Summary Understanding Transition Performance During Offshore It Outsourcing

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Understanding transition performance during offshore IT outsourcing

Erik Beulen, Vinay Tiwari and Eric van Heck

Research question: What factors influence transition performance and why?

Transition phase
A typical IS outsourcing relationship (figure 1) can broadly be divided into six phases: initiation, service provider selection, contract negotiation, transition, service delivery and contract renewal/termination.

Knowledge transfer: the extent to which clients acquire, absorb, and utilize knowledge on outsources IT from vendors. During transition, knowledge transfer is key. There are two types of knowledge transfer: services transferred from the provider to the outsourcer, and the organization-specific knowledge regarding processes and procedures is transferred from the outsourcer to the provider.

Theoretical background: transition performance
Focus is on four factors: transition planning, knowledge transfer, transition governance, and retained organization. These factors influence transition performance. The factor transition planning is impacting the three other factors.

Transition planning:
Transition planning during outsourcing relationships has a clear starting and end point, with well-defined deliverables and can be characterized as a project. It is developed jointly with consultation between the client and the service provider organization. There are 4 sub-factors related to project planning, namely: * Project interdependencies: client organizations need to keep other possible projects (such as software package implementation or hardware installations) and their interdependencies under consideration. Otherwise it can negatively impact the transaction. * Identification of resources: capable client and service provider personnel need to be identified prior to the transition. These resources are required to ensure that a proper knowledge transfer takes place. * Quality of transition plan: a thoroughly prepared transition plan (with roles, responsibilities of both firms and transition deliverables), jointly agreed upon by both client and service provider, is essential for a smooth transition. * Contractual and regulatory obligations: an outsourcing relationships involves contractual agreements between two firms, transition planning needs to consider any potential conflict with other contractual or regulatory obligations.

Knowledge transfer:
Knowledge transfer represents one of the most critical activities during the transition period of any outsourcing relationship. There are 4 sub-factors related to knowledge transfer that influence the transition: * Idiosyncrasies of outsourced activities: refers to the specific or customized processes existing in the client organization or their IS systems that differ from an industry-wide standard perspective. An understanding of these specifics is necessary for a successful transition. * Prior history of interaction between client and service provider: any previous experience between firms influences their perceptions related to motivation, trust and capabilities towards the other. * Motivation of subject matter experts: crucial aspect within knowledge. Their motivation is influenced by ‘’inter dia’’, feeling of job insecurity and loss of control. * Ramp-down of client IT personnel: an uncontrolled or poorly planned ramp-down of a client’s IT personnel can lead to the loss of knowledge to be transferred to the service provider personnel.

Transition governance:
Transaction cost economics provides us with the basic foundational knowledge that formal governance mechanisms, such as contracts, are essential in alleviating known exchange hazards such as uncertainty in inter-organizational relationships. There are 4 sub-factors within transition governance: * Involvement of cross-functional personnel: lack of cross-functional teams (such as development, maintenance, functional,...
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