The Key Role of Interfaces in IT Outsourcing Relationships

Many IT outsourcing operations fail, and when they do not fail they often impose renegotiations over the life of the contract between outsourcers and service providers. Possible remedies include the improvement of knowledge-sharing processes over organizational boundaries between partners, who may learn more about the problems that occur while looking at possible solutions together. Ensuring the right flow of knowledge in the two directions is central to the success of IT outsourcing operations, particularly in the transition stage of the relationship. However, these solutions do not fully acknowledge the different interrelationships between the main factors affecting knowledge transfer in outsourcing relationships in a dynamic way. In this paper, previous research on modeling knowledge-sharing across boundaries is applied to IT outsourcing contracts during the transition phase of the IT outsourcing relationship. Simulation experiments suggest that four reinforcing processes play key roles in the progress of the outsourcing relationship: trust, outsourcers’ and providers’ knowledge, commitment, and interfacing. DOI: 10.4018/jitsa.2012010103 38 International Journal of Information Technologies and Systems Approach, 5(1), 37-56, January-June 2012 Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. interfaces, which have proven to be effective in other knowledge-intensive tasks across professional and organizational boundaries (Black, 2002; Black, Carlile, & Repenning, 2004; Luna-Reyes, Black, Cresswell, & Pardo, 2008). Our model provides dynamic explanations for the success and failure of IT outsourcing operations at the transition stage at the beginning of the relationship between outsourcers and their IT service providers. The paper addresses the following research question: what are the dynamic factors that account for the success or failure of IT outsourcing relationship during the initial transition stage? Simulation experiments suggest that four reinforcing processes play key roles in the progress of the outsourcing relationship: trust, outsourcers’ and providers’ knowledge, commitment, and interfacing. We first present a review of the development of those four processes in the literature and their importance in IT outsourcing relationships. Then we present an integrative systems dynamic base model that combines those dimensions and a series of simulations. We analyze and comment on the model and the simulations in the discussion and present the limitations of this study and future research directions in the conclusion.