A Risk Based View of Influential Factors in IT Outsourcing Relationship for Large Multinational Companies: A Service Buyer Perspective

A Risk Based View of Influential Factors in IT Outsourcing Relationship for Large Multinational Companies: A Service Buyer Perspective

Georg Hodosi (Stockholm University, Sweden), Lazar Rusu (Stockholm University, Sweden) and Seungho Choo (Accenture, Finland)
DOI: 10.4018/ijsodit.2012070103
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Abstract

Information Technology Outsourcing (ITO) is well spread among large Multinational Companies (MNCs) in Europe, and it is expected to increase even more. The authors’ focus is the service buyer company who needs a well working relation with its ITO supplier for handling emergent issues, daily operation and events that have not been foreseen. In the last years, an increasing attention has been paid to improve ITO relationship. Reviewing the research literature, they have not found any studies about Influential Factors (IFs) that could improve the ITO relationship, nor, how risk factors are interrelated to ITO relationship. Therefore, the authors address this issue by providing 15 IFs that could improve the ITO relationship for large MNCs and their providers and could help the service buyers companies’ to concentrate on these IFs. Additionally, the authors developed a framework that could support the ITO decision makers in both mitigating the risks and improving the ITO relationship.
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Research Background

The relationship in ITO has to cover the whole life cycle of the ITO, from contract negotiation to handling unexpected and unpredictable events as well as to create efficiently working climate on all working levels. There is no doubt that contracts are always: incomplete, the content is limited, and the available knowledge when designing the contract is restricted to the current known facts Williamson (1975, 1985). Therefore, contracts should be updated continuously to cover the actual demands, as well as to open for future business requests. However, this does not mean that the contracts can be open, as the risk of opportunistic behavior by the supplier must be safeguarded against to avoid negative consequences. This balance among limited size of contracts, enough flexibility to provide improvements and disclose opportunistic behavior combined with enough incentives for both parties open a wide field for ITO relationship to be practiced in a successful way.

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