The role of IT human capability in the knowledge transfer process in IT outsourcing context

Our research attempted to identify the behavioral process of knowledge transfer by examining the effects of IT human capability, human character, trust, and cooperative learning on it in an IT outsourcing situation. By analysing data collected from vendor and client matched-pair samples of 87 IT outsourcing projects, we found that both the client's and the vendor's character influenced trust, trust affects on cooperative learning, and the cooperative learning influence on knowledge transfer. More importantly, it we found that the client's IT human capability had a direct impact on cooperative learning and knowledge transfer. This indicated that client's IT human capability was a crucial factor in effective knowledge transfer during IT outsourcing. It also implied that client firms should identify and retain some IT personnel who can apply vendors’ competencies in IT practice and respond effectively to any technological challenges.     

The mediating role of psychological contract breach in IS outsourcing: inter-firm governance perspective

A substantial body of previous research on the client–vendor relationship has identified inter-organizational partnerships and formal contracts as important governance mechanisms for outsourcing performance. Successful IS development through outsourcing, however, may be more dependent on the people who execute the project in the field than on inter-firm relationships and agreed-upon formalities. Among individual-level variables, the special importance of psychological contracts has recently been noted in IS literature. This study investigates the mediating role of psychological contract breach between these two firm-level governance factors and outsourcing performance. By analyzing matched responses from project managers, vendor participants, and system users, we found that the effects of explicit legal contracts and partnership quality on outsourcing outcome are fully mediated by the client's perception of breach by the vendor. This study offers an extended theoretical perspective on the governance of firm-level collaboration, especially revealing that the benefits of formal contracts and inter-organizational partnerships eventually translate into satisfactory outsourcing outcomes for system users through each party's perception of breach on the individual level. Moreover, discrepancy was observed in this study between the client and vendor regarding the impact of legal contracts on individuals’ psychological contract while that of partnership was prominent in both sides.     

Getting the control across: Control transmission in information systems offshoring projects

Offshoring of information systems (IS) projects has become a widespread global practice. While prior research suggests that controlling, and communicating with, offshore vendors represent key managerial challenges, the topic of how control is communicated, or transmitted, from client to vendor has been widely neglected. Our study focuses on control transmission in the critical relationship between client and offshore vendor managers, and its impact on the performance of IS offshoring projects. Drawing on a matched‐pair survey with 172 client and vendor managers from 86 projects, our results provide several new insights to the IS literature: First, we find that both behaviour and outcome control have the capacity to be transmitted consistently in lateral IS offshore project relationships. Second, our results show that consistent transmission translates into a performance effect only for outcome control. Third, we find that high‐performing offshore projects are characterized by both greater control transmission consistency and greater use of outcome control compared to low‐performing projects. In sum, our study extends theory on IS project control by highlighting that effective control of IS offshoring projects is not only about selecting proper controls but also about ensuring that, as a controller, you get the control across to the controllee.     

Multiparty sensemaking: A technology‐vendor selection case study

Information system (IS) procurement history is replete with poorly executed, multimillion dollar procurement decisions. Yet we barely understand what effective IS procurement should look like. IS procurement is highly challenging, as it requires the client to simultaneously select a technology and vendor. This paper explores the technology‐vendor selection process through the sensemaking perspective. Our study develops a sensemaking model for technology‐vendor selection that connects the multiple rounds of client‐vendor communicative actions with the client's sensemaking process. We show how the client reconciles fragmented and sometimes conflicting cues and information through three intertwined cycles: immediate, retrospective, and decision. Sensebreaking occurs as a separate process (and not a communicative action) when disruptive cues occur persistently and from different vendors over multiple rounds of sensemaking. We derive a set of critical factors, on the basis of the sensemaking perspective, for selecting an appropriate vendor and technical solution. These insights in turn help explain many poorly executed IS procurement decisions.     

The effective promotion of informal control in information systems offshoring projects

As firms increasingly engage in interorganizational information systems (IS) projects, including IS offshoring projects, the challenge for client firms of effectively exercising control across organizational boundaries becomes critical. Although the importance of informal controls (clan and self-control) in this context has been recognized, prior research has focused primarily on formal controls. Consequently, our understanding of the use of clan and self-control in interorganizational IS projects is scarce, and partly inconsistent or contradictory. This study focuses the client’s role in promoting informal controls in interorganizational projects involving distant client–vendor relationships as well as the effectiveness of such controls. We use matched-pair survey data from 86 IS offshoring projects involving client and vendor relationship managers. Our results show an interesting pattern: while clan control is considerably more difficult to promote than self-control in client–vendor project relationships, only clan control has a direct positive impact on project performance. Moreover, formal control modes, national cultural values, and project context factors moderate both the promotion and the effectiveness of informal controls. Our study’s main contributions lie in establishing the relevance of the distinction between informal control given and received, and the importance of the client’s role in promoting informal controls.     

Client–vendor knowledge transfer in IS offshore outsourcing: insights from a survey of Indian software engineers

We use knowledge‐based theory to develop and test a model of client–vendor knowledge transfer at the level of the individual offshore information systems engineer. We define knowledge transfer in this context in terms of mechanisms by which an offshore engineer employed by a vendor can (a) gain understanding of their onshore client; and (b) utilize their knowledge for the benefit of the client. Over large geographic, cultural and institutional distances, effective knowledge transfer is difficult to achieve, although it is central to the success of many offshore outsourcing contracts. Our empirical test consists of a survey of vendor software engineers physically located in India but working on development projects for clients in Europe and the United States. The findings support predictions regarding engineer exposure to explicit and tacit knowledge: We find client–vendor knowledge transfer to the offshore vendor engineer to be positively associated with formal training and client embedment. We also test whether an offshore vendor engineer's inappropriate reliance on informal discussions in the offshore location hinders effective client–vendor knowledge transfer. Our result for this is mixed. Finally, we show differences between offshore engineers who have had previous onshore experience and those who have not. Client embedment is a potent driver of knowledge transfer when the offshore engineer has had previous onshore placement, while it acts to reduce inappropriate reliance on informal discussions for those that have not had an onshore placement.     

Trust in software outsourcing relationships: An empirical investigation of Indian software companies

This paper investigates trust in software outsourcing relationships. The study is based on an empirical investigation of eighteen high maturity software vendor companies based in India. Our analysis of the literature suggests that trust has received a lot of attention in all kinds of business relationships. This includes inter-company relationships, whether cooperative ventures or subcontracting relationships, and relationship among different parts of a single company. However, trust has been relatively under-explored in software outsourcing relationships. In this paper, we present a detailed empirical investigation of trust in commercial software outsourcing relationships. The investigation presents what vendor companies perceive about getting trust from client companies in outsourcing relationships. We present the results in two parts—(1) achieving trust initially in outsourcing relationships and (2) maintaining trust in ongoing outsourcing relationships. Our findings confirm that the critical factors to achieving trust initially in an outsourcing relationship include previous clients' reference and experience of vendor in outsourcing engagements. Critical factors identified for maintaining trust in an established outsourcing relationship include transparency, demonstrability, honesty, process followed and commitment. Our findings also suggest that trust is considered to be very fragile in outsourcing relationships.     

IT outsourcing research from 1992 to 2013: A literature review based on main path analysis

Applying main path analysis, this paper investigates the IT outsourcing (ITO) field by identifying a set of papers that have played a central role in the development of the field and the major research themes emerging from the citation patterns. We selected the top 120,000 main paths from 6.45 million main paths among 798 ITO papers, resulting in a data set of 280 papers that represent the most important nodes supporting ITO knowledge flow. Based on our analysis of the multiple main paths, twelve major research themes emerged: ITO motivations, ITO decisions, ITO risks, debate around transaction cost theory, client–vendor relationship, the vendor's perspective, psychological and formal contracts, ASP, BPO, opensourcing and crowdsourcing, offshore outsourcing, and multisourcing. Finally, we discussed future directions of ITO research based on our findings. Our study is among the few studies that have used bibliometric analysis methods to analyze and visualize the citation network characterizing the rich body of ITO literature. The main path analysis precisely identified and visualized the major knowledge flow in the evolution of ITO research and major ITO research streams, thus providing an in-depth understanding of ITO research in the last 20 years.     

Congruent patterns of outsourcing capabilities: A bilateral perspective

Despite the extensive proliferation of Information Technology Outsourcing (ITO), firms often obtain unsatisfactory outsourcing outcomes due to the lack of appropriate outsourcing capabilities of a client or their vendor. ITO clients strive to enhance outsourcing performance by establishing their own outsourcing capabilities as well as contracting with capable vendors to meet their strategic needs. Thus, for the success of an ITO project, it is imperative to find an effective combination of complementary outsourcing capabilities on both sides. However, knowledge of how to identify and develop a set of appropriate outsourcing capabilities of both client and vendor has yet to be developed. This study aims to fill this knowledge gap by elaborating on the configurational mechanisms of outsourcing capabilities from a bilateral perspective, which explicate how multiple types of client and vendor outsourcing capabilities combine into configurations simultaneously to produce high ITO performance. First, based on the ITO literature, we develop a conceptual framework that identifies three key types of outsourcing capabilities. Then, with the matched dataset collected from a client and their vendor, we conduct a fuzzy-set qualitative comparative analysis (fsQCA), which is a set-theoretic configurational method to investigate the systemic and holistic interdependencies among key outsourcing capabilities that produce high outsourcing performance. On the basis of the conceptual framework and empirical findings, we present four viable propositions to build configurations of client and vendor ITO capabilities that can achieve ITO success with theoretical and practical implications.     

Barriers in the selection of offshore software development outsourcing vendors: An exploratory study using a systematic literature review

Context

Software development outsourcing is a contract-based relationship between client and vendor organisations in which a client contracts out all or part of its software development activities to a vendor, who provides agreed services for remuneration.

Objective

The objective is to identify various barriers that have a negative impact on software outsourcing clients in the selection process of offshore software development outsourcing vendors.

Method

We have performed a systematic literature review (SLR) process for the identification of barriers. We have performed all the SLR steps such as the protocol development, initial selection, final selection, quality assessment, data extraction and data synthesis.

Results

We have identified barriers such as ‘language and cultural barriers’, ‘country instability’, ‘lack of project management’, ‘lack of protection for intellectual property rights’ and ‘lack of technical capability’ that generally have a negative impact on outsourcing clients. We have identified only one common frequently cited barrier in three types of organisations (i.e. small, medium and large) which is ‘language and cultural barriers’. We did not identify any common frequently cited barrier in three continents (Asia, North America and Europe) and in two decades (1990-1999 and 2000-mid 2008). The results also reveal the similarities and differences in the barriers identified through different study strategies.

Conclusions

Vendors should address frequently cited barriers such as ‘language and cultural barriers’, ‘country instability’, ‘lack of project management’, ‘lack of protection for intellectual property rights’ and ‘lack of technical capability’ in order to compete in the offshore outsourcing business.     

A logistic regression framework for information technology outsourcing lifecycle management

We present a methodology for managing outsourcing projects from the vendor's perspective, designed to maximize the value to both the vendor and its clients. The methodology is applicable across the outsourcing lifecycle, providing the capability to select and target new clients, manage the existing client portfolio and quantify the realized benefits to the client resulting from the outsourcing agreement. Specifically, we develop a statistical analysis framework to model client behavior at each stage of the outsourcing lifecycle, including: (1) a predictive model and tool for white space client targeting and selection—opportunity identification (2) a model and tool for client risk assessment and project portfolio management—client tracking, and (3) a systematic analysis of outsourcing results, impact analysis, to gain insights into potential benefits of IT outsourcing as a part of a successful management strategy. Our analysis is formulated in a logistic regression framework, modified to allow for non-linear input–output relationships, auxiliary variables, and small sample sizes. We provide examples to illustrate how the methodology has been successfully implemented for targeting, tracking, and assessing outsourcing clients within IBM global services division.Scope and purposeThe predominant literature on IT outsourcing often examines various aspects of vendor–client relationship, strategies for successful outsourcing from the client perspective, and key sources of risk to the client, generally ignoring the risk to the vendor. However, in the rapidly changing market, a significant share of risks and responsibilities falls on vendor, as outsourcing contracts are often renegotiated, providers replaced, or services brought back in house. With the transformation of outsourcing engagements, the risk on the vendor's side has increased substantially, driving the vendor's financial and business performance and eventually impacting the value delivery to the client. As a result, only well-ran vendor firms with robust processes and tools that allow identification and active management of risk at all stages of the outsourcing lifecycle are able to deliver value to the client. This paper presents a framework and methodology for managing a portfolio of outsourcing projects from the vendor's perspective, throughout the entire outsourcing lifecycle. We address three key stages of the outsourcing process: (1) opportunity identification and qualification (i.e. selection of the most likely new clients), (2) client portfolio risk management during engagement and delivery, and (3) quantification of benefits to the client throughout the life of the deal.     

Optimizing vendor selection in a two-stage outsourcing process

The decision processes surrounding outsourcing are complicated by the very nature of uncertainty involved in the outsourcing process and by poor vendor management. In this study, we focus on vendor selection, one of the two basic issues of vendor management in outsourcing. Due to the limitation of the classic one-stage vendor selection model, we propose a two-stage vendor selection research framework in outsourcing. The first stage is a trial phase that helps the client to find the best match between the vendor and the outsourced project. In the second stage, the client employs the chosen vendor for the full implementation of the project. We formulate this selection decision under the two-stage framework as a combinatorial optimization model. We analyze the complexity of the problem and develop a solution procedure to find the exact optimal solution. By applying this model to numerical case studies, we demonstrate that benefit to adopt two-stage process to the vendor depends on information improvement in the first stage and the client's ability to adapt to updated knowledge. We also argue that the selection of vendors for the first stage testing is more about creating a good vendor portfolio than simply picking the frontrunners.     

Vendor capabilities and outsourcing success: A resource-based view

Outsourcing is a generally accepted method for fulfilling an organization’s information systems (IS) needs. A prominent motive for outsourcing is a desire to increase the organization’s access to high-quality information technology and expertise. There is, however, little research that examines the connection between vendor capabilities and customer satisfaction. This paper addresses that gap by using the resource-based view of the firm to investigate linkages between vendor capabilities, IS quality, and customer satisfaction. A survey was completed by managers of outsourcing customer firms. The results were analyzed using Partial Least Squares (PLS). The results indicate that customers evaluate a vendor primarily in terms of technological capabilities, followed by relationship management capabilities. The vendor’s understanding of the customer’s business was not considered to be significant. There is a significant connection between the vendor’s capabilities and the quality of the IS function, which in turn was related to customer satisfaction.     

The impact of cultural differences in offshore outsourcing—Case study results from German–Indian application development projects

Offshore outsourcing to vendors in foreign countries causes unique challenges which need to be understood and managed effectively. This paper explores cultural differences in IS offshoring arrangements involving German client organizations that outsource application development activities to Indian vendors. For this purpose, a research framework is developed based on both theoretical considerations and specific empirical observations from multiple case studies. The goal is to (1) explore the nature of cultural differences in offshore outsourcing arrangements in depth and to (2) analyze the relationship between those cultural differences and offshore outsourcing success. Based on the case findings, implications and practices for the management of offshore development projects are outlined. The results indicate that cultural differences in terms of power distance, IS designer values, and an active versus passive working attitude critically affect several dimensions of relationship quality, thereby influencing offshore outsourcing success. A clear definition of roles and mechanisms, strong leadership, and an active management of culture by adapting to either the client’s or the vendor’s national culture appeared to be effective ways to manage cultural differences.

Offshore outsourcing of software development and maintenance: A framework for issues

Frameworks intended for identifying and organizing issues associated with offshore outsourcing of software development have focused on project or site selection. Existing frameworks are not comprehensive because they do not fully address one or more of the following issues: (1) the relationship between project characteristics and site suitability, (2) financial and intellectual property issues in the context of software development, and (3) the role of agents outside the outsourcing and vendor firms in the offshore outsourcing process. To overcome these limitations, we propose a more comprehensive framework that links projects (which require resource) and sites (which possess resources). It also includes environmental agents whose actions affect resource availability at the sites. The framework serves as an useful tool to systematically address the issues that arise in the context of offshore outsourcing of software development. We use the framework to review and classify existing literature.     

Quantity discount model to increase vendor's profits and decrease buyer's costs

A generalized optimal quantity discount is developed which minimizes the buyer's costs and maximizes the vendor's profit. Through the dual variable, a relationship is established between vendor and buyer models, and related pricing schemes are developed.     

The impact of IT outsourcing on information systems success

The objective of this research is to assess the impact of IT outsourcing on Information Systems’ success. We modeled the relationships among the extent of IT outsourcing, the ZOT (the Zone of Tolerance), and IS success. We justified our model using the expectancy–disconfirmation theory, the agency theory, and transaction cost economics, and we empirically tested it using structural equation modeling with responses from IS users. We found significant direct and indirect effects (through the service quality) of outsourcing on IS systems’ perceived usefulness and their users’ satisfaction. Whereas the extent of outsourcing is negatively related to the service quality and perceived usefulness, the ZOT-based IS service quality is positively related to the user satisfaction.     

An evaluation of the impact of corporate strategy and the role of information technology on IS functional outsourcing

Information systems (IS) outsourcing, or the turning over of IS functions to an external vendor, is proliferating among business firms. This study represents an early attempt at understanding motivations of IS outsourcing. Outsourcing is discussed as an administrative process innovation, and initiation (or the need to innovate) was examined. Resource based perspectives are discussed in order to motivate the propositions which relate resource gaps to the extent of IS outsourcing. It is suggested that organizational strategy and the role of information technology (IT) would moderate this relationship. Data were gathered through a survey of 188 IS executives to test the propositions with carefully validated measures for the outsourcing of five IS functions. The results indicate that outsourcing is indeed strategic. Organizational strategy and role of IT both had a profound impact on the base relationship between gaps and outsourcing. The discussion then attempts to explain the changes in the base relationship consistent with the exploratory nature of the study.     

Differences between success factors of IS quasi-outsourcing and conventional outsourcing collaboration: a case study of two Finnish companies

Conventional IS outsourcing does not always meet expectations, often because the company lacks control over the outsourced activity. Quasi-outsourcing collaboration, where the company transfers its IS personnel to a subsidiary, allows the company to maintain more control over the relationship than in conventional outsourcing. In this qualitative case study of two Finnish companies, differences between success factors of IS quasi-outsourcing and conventional outsourcing are identified and discussed. The study has practical and theoretical implications. We identified 1) success factors of conventional outsourcing that are already fulfilled (e.g. trust) or less challenging (e.g. physical information technology infrastructure) in quasi-outsourcing, 2) success factors that are more challenging in quasi-outsourcing than in conventional outsourcing (e.g. structured interaction processes), and 3) success factors that proved important in both types of outsourcing but showed qualitative differences (e.g. mutual dependency). Our findings can help companies make a more informed choice between these two types of outsourcing.