IT outsourcing from a client perspective: exploring client developments and their impact on supplier capabilities

Abstract

IT outsourcing is an area that is developing rapidly, requiring a solid relationship between customers and suppliers. Kern and Willcocks (2001) have argued that relationships in IT outsourcing have received little attention in conceptual and empirical research. Yet all researchers emphasize the importance of the relationship between client and supplier as being critical. A relationship is defined as “a long-term commitment, a sense of mutual cooperation, shared risk and benefits, and other qualities consistent with concepts and theories of participatory decision making” (Henderson 1990, 8). While IT outsourcing relationships have been addressed in the literature (Klepper 1994, 1995; McFarlan and Nolan 1995; Willcocks and Kern 2001), only a few researchers have researched the relationship between client and supplier and most of them have been inconclusive (Kern and Willcocks 2002, 4). Empirical research by Lacity and Willcocks (2000a) has shown that a number of client organizations encountered severe problems. These problems can be observed in six areas: strategy, cost, management, operations, contracts, and technology. In four of these areas, strategy, management, operations, and technology, suppliers are causing problems due to insufficient skills in business and IT. Many problems and challenges in outsourcing arrangements are related to the IT supplier capabilities.