characteristics of the area being outsourcecl

Identifying Appropriate Governance Principles for Different Types of Sourcing Arrangement

Three shortcomings in existing information technology (IT) governance research are identified: an overemphasis on implementation rather than principles, a focus on the individual organisation rather than the relationships between organisations and a tendency to divorce the technology from the activities that rely on it. A governance framework comprised of the overarching principles of direction and control is proposed and it is suggested that these principles can be delivered through a focus on performance, conformance, openness and transparency, responsibility and accountability, and evaluation and monitoring. The importance of outsourcing as a form of inter-organisational relationship is highlighted and three case studies of different types of outsourcing arrangement conducted to test the usefulness of the framework. The results suggest that organisations recognise the importance of effective governance to the success of their relationships, that designing appropriate governance for relationships is complicated by factors such as the need to accommodate the disparate requirements of the parties involved and that the framework proposed appears to capture the essential areas

Bridging the gaps: Packaged software implementation projects in Vietnam

Implementations of advanced information systems in developing countries are often perceived as a way to economical prosperity and modernity. However, even in the best of scenarios implementing major information systems is far from a risk-free activity. The reality of developing countries adds extra complexity to an already demanding endeavor. This study explores socio-technical aspects of an unprecedented technological journey in the Vietnamese banking industry, and thus responds to calls for more empirical research in this field. In this paper we present contextual issues affecting the studied software package implementation project and propose a theoretical framework for a basic social process we called “gap bridging.

An Empirical Study on the Importance of Psychological Contract Commitment in Information Systems Outsourcing

In IS outsourcing relationship literature, research has focused on detailed legal contracts and partnerships. We investigate the role of psychological contracts between client and vendor in the IS outsourcing context. The aim of this paper is to put the concept “psychological contract commitment” (PCC) under the spotlight, finding out its mediating effects between legal contracts/partnerships and IS outsourcing success. By analyzing 50 matched survey responses gathered from project managers, vendor firms, and end-users, we found that psychological contract commitment has both direct and mediating effects on outsourcing success. Along the same lines, the key findings suggest that psychological contract commitment explains why legal contracts and partnerships are still crucial to IS outsourcing success

Sourcing, Risk and the Financial Market

Outsourcing has become a commonly accepted alternative of strategic management. But how do stockholders rate the corporate decision to divest parts of the former business? We study the stock market reaction of outsourcing announcements of the global financial services industry, using event study methodology and multivariate cross-sectional regression analysis. We analyze a sample of 162 outsourcing transactions between 1997 and 2004 in order to investigate the drivers of excess returns to shareholders of outsourcers and insourcers in the global financial services industry. The analysis studies the impact of independent variables, the driving factors. Our findings indicate that many of these factors have significant explanatory power, indicating that capital market’s reaction to an outsourcing announcement might at least partly be forecasted. Partnering with experienced service providers significantly benefits the outsourcer. Evidence indicates that insourcers significantly benefit from large deals and transactions relating to traditional IT processes

Understanding IT Backsourcing Decision

Even though outsourcing is a popular means of meeting internal IT needs, press reports and statistics suggest that the decision to backsource is becoming increasingly common. Some organizations backsource upon expiration of contracts; others terminate existing contracts to implement backsourcing. In both cases, organizations incur high rebuilding fees and expensive contract termination fees. Still, many choose to incur these expenses and undergo the trouble of internalizing the once-outsourced functions. This makes backsourcing decision an interesting strategic turnaround. A review of existing literature shows that backsourcing decision has received little attention. This paper examines factors that motivate the decision to backsource. Based on four case studies, contributing factors to backsourcing decision are compared and contrasted. The findings suggest that organizations backsource to correct existing problems and to harvest new business opportunities. Specifically, when outsourcing contracts fail to meet expectations, organizations backsource to rebuild internal IT capabilities. Organizations also backsource when changes occur to their strategic goals, organizational structure, and IT role. Changes from external business environment such as mergers and alliance formation also contribute to backsourcing decision

Aligning Drivers, Contract, and Management of IT-outsourcing Relationships: A Type-dependent Model

In today’s competitive business environment, information technology outsourcing has become a wide-spread reality across all industries and sectors. Researchers have investigated this complex phenomenon from various angles, and established a sound knowledge base regarding the drivers, management, and success factors related to IT outsourcing. However, little is known about the relationship between outsourcing drivers and goals on the one hand, and contractual and managerial aspects on the other hand. To overcome this gap, this study presents a synthesized conceptual model of existing literature that relates aspects of contractual governance and relationship management to three generic types of IT outsourcing, based on their underlying drivers: task-based, process-based, and partnership-based outsourcing. Our model identifies the specific contractual and managerial factors relevant for each type of outsourcing, and proposes that alignment across all elements is influential to the success of IT outsourcing initiatives

CLIENT-VENDOR RELATIONSHIPS IN CLOUD COMPUTING: LESSONS FROM IT OUTSOURCING

There is considerable debate in the IS research literature about the nature of cloud computing. Whereas some researchers suggest that cloud computing is a paradigm shift that is changing the IT industry, others argue that cloud computing is just another form of IT outsourcing. Based on a review of the IS research and practitioner literature, this paper takes a middle position. We believe that while cloud computing represents a new delivery model of IT resources, there are lessons to be learnt from earlier studies in outsourcing. Hence this paper focuses on one issue in particular: the relationship between the client and vendor. Drawing from existing studies in IT outsourcing, this paper seeks to identify those factors related to client-vendor relationships that might be relevant in the context of cloud computing. We propose four factors as being particularly relevant for cloud computing: commitment, cooperation, cultural compatibility and trust

THE EFFECTS OF CLIENT GOVERNANCE MECHANISMS AND RELATIONAL EXCHANGE ON IS OUTSOURCING EFFECTIVENESS

Although recent years have seen enormous growth in the nature and extent of IT outsourcing, organizations still struggle with factors that contribute to effective outsourcing. Drawing upon two theoretical lenses – formal and informal governance mechanisms and relational exchange theory – this study explores the relationships between four dimensions of governance (contractual governance, structural governance, extra-contractual governance, relational governance), two characteristics of the relational exchange (joint commitment, relationship trust) and four dimensions of IS outsourcing effectiveness (execution-level effectiveness, business benefits, functional benefits, economic benefits). Data collected from a field survey of 141 IS managers from client firms with application outsourcing arrangements are used to test these relationships. Results from PLS SEM analysis indicate that the four dimensions of governance mechanisms have different positive influences on the individual dimensions of outsourcing effectiveness, with joint commitment and relationship trust partially mediating the relationships. By modeling formal and informal governance mechanisms as antecedents to relational exchange, and by disaggregating the effectiveness dimensions, the findings from this study extend prior research and have important implications for researchers and practitioners alike

EXPECTATION SHORTFALL IN THE HIGHLY SPECIALIZED B2B IT INNOVATION

Expectation shortfall is a common occurrence in outsourcing. Prior literature suggests that strategies such as strict contract terms and proper evaluation of the vendor capabilities are adopted to avoid expectation shortfall. However, in the case of highly specialised technical products custom made to vendor requirements (i.e., B2B IT innovation), traditional strategies in managing outsourcing projects may not work as expected. This is mainly due to the complexity of the product requirements and the inability to assess the scope of the project in depth at the beginning. In this research, we adopt the vendor’s perspective to better understand how organizations in the highly specialized B2B IT innovation handle outsourced projects to avoid expectation shortfall. We uncover a dynamic innovation process which the client and the vendor go through. In addition, we suggest strategies to achieve B2B IT innovation in a win-win scenario while elucidating reasons of failure