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Structure of service level agreements (SLA) in IT outsourcing: The construct and its measurement

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Abstract

The increased reliance of companies on IT outsourcing has turned management attention to a set of skills of managing relationships with service providers. While some recent studies have shown that the contracting ability to effectively manage relational exchanges can improve various dimensions of organizational performance, there has been relatively little analysis of how firms strategically use contracts to successfully manage their interfirm relationships. As an extension of past studies emphasizing the importance of the contract and service level agreements (SLA), the study develop an inclusive and conceptually sound framework for structuring SLA in IT outsourcing arrangements drawing upon control theory. Along with a careful description of measurement development as well as rigorous statistical validations, it contributed to instrument development for a set of 11 first-order SLA contractual factors and their relationships with three second-order substantive factors. The results of the study are framed as a tool for benchmarking SLA structuring efforts as well as a foundation for the future study of managing IT outsourcing relationships. The study suggests empirically testing of (1) the complementarity or substitutability between formal contract and relational governance, (2) institution based trust as an initial trust building mechanism, and (3) IT outsourcing success from a contractual perspective as potential areas of future research using the results of the study.

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Notes

  1. Control modes that rely on mechanisms that influence the controlee’s behavior through performance evaluation and rewards.

  2. Control modes that utilize social or people strategies to reduce goal differences between controller and controlee.

  3. Formal written agreements developed jointly between the service recipient and the service provider that specifies a product or service to be provided at a certain level so as to meet business objectives.

  4. Please refer to Kirsch (1997) and Choudhury and Sabherwal (2003) for complete discussion about four control modes.

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  1. Information Technology and Operations Management, The Barry Kaye College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL, 33431-0991, USA

    Jahyun Goo

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Table 6 Measurement items and evidence of unidimensionality and reliability
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Goo, J. Structure of service level agreements (SLA) in IT outsourcing: The construct and its measurement. Inf Syst Front 12, 185–205 (2010). https://doi.org/10.1007/s10796-008-9067-6

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