Exploring relationships in information technology outsourcing: the interaction approach

Abstract

Information technology (IT) outsourcing ventures have been termed successful or less successful in achieving their expected outsourcing objectives according to the operational effectiveness of the ensuing client–upplier relationship. Yet researchers and practitioners share no consistent understanding of the actual operational characteristics of these IT outsourcing relationships. The paper bridges this gap by adopting the International Marketing and Purchasing (IMP) group's dyadic ‘interaction Approach’, which delineates carefully the context, parties, interaction and behavioural dimensions of buyer–supplier-type relationships. Applied to outsourcing, this ‘approach’ enables us to shed some light on the crucial dimensions of IT outsourcing relationships. Exploratory research into 12 organisations identifies the potential of the ‘interaction approach’, in providing a comprehensive, consistent, holistic set of constructs to guide analysis. The constructs of ‘interaction’ and ‘atmosphere’ proved particularly useful in providing in-depth insights. However, other interaction constructs of ‘environment’, ‘parties’ and ‘institutionalisation and adaptation’ were limited in their operationalisability. The paper suggests how these can be supplemented, and how IT outsourcing relationships can then be studied over time more satisfactorily. The interaction approach, as applied to the qualitative research data, also helped to identify a number of management issues that warrant careful consideration if IT outsourcing relationship management is to be improved. At the same time, the research identified certain factors in IT outsourcing relationships not captured satisfactorily by the interaction approach, namely the centrality of the contract, the importance of formal processes, and the hidden costs of relationship management. One suggested way forward is to combine interaction, contract and transaction cost perspectives.