Outsourcing Performance

Abstract

For the vendor an IT outsourcing relationship is successful if it generates profit for the company and if it strengthens the company’s value proposition in terms of complementary competencies such as IT personnel development, methodology development and dissemination, and customer relationship management (Levina & Ross, 2003). For the client an IT outsourcing relationship is successful if it generates profit for the company and if it contributes to achievement of outsourcing objectives as exemplified by Lee and Kim (1999). Managing successful IT outsourcing relationships means to us that source firm and sourcing firm both achieve their objectives in a joint effort. Achieving objectives is a matter of outsourcing outcome. In this chapter we start by presenting the vendor’s value proposition because outsourcing outcomes are dependent on the vendor’s ability to create value for both parties in the relationship. Satisfaction based on successful exploration and exploitation of the vendor value proposition plays an important role in building other important assets for the client company. The following two sections in this chapter discuss outsourcing opportunities and threats in a client perspective. Next, we present a method for developing quantitative performance measurements. Although decisions to outsource should be a part of the overall business strategy, control and objective measurement of service quality is important for any company as this may influence the overall relationship. At the end of this chapter, we take a look at how to measure the success of IT outsourcing relationships.