Impact of IT Multisourcing on vendor opportunistic behaviour - A research framework

IT Multisourcing (ITM), the provision of IT services by multiple interdependent vendors to a single client, is widely prevalent now. ITM, in principle, is believed to mitigate both strategic and operational risks of IT outsourcing for client organizations. Yet an in-depth inquiry into the association of ITM with these risks is largely missing in literature. There is limited research which systematically investigates the effects of ITM on different forms of risk. This paper develops a theoretical framework to understand the implications of ITM for the specific risk of vendor opportunistic behaviour, also termed ‘strategic risks’ of outsourcing. The fundamental attributes of ITM are identified and mechanisms through which they influence vendor opportunistic behaviour are explained. The advantages and limitations of the framework are discussed and future research directions are laid out

Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing

While multisourcing offers benefits such as access to best-of-breed resources and enhanced competition, it also presents clients with a new governance challenge, namely the need to ensure that vendors not only deliver their individual contributions but also collaborate to produce a coherent joint outcome. Clients can address this challenge by combining bilateral governance focused on each vendor’s individual performance with collective governance aimed at the vendors’ joint performance. However, it is unclear how the simultaneous application of bilateral and collective governance affects multisourcing performance. Indeed, the literature falls short in systematically differentiating these governance mechanisms and empirically examining their interplay. Drawing on existing work on multisourcing and on the outsourcing governance literature, we argue that bilateral and collective governance direct efforts toward different performance dimensions (individual vs. joint), invoke different metaphors (market vs. team), and promote conflicting norms (competitive vs. cooperative), which can result in trade-offs when bilateral and collective governance mechanisms are combined. Results from a survey of 189 multisourcing arrangements support our expectation that bilateral and collective governance promote different performance dimensions. Notably, one collective governance mechanism, conflict management procedures, contributes to both individual and joint performance. We find substitutional effects between bilateral and collective governance in relation to joint performance but not individual performance, indicating that the benefits of collective governance for joint performance are more easily compromised than the benefits of bilateral governance for individual performance. We also observe complementary effects within collective governance mechanisms. Our key contribution lies in theorizing and empirically examining the effects and interplay of bilateral and collective governance in multisourcing

Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing

While multisourcing offers benefits such as access to best-of-breed resources and enhanced competition, it also presents clients with a new governance challenge, namely the need to ensure that vendors not only deliver their individual contributions but also collaborate to produce a coherent joint outcome. Clients may address this challenge by combining bilateral governance focused on each vendor’s individual performance with collective governance aimed at the vendors’ joint performance. However, it is unclear how the simultaneous application of bilateral and collective governance affects multisourcing performance. Indeed, the literature falls short in systematically differentiating these governance mechanisms and empirically examining their interplay. Drawing on existing work on multisourcing and on the outsourcing governance literature, we argue that bilateral and collective governance direct efforts towards different performance dimensions (individual vs. joint), invoke different metaphors (market vs. team), and promote conflicting norms (competitive vs. cooperative), which can result in trade-offs when bilateral and collective governance mechanisms are combined. Results from a survey of 189 multisourcing arrangements support our expectation that bilateral and collective governance promote different performance dimensions. Notably, one collective governance mechanism, conflict management procedures, contributes to both individual and joint performance. We find substitutional effects between bilateral and collective governance in relation to joint performance but not individual performance, indicating that the benefits of collective governance for joint performance are more easily compromised than the benefits of bilateral governance for individual performance. We also observe complementary effects within collective governance mechanisms. Our key contribution lies in theorizing and empirically examining the effects and interplay of bilateral and collective governance in multisourcing

Single-sourcing vs. multisourcing : an empirical analysis of large information technology outsourcing arrangements

As the information technology (IT) services landscape matures, clients are increasingly adopting multisourcing arrangements that involve multiple vendors. Although a large body of information systems (IS) literature addresses issues of whether to outsource (to a single vendor), what types of contracts to use, and how to achieve optimal relational governance, little is known about the antecedents and consequents of the single versus multisourcing decision. Moreover, while conceptual and analytical models of single-sourcing versus multisourcing have been developed, there is no empirical IS research using a large-scale data set with rigorous econometric analysis that examines the antecedents and consequents of multisourcing in the IT context. This paper fills this void, using the transaction cost economic lens and a data set of 49,057 large IT outsourcing arrangements that spans multiple industries and dates back 25 years. We find that there is a curvilinear relationship between number of IT services in an IT outsourcing arrangement and the likelihood of multisourcing. This relationship increases as the number of IT services increases to up to five services and then decreases. For managers who plan to multisource IT outsourcing arrangements, this research provides guidance to minimize exchange hazards through a better understanding of the relationship between sourcing choice, client IT outsourcing capabilities, the competitiveness of the vendor landscape, and the number of IT services in an IT outsourcing arrangement. We provide empirical evidence that the choice between single-sourcing and multisourcing is material to the performance of outsourcing contracts as an incorrect sourcing choice is likely to result in negative contract outcomes

How adidas Realized Benefits from a Contrary IT Multisourcing Strategy

In traditional IT outsourcing and multisourcing arrangements, clients isolate vendor tasks, resulting in modular sourcing structures. But this approach can stifle vendor competition, result in vendor lock-in and hinder organizational flexibility. This article describes how adidas adopted a new type of multisourcing strategy, which embraces vendor overlaps to overcome these constraints and deliver a range of benefits. We provide guidelines for implementing this new type of multisourcing strategy.Click here for podcast summary (mp3)Click here for free 2-page executive summary (pdf)Click here for free presentation slides (pptx

Information Technology Outsourcing Strategies to Ensure Customer Satisfaction

Many information technology (IT) outsourcing initiatives fail, resulting in a high impact on business results and customer satisfaction. Without effective strategies, business leaders who outsource their IT services are at considerable risk of failure and stakeholder dissatisfaction. The purpose of this multiple case study was to explore outsourcing strategies that IT managers in Southern Ontario, Canada, used to ensure customer satisfaction. Participants included 9 executives with experience in complex IT outsourcing initiatives. Stakeholder theory and transaction cost economics theory were the conceptual frameworks for the study. Data were gathered using semistructured interviews to query 8 topical areas including IT outsourcing reasons, challenges, and successful solutions. Data analysis using thematic analysis revealed 4 themes: strategic intent for outsourcing, applicable frameworks, risk awareness, and partnership strategies. Key findings included the importance of clients’ and suppliers’ focus on deal principles, innovation, and work-collaboration strategies to enhance performance and customer satisfaction. Information technology managers’ application of the findings of this study may improve business success and contribute to positive social change by revitalizing the clients’ and suppliers’ economies to create job opportunities and improve the quality of lives of employees and their communities