Analyzing IT outsourcing relationships as alliances among multiple clients and vendors

Abstract

As the business environment become more uncertain and competitive, many organizations are seeking ways to gain economic efficiency and share in business and technology risk. Despite wide differences in the reference disciplines applied to outsourcing research, the vast majority of it assumes a one-to-one relationship between the client and the outsourcing vendor. This paper examines the economic, strategic and organizational issues involved in IT outsourcing when more complex arrangements are considered-such as multi-vendor alliances, co-sourcing and complex multi-vendor, multi-client relationships. We identify a taxonomy of four classes of outsourcing relationships (based on how many clients and vendors are involved in the outsourcing relationship), and illustrate each with recent business examples. Grounded in this taxonomy, we develop a theoretical framework that identifies both enabling and constraining forces that may influence client firms in choosing among the four types of outsourcing relationships. This paper provides insights regarding how the variations in the nature of these outsourcing relationships may shape the benefits and risks be achieved from outsourcing, as well as the ongoing complexity of managing outsourcing relationships.