Title: Establishing the trust-control balance in client-vendor outsourcing relationships: empirical evidence from two IS outsourcing projects
Abstract: Abstract Nowadays, intense global competition requires companies to reposition themselves in value networks and build more sustainable and long-term relationships with their outsourcing partners. Trust and formal controls are critical issues in contemporary outsourcing arrangements today. This paper contributes to the understanding of the trust-control nexus in dynamic outsourcing relationships and argues that the achieved level of balance leads to a different course of the development of an outsourcing arrangement. These issues are explored in two case studies, where the knowledge on trust and controls is constructed in the form of organisational narratives. The analysis of the cases reveals how the client and vendor’s actions oscillate between different balancing levels of trust and controls in the relationship dynamics and how this leads to contrasting outsourcing outcomes. Keywords IS outsourcing relationship, trust, formal controls, balance, case study. ITRODUCTION Information Systems (IS) outsourcing is not a new phenomenon. The outsourcing literature over the last three decades indicates that research issues on this topic have shifted over time, reflecting the changes that have occurred in outsourcing practices (Hirschheim et al. 2008). Currently, outsourcing as a means of meeting organizational IS needs is a commonly accepted and evolving practice (Dibbern et al. 2004), and a major strategic option in IS management (Lee et al. 2008). The reason for the continued interest in the IS outsourcing phenomenon is closely related to the steady change of that phenomenon itself (Hirschheim et al. 2008). Although complex to execute and sometimes yielding controversial results, IS outsourcing is still perceived by many as the best way for organisations to lower operational costs, increase flexibility, benefit from the suppliers’ economies of scale and gain access to specialised resources (ibid). On the other hand, it is still considered to be a risky business arrangement (Aubert et al. 2003). Nowadays, in the time of globalisation, outsourcing has become a powerful solution for companies. While the gradual development of the outsourcing relationship and its effective management has received growing attention in industry as well as in academia, the effective management of IS outsourcing continues to be a challenge for organisations today. One of the major issues that both client and vendor organisations are facing today is increasing pressure to demonstrate the value of outsourcing (Lacity and Hirschheim 2003). Building and sustaining a flexible relationship between a client and a vendor is one way to create a value and achieve business benefits (Willcocks and Kern 1998). Improving the quality of the outsourcing relationship between a client and a vendor has been suggested as an important means to meet the outsourcing challenge (Lee et al. 2003) and it is not surprising that trust is a critical issue in this. In particular, many researchers suggest a cooperative partnership between a client and a vendor (e.g. Fitzgerald and Willcocks 1994) built on an effective trust-based relationship has an indirect impact on the success of the outsourcing deal (e.g. Sabherwal 1999). As a catalyst in many buyer-seller interactions, trust can provide buyers with high expectations of satisfying exchange relationships (Kern and Willcocks 2000). In the outsourcing arrangement both sides are locked in a contract that specifies roles, responsibilities, payments and other operational details associated with the outsourcing arrangement. Setting up an appropriate set of formal controls through a well-crafted contract and the implied control mechanisms (formal processes) is assumed to reduce operational and production costs, and risks, on the one hand, and also to reduce the outsourcing partner’s potential opportunism (Barthelemy 2003). Formal controls are also expected to establish a balance of power between the outsourcing partners (Lacity and Hirschheim 1993) as well as to provide incentives for value creation. However, such a set of management techniques implied by the contract is inherently complicated to apply in a real outsourcing setting (Mao et al. 2008), while overreliance on the outsourcing contract and/or forms
Publication Year: 2009
Publication Date: 2009-01-01
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot