Vendors’ perspectives on trust and control in offshore information systems outsourcing

Whereas most discussion of outsourcing has concentrated on the clients’ perspective, we investigated the formation of offshore IS vendors’ trust in their client and the client's control over the vendor; these were assumed to affect the vendor's performance. Focusing on the Japan–China offshoring context, we conducted a survey of 110 project managers in nine Chinese IS outsourcers. Our findings indicated that trust had a significant effect on project quality but little on cost adherence; the relationship between control and the two vendor performance measures were the opposite of this. Furthermore, information sharing, communication quality, and inter-firm adaptation emerged as three significant contributors to the vendor's trust in the client; goal setting and cultural blending turned out to be significant in influencing the client's control over the vendor. One of the key contributions and implications of our research was that certain offshore client behaviors could shape vendor performance by influencing the vendor's trust in the client and client's control over the vendor, beyond formal contracts. These findings may be useful for both offshore vendors and clients in developing successful IS outsourcing.     

Effects of initial and ongoing trust in IT outsourcing: A bilateral perspective

Much has been written about the need for trust in outsourcing relationships, but the literature has produced only a few theoretical models that explain the process that helps it evolve. We proposed a theoretical model by distinguishing ongoing beliefs, such as ongoing trust and distrust, from initial perceptions, such as initial trust and distrust, in the context of IT outsourcing, and then explored empirically how these interacted with one another the knowledge sharing experience between the participants, thus leading to a successful experience from both the outsourcer and the service provider. The model and its hypotheses were tested using two-stage survey data collected from IT outsourcing projects. Our results showed that the ongoing trust and distrust between the receiver and provider were crucial in attaining benefits and that the outcome was also affected by the perceptions of the participants at the initial stage of the outsourcing process. We also found that knowledge-sharing experience between the parties moderated the impact of initial trust or distrust on the ongoing trust or distrust in different ways: the change in the service provider's initial perceptions were apparently more visible and positive than those of the service receiver's, although both initial perceptions tended to be cognitively consistent. These results helped us understand how trust evolves over time in an outsourcing relationship, and enabled us to explore the different viewpoints of the service provider and receiver.     

A review of the IT outsourcing literature: Insights for practice

This paper reviews research studies of information technology outsourcing (ITO) practice and provides substantial evidence that researchers have meaningfully and significantly addressed the call for academics to produce knowledge relevant to practitioners. Based on a review of 191 IT outsourcing articles, we extract the insights for practice on six key ITO topics relevant to practitioners. The first three topics relate to the early 1990s focus on determinants of IT outsourcing, IT outsourcing strategy, and mitigating IT outsourcing risks. A focus on best practices and client and supplier capabilities developed from the mid-1990s and is traced through to the late 2000s, while relationship management is shown to be a perennial and challenging issue throughout the nearly 20 years under study. More recently studies have developed around offshore outsourcing, business process outsourcing and the rise, decline and resurrection of application service provision. The paper concludes by pointing to future challenges and developments.     

An integrative model of trust on IT outsourcing: Examining a bilateral perspective

Trust has been considered a central aspect of successful IT outsourcing. Although a great deal of interest in trust has been described, there are very few theoretical models in the IT outsourcing literature to explain mutual trust, its role, and its impact in IT outsourcing. This study proposes a trust-based relationship research model to assess the perceived IT outsourcing success in terms of (1) mutual trust with its temporal dimension of initial trust and initial distrust, and (2) knowledge sharing with the moderating effect of mutual dependency. This model was then validated and applied in a study involving organizations in Korea. The data was collected and analyzed to understand initial trust, initial distrust, knowledge sharing, and mutual dependency as contributing factors to success in IT outsourcing. The results show that mutual trust between the service receiver and provider is very important for knowledge sharing and outsourcing success, and is affected by the initial perception to each other’s partner at the beginning of the outsourcing process. Interestingly, this study also shows that initial trust is considered a significant factor in the perception of mutual trust from the service receiver’s perspective, but not from the service provider’s viewpoint. The results help extend our understanding of critical success factors in outsourcing success and of different standpoints between the service receiver and provider.

基于粗糙集分类一致性的规则挖掘算法研究 ——以IT外包中知识转移风险为例

随着IT外包服务业务的不断增长,IT外包服务中知识转移所导致的风险问题也愈加突出,如何规避IT外包中的风险问题也显得尤为重要。从知识分类的角度出发,利用粗糙集理论,对IT外包中的知识转移风险规则挖掘算法进行了分析与探讨,结合具体案例予以实证,以期为IT外包企业风险控制做出贡献。     

Outsourcing success in the eye of the beholder: Examining the impact of expectation confirmation theory on IT outsourcing

Expectations have been found to exert a significant impact on client satisfaction in outsourcing projects and have been utilized to understand how individuals accumulate experiences and develop beliefs. In this study, we examine the impact of expectations on IT outsourcing success. Although extant studies identify multiple potential expectations, the expectations construct is often viewed as unidimensional with expectations examined at a general level. Furthermore, our multidisciplinary literature review indicates a gap in the literature regarding which expectations to employ. We therefore draw upon the Expectation Confirmation Theory (ECT) to determine a parsimonious set of expectations that combine to influence outsourcing success. Through an international survey of chief information officers (CIOs) and other senior IT outsourcing practitioners, we demonstrate the impact of expectations on IT outsourcing success. Moreover, we evidence that the should, minimally acceptable, and intolerable expectations can be used to predict outsourcing success. This study contributes to the outsourcing literature, specifically, and the multidisciplinary ECT literature, generally, by evaluating the multi-faceted nature of expectations. The results have practical implications for clients and vendors engaged in IT outsourcing and those who engage in expectation management.     

Analyzing the impact of a firm's capability on outsourcing success: A process perspective

We investigated the effect of a firm's resource capabilities and interaction processes on the success of IT outsourcing. Grounded in available literature on outsourcing relationship and process theory as well as a resource-based view of the IT resource capability, a conceptual model was composed to examine the causal structure of capability, process, and relationship in IT outsourcing. We identified the firm's resource capability factors and, based on the premise that relationship intensity should be affected by the IT outsourcing process, we developed a first-order factor analysis of resource capabilities in the interactions between the outsourcer and provider. Results of empirical testing using responses from 267 IT outsourcing project teams in Korea supported most of our hypotheses. The integration of corporate IT resource and capability theories with social exchange theory distinguishes our research from that of others, who have generally treated these theories separately.     

An investigation of factors that influence the duration of IT outsourcing relationships

Past studies in the IT outsourcing area have examined the management of IT outsourcing relationships from a variety of perspectives. The present paper extends this line of research. In this study, we take a multi-theoretic perspective to explore factors that determine the duration of continuing IT outsourcing relationships between vendor and client firms. Five ex-ante and two ex-post factors that may influence relationship duration were examined in this study. Data for this study were collected using a nationwide survey. To investigate the dynamics of continuing outsourcing relationships through repetitive contracts, we performed survival analysis using an accelerated failure-time (AFT) model. Four factors are found to have a significant relationship with relationship duration as hypothesized. However, three factors, of which two are ex-post factors, are found to not have a significant impact on outsourcing relationship duration. Implications and contributions of the study are discussed.     

Knowledge transfer and utilization in IT outsourcing partnerships: A preliminary model of antecedents and outcomes

We developed a nomological network of antecedents and outcomes of knowledge transfer and utilization in IT outsourcing relationships, and tested it using a survey of 146 IT outsourcing partnerships in Singapore.     

Evaluating cross-organizational impacts of information technology – an empirical analysis

This paper documents information technology (IT) impacts that extend across organizational boundaries based on the economic theory. It evaluates how a firm's production cost is affected by the IT decisions of its business partners, over which it has no direct control. Using cross-sectional data on 100 audit engagements for the 100 largest continuing clients of a leading international public accounting firm's main office, it empirically evaluates the impact of the clients’ IT choices on their supplier's (the public accounting firm's) production costs, professional allocations and product prices. The results indicate, other things being equal, that the higher intensity or complexity a client's IT exhibits, the more effort public accounting professionals need to exert, thus, the higher the production cost incurred by the public accounting firm. In contrast, the better documentation or security a client's IT furnishes, the lower the cost the public accounting firm sustains. Furthermore, such differences in production cost are eventually passed on to the client via differences in product price.     

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 capabilities and firm performance: A contingency analysis of the role of industry and IT capability type

Previous empirical studies examining the relationship between IT capability and accounting-based measures of firm performance reported mixed results. We argued that prior work has relied on aggregate overall measures of the firm's IT capability, ignoring the specific type and nature of IT capability; and also has not fully considered important environmental conditions that influence the relationship. Drawing on a resource-based view, we advanced a contingency perspective and proposed that IT capabilities’ impact on firm resources was contingent on the “fit” between the type of IT capability/resource a firm possesses and the demands of the industry in which it competes. Specifically, using publicly available rankings as proxies for two types of IT capabilities (internally and externally focused), we empirically examined the degree to which three industry characteristics (dynamism, munificence, and complexity) influenced the impact of each type of IT capability on measures of financial performance. After controlling for prior performance, we found there was general support for the posited contingency model. The implications of these findings are also discussed.     

Combining transaction cost and resource-based insights to explain IT implementation outsourcing

This empirical work aims to shed some light on the governance choice for information technology (IT) outsourcing decisions. By combining transaction cost and resource-based arguments, we explain the role that some economic and strategic factors as well as their relationships may play. Hypotheses are tested for the implementation of an HR software application with primary data collected from large Spanish firms. Findings seem to provide more support for resource-based arguments than for transaction-cost propositions. Thus, our results suggest that cumulative knowledge from either coordination and interaction between internal units or experience in IT outsourcing is not a significant factor unless the organization is able to develop a strategic capability. Unlike for technology specificity, no evidence was found for the significance of behavioral uncertainty and strategic contribution.     

Exploring the supply-side of IT outsourcing: evaluating the emerging role of application service providers

The paper explores the supply-side of IT outsourcing by focusing upon the emerging role of application service providers (ASPs). It traces the transition from first wave IT outsourcing in the 1960s, to business-centric outsourcing in the 1980s and 90s to application outsourcing in the 21st century. Drawing from empirical research on a taxonomy of ASPs, the paper explores how application outsourcing is currently changing the nature of the outsourcing contract and relationship between client and supplier. This will have significant implications for traditional outsourcing and ERP vendors in the software and computing services industry, in addition to presenting new opportunities to SMEs with little history or experience of outsourcing.     

Analyzing IT maintenance outsourcing decision from a knowledge management perspective

IT outsourcing is a complex and opaque decision problem. Managers facing a decision about IT outsourcing have difficulty in framing what needs to be thought about further in their discourses. Framing is one of the most crucial steps of human decision making and needs to be assisted to better understand a decision situation. In this research, we examine a number of decision primitives in the context of an IT outsourcing decision situation. We demonstrate how the decision primitives can be employed so that managers can probe deep to better understand a decision situation and to establish a decision basis. In the organizational setting, we exemplify the use of the decision primitives in relation to the perceived outsourcing implications for the managers looking for assistance in accommodating a knowledge management perspective on IT outsourcing. Consequently, we induce insight and a guideline on how to use knowledge management for effective outsourcing in one of the leading financial institutes in Europe.

Analysing four types of IT sourcing decisions in the context of scale, client/supplier interdependency and risk mitigation

The main thrust of the article is to distinguish between four types of IT sourcing decision: total outsourcing; multiple-supplier sourcing; joint venture/strategic alliance sourcing; and insourcing. To illustrate each type, detailed case histories are used that analyse the reasons why specific IT sourcing decisions were adopted. Here, we consider total outsourcing at the London Stock Exchange; multiple-supplier sourcing at ICI plc; joint venture project sourcing at CRESTCo Ltd; and insourcing at the Royal Bank of Scotland. The trend towards outsourcing is increasing in all industrial and commercial sectors. However, client organizations need to become more aware of some of the pitfalls, particularly in respect of large-scale outsourcing deals to single or multiple suppliers. This is because the move to IT outsourcing engenders the need to develop new capabilities and skills to manage complex commercial contracts. We therefore conclude that, while many IT outsourcing contracts followed rationalization, cost-cutting and disappointing results from in-house IT provision, short-termism and current uncertainties over market, business and political conditions pose problems for many organizations in deciding future outsourcing arrangements.     

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.     

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.     

IT sourcing reflections

For more than a decade, the authors have studied the best, worst, and emerging information technology sourcing practices in 543 large and small organizations world-wide. From an initial focus on cost reduction in the early 1990s, the authors found that customers now expect many business advantages from IT outsourcing, including better service, infusion of new technology, transformation of fixed IT budgets to variable IT budgets, improved business processes, and even increased revenues. In short, customers expect IT outsourcing to transform IT functions into lean, dynamic groups that respond quickly to business needs and opportunities. But how do customers actually achieve such business advantage? Customers must become adept at managing four continual processes to successfully exploit IT outsourcing:

• Assess the in-house IT portfolio to determine which activities are best outsourced
• Evaluate market options for the best sourcing models and best suppliers to achieve customer objectives, ranging from simple ASP provision to the creation of customer-supplier joint ventures
• Craft contracts to align customer and supplier expectations and incentives; and
• Continually manage supplier relationships.

Major supplier lessons are also identified, which call for superior supplier integrity in selling, negotiating, and delivering IT services. The overall lesson is that outsourcing can achieve significant results, but it requires new management capabilities.     

IT outsourcing in insurance services: risk, creative contracting and business advantage

Abstract. Risks in IT outsourcing have received little systematic academic attention, despite growing evidence of wide disappointment and difficulty as well as some successes in outsourcing IT. This paper explores the 1993–98 case history of Polaris, a software intermediary in the European insurance sector. Despite the considerable risks inherent in outsourcing business-critical technology, Polaris was found to be achieving business advantage from such a strategy. This paper details 10 major risk areas in IT outsourcing distilled from previous research. It focuses on the sourcing, contractual and management choices made at Polaris. It assesses, against prior research findings, the degree to which these choices mitigated short- and long-term risk, and whether learning points flow from the analysis for other IT outsourcing arrangements.