Management of IS Outsourcing Relationships – A Dyadic Analysis of Antecedents and Consequences of Dependencies and Power

Many companies today rely heavily on specialized information technology (IT) suppliers for fulfilling their IT demands. However, external provision, i.e., outsourcing, of IT services is a risky endeavor, and expectations are frequently not met. This dissertation addresses the challenge of successfully managing outsourcing relationships between clients and IT suppliers. The dissertation begins by presenting results from a multiple case study that analyzes the organizational design of the management of supplier relations in the IT organizations of five client companies. These results contribute to research in this area and show IT decision makers on the client side efficient ways of organizing the ‘client-supplier interface’. Special attention is paid to the risks associated with outsourcing arrangements that should be addressed as part of successful relationship management. From a client’s perspective, excessive dependence on the IT supplier is viewed as a major outsourcing hazard. However, research from related disciplines suggests not only analyzing a client’s dependence but also incorporating the supplier’s dependence on the client in a dyadic exchange relationship. Differences between the dependency levels of the client and the supplier can lead to a power advantage for one party that can then be used to the detriment of the dependence-disadvantaged party. The dissertation investigates different dependence and power constellations in outsourcing relationships using a case study approach. The investigation results in conceptualizations and measurement instruments for client and supplier dependence in outsourcing relationships. The dissertation ends with a large-scale empirical survey that analyzes the effects of different combinations of dependencies and power use on the contractual partners’ satisfaction with the exchange performance. Taken together, the results advance knowledge about the successful management of outsourcing relationships and, more specifically, they enable clients and IT suppliers to capture and optimize dependence relations.