Client-Vendor Relationships in Offshore Applications Development

Abstract

This article presents an evolutionary framework for the establishment and progression of client-vendor relationships in the context of offshore applications development. It is argued that such a relationship typically begins as a cost-reduction exercise, with the client contracting out simple, structured applications to one or more offshore vendors. Over time, the client assigns increasingly complex applications to selected vendors and cultivates loose, trust-based, networklike relationships with them. As offshore applications continue to evolve and become business-critical, the client may seek to regain control by establishing a command-based hierarchy. This may be achieved through part or full ownership of a vendor organization or by starting a captive offshore subsidiary. Thus, the initial client objective of cost reduction ultimately is displaced by one pertaining to risk control. Pertinent prior research is used to justify the proposed framework. This is followed by a case study that describes how a specialty telecommunications company is pursuing just such an evolutionary path.