Understanding transition performance during offshore IT outsourcing
Erik Beulen, Vinay Tiwari and Eric van Heck
Research question: What factors influence transition performance and why?
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 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 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.
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,...