Contracting and Relationship Theories Applied to IT Outsourcing

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-supplier relationship. Yet, even now, researchers and practitioners know little about the actual operational characteristics of these outsourcing relationships. This lack of insight on outsourcing relationships forms the rationale for the research on which this chapter is based. An attempt at bridging the gap is made by adopting the IMP group’s dyadic “Interaction Approach” to shed some light on the crucial dimensions of IT outsourcing relationships. Exploratory research into twelve organizations identified the potential of the “interaction approach”, but also highlighted its various limitations. Despite these, we find that the “Interaction approach” represents a very useful foundation for delimiting such relationships. The “Interaction” approach also helps to identify a number of management issues that warrant careful consideration if IT outsourcing relationship management is to be improved. Our more recent work (Kern and Willcocks, 2001; Willcocks and Cullen, 2005) confirms that relationships remain a problematic area in outsourcing, and that the Interaction approach retains considerable potency for analyzing outsourcing arrangements.