A Model of the Evolution of IS Outsourcing Relationships

In recent years, contracts worth hundreds of millions of dollars have been written by major corporations to outsourceportions of their information systems function. Some of these will evolve into closely knit and inter-coordinatedrelationships. Others will probably dissolve in acrimony.This research proposes a model of the evolution of IS outsourcing relationships. It is based on models from the marketingliterature (Anderson and Narus 1990: Dwyer, Schurr and Oh 1987). These models incorporate aspects of expectations,relative returns, trust cooperation, conflict, and adaptation constructs that are useful for understanding how long-termrelationships can evolve between the information system customer and the outsourcing vendor.The model is formulated in two stages. First, a static model is constructed thal explains satisfaction from an outsourcingrelationship at a point in time. Then the static model is elaborated into a comparative static model or simple dynamicmodel through the application of the concept of adaptation. Adaptation refers to the ways in which one or both parties inan outsourcing relationship modify behaviors to accoinmodate the other party (Hallen, Johanson, and Seyed-Mohamed1991). The model incorporates power and trust as two factors from social exchange theory that condition adaptation.Adaptation that changes the relationship in mutually beneficial ways will lead the outsourcing parties to greater trust andgreater satisfaction and a deepening of the outsourcing relationship. Alternatively, adaptation that enriches one party at theexpense of the other is destructive to the outsourcing relationship and may ultimately lead to its dissolution. REFERENCESAnderson, J. C., and Narus, J. A. "A Model of Distributor Finn and Manufacturer Firm Working Partnerships," Journalof Marketing, Volume 54, January 1990, pp. 42-58.Dwyer. F. R.; Schurr P. H.; and Oh S. "Developing Buyer-Seller Relationships," Journal ofMarketing, Volume 51, April1987, pp. 11-27. Hallen, L.; Johanson, J.; and Seyed-Mohamed, N. "Interfirm Adaptation in Business Relationships," Journal qfMarketing,Volume 55, April 1991, pp. 29-37.