Relationship, contract and IT outsourcing success: Evidence from two descriptive case studies

Abstract

In spite of the continuous increase in IT outsourcing activities globally, a significant percentage of outsourcing deals are considered either a failure or suffered from serious problems. In China where IT outsourcing practice is still at its initial stage, the situation is more serious. There lacks systematic guidance in terms of how to negotiate decent contracts and how to develop sound relationships. In view of this, an emerging trend of research has explored either the contract or relationship issues in successful IT outsourcing. However, few efforts have been paid to investigate the effects of both relationship and contract on IT outsourcing success with an integrated view. The current research develops a research framework based on the theories in Economics, Management and Marketing fields to investigate the effects of both relationship and contract on IT outsourcing success. To support the propositions, evidence was collected from two descriptive case studies conducted in Hong Kong and Mainland China respectively. The case analysis implies the dimensionalities of relationship and contract. What is more, IT outsourcing success is mainly evaluated from the technological benefits instead of the strategic or economic benefits the client company could gain from an IT outsourcing relationship. A significant contribution of this study to theory is to look into IT outsourcing phenomenon with a balanced view and through an integrated theoretical lens. For practitioners, this research helps clear executives’ doubts about simultaneously employing both relationship and contract as a governance mechanism in managing IT outsourcing deals.