Partnership quality in IS outsourcing : social theory perspective

Abstract

The decision to outsource Information System (IS) functions has recently become more popular because organizations need diverse and high quality information services to survive and excel in the rapidly changing external environment. This phenomenon shifts the traditional form of hierarchical IS governance to a newer market form of governance. In this process, various outsourcing options have developed based on the degree of outsourcing - total or selective, period of outsourcing - long term or short term, number of vendors - single or multiple vendors, and outsourcing types - service or asset outsourcing. Many firms have addressed these issues, but mostly from the economic viewpoint: cost reduction. However, this approach failed to address the fact that the economies of scale and scope achieved by IS outsouring may vary significantly depending on the environment, structure and strategy factors. To overcome such problem, several firms have established intimate partnerships with service providers as in the Kodak-IBM-DEC partnership and USAA-IBM partnership. They recognized the limitations of the legal contracts and sought flexible relationships with their service providers based on mutual trust. On the research side, much of the literature fails to distinguish between the components of partnership quality and its antecedent conditions. Many researchers have examined partnership quality through the correlation analysis among the partnership-related variables or between partnership success and related variables. Such studies, however, drew multiple, sometimes conflicting conclusions. Despite the various theories on partnership such as resource-dependency theory, transaction-cost theory, agent-cost theory from the economic viewpoint and social exchange theory and power-political theory from the social viewpoint, there has been a lack of an integrated view to provide an in-depth analysis of the outsourcing partnership. The objective of this study is to enhance the...