Paper no.69 An Investigation of the Impact of Client-Vendor Partnership Quality on IS Outsourcing Success: the Case of Oman

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1 Paper no.69 An Investigation of the Impact of Client-Vendor Partnership Quality on IS Outsourcing Success: the Case of Oman Abstract While Information Systems (IS) outsourcing has been increasing unabated in the past few decades, managing effective client-vendor partnership is still a challenge for many organizations. Empirical studies in IS outsourcing have mainly focused on the detriments of outsourcing, while not sufficiently investigating the area of client-vendor partnership. This research intends to bridge this gap by examining the impact of client-vendor partnership quality on IS outsourcing success from the client s point of view in the context of Oman. I argue that partnership quality is positively associated with IS outsourcing success. A triangulation of multiple-case study and survey questionnaire approaches will be carried out in Oman. This research will be of value to practitioners responsible for managing their organizations IS outsourcing as well as to the body of knowledge in the growing IS outsourcing literature. Keywords: Partnership quality, IS outsourcing success, Oman Introduction Information Systems (IS) outsourcing has been growing globally at a rapid rate (annual rate of an estimated 20%) as an important strategy in the delivering of IS services in the past few decades (Lacity et al., 2008; Kern and Willcocks, 2002). Public and private organizations worldwide have outsourced their IS in order to cut down cost, focus on core business, access new skills and technology (Kakumanu and Portanova, 2006) and recently to establish strategic and sustained partnerships (Fjermestad and Saitta, 2005). But despite this growth, many IS outsourcing projects have been termed less successful in achieving their expected objectives. Additionally, from the academic side, there is insufficient 1

2 number of research studies that have addressed these issues, particularly those related to partnership between the client and vendor in IS outsourcing ventures. This paper is part of an on-going research that seeks to understand the impact of client-vendor partnership quality on the success of IS outsourcing in the context of Oman as a developing country. The research will employ a multi-theoretic approach to identify the key attributes that may have an influence on the quality of client-vendor partnership and consequently contribute to the success of IS outsourcing. Since the main research is at its early stage, this paper will only review the relevant literature and discuss the research problem, research aim and objectives and the suggested methodology that will be used in this research. The author is currently in the stage of developing a framework for this research. The key findings of the research will be presented at a later stage once data are collected and analyzed. Literature Review IS Outsourcing Partnership Partnership is basically defined as an interrogational relationship that is established in order to share rewards and risks between parties (Tafti, 2005). Kim and Park (2003, p.53) defined partnership as a long-term relationship and is based on mutual recognition and understanding between the transaction parties that each companies success in the transaction is intrinsically dependent on the other. Several business disciplines have recognized the importance of partnership in today s competitive and turbulent business environment. Past marketing studies, for example, have identified the value of strategic partnerships to both clients and vendors. In this field, well-established partnership relationships have been proved to improve performance, reduce cost and increase cooperation. 2

3 According to Tuten and Urban (2001) partnership tend to contribute to improving profitability for clients, particularly among vendors that are market share leaders. On the other hand, vendors that maintain and sustain long-term mutual relationships with selected clients can enjoy the benefits of reducing cost and utilizing inventory. In recent years, client-vendor partnership has attracted the attention of IS researchers too. Sun et al. (2002) stated that some organizations (clients) establish IS outsourcing partnership with their service providers (vendors) because they are lacking the proper skills to write complete and robust contracts. Others find partnership an adequate mechanism for protecting investments and promoting further business between the two parties. As the nature of outsourcing relationship has shifted recently from contractual to a partnership-based relationship, the quality of client-vendor partnership has proved to enhance knowledge, resource and asset transfer between the two parties (Lee, 2001). Sargent (2006) argued that the presence of well-established client-vendor partnership might lead to more consistent service quality and provide important determinant for IS outsourcing success. Partnership Quality: Determinants and Components The quality of partnership refers to the degree to which the desired outcome of a partnership between the client and the vendor is met (Alborz et al., 2003). Past studies in IS outsourcing partnership have identified several factors (determinants), based on different theories such as social exchange theory, relational exchange theory and power-political theory, that may have an impact on the quality of IS outsourcing partnership. Lee and Kim (1999) argued that the quality of partnership is often affected by three factors: (1) Dynamics factors (information sharing, communication, coordination, joint action and participation) (2) Static factors (age of relationship and mutual dependency) (3) Contextual factors (cultural similarity and top management support). Furthermore they identified five components of partnership quality that may contribute to the success of IS outsourcing namely, trust, business 3

4 understanding, benefit and risk share, conflict and commitment. Gurung and Prater (2006) also found out that cultural compatibility affects the quality of outsourcing partnership. If the client and vendor organizations are from totally different nations, then they most probably will face a challenge to bridge this gap and establish a close partnership. Moreover, shared values and objectives often have an impact on the development of client-vendor partnership, especially when it comes to offshore IS outsourcing. IS Outsourcing Success Success of IS outsourcing has been viewed differently by various researchers. According to Gurung and Prater (2006, p. 35) success is the level of fitness between the customer s requirements and the outsourcing outcomes. An organization perceives IS outsourcing as success if it is satisfied with the business value of outsourcing relationship and if the main objectives are relatively met. Waheed and Molla (2004) viewed the success of IS outsourcing in terms of project completion within time and budget limit, better quality of IS and knowledge transfer. Research Aim, Objectives and Contribution The overall aim of this research is to investigate the impact of client-vendor partnership quality on the success of IS outsourcing. The specific objectives of the research are to: - explore and acquire a deep understanding of the current status of IS outsourcing partnerships in Oman - understand the factors causing organizations to form IS outsourcing partnerships. - understand how partnership developed and evolved, what the conflict are, and how organizations attempt to resolve them - understand how partnership quality may affect IS outsourcing success. 4

5 This research will make a number of contributions and add valuable insights to both the academic and the business community. From the academic point of view, the research contributes to the knowledge of IS outsourcing by filling the gap in the literature by proposing a research model that evaluates the impact of client-vendor partnership quality on the success of IS outsourcing in the context of developing countries such as Oman. The business world, on the other hand will find in this study a set of best practice guidelines for organizations that might consider establishing IS outsourcing partnerships. Research Methodology To achieve the previously mentioned aim of this research, both qualitative and quantitative methodologies will be used in order to verify interpretation and conclusions. A combination of case study and survey will be employed to collect the primary data for this research. This approach of integrating two or more methods within a single research design is called triangulation. According to Bryman and Bell (2007, p. 59) triangulation approach attempts to cancel out the limitations of one method by the use of another in order to cross-check the findings. The value of combining multiple research methods in IS research has also received a great deal of attention in the past few years. Sun et al. (2002) stated that it is often recommended to use a case study approach (fieldwork) to gain valuable insights and in-depth knowledge about the phenomenon being investigated before proceeding to a more objective method like a survey. Multiple-Case Study Case study has been found as an appropriate method when a natural setting or a focus on contemporary events is needed (Bryman and Bell, 2007). Moreover, according to (Yin, 1994) multiple-case study is desirable when the intent of the research is description, theory building or theory testing. 5

6 Four (2 public and 2 private) organizations will be investigated in Oman. The unit of analysis is each organization s IS outsourcing case. In-depth semi-structured interviews will be conducted with a select number of key staff (IS directors, IS project mangers, legal advisors) involved in IS outsourcing projects. The interviews will offer a chance to gather a rich database of open-ended responses to questions about the opportunities and challenges of IS outsourcing partnerships. Self-Administrated Survey Survey questionnaires will be self-administrated rather than self-completed. They will be handed in to IS managers of 200 organizations in order to obtain a comprehensive understanding of the IS outsourcing practices in the Oman. The completed questionnaires will be then collected all in person after a specified period of time. The reasons for choosing self-administrated questionnaire over other types, such as postal questionnaire, despite the fact that the later is cheaper, are threefold. First, selfadministrated questionnaires are relatively quicker and can produce high response rate. Second, they give the opportunity to introduce the research topic and motivate the respondents to offer their frank answers. Third, the postal service in Oman where data will be collected is still inefficient and that could cause delay in the process of collecting data. Organizational Documents Organizational documents such as request for proposals (RFPs), vendor evaluations techniques and minuets of meetings and contracts will be evaluated, as much as access permits, in order to gain insights on organizational decisions and actions. 6

7 Data Analysis Techniques Statistical software packages such as SPSS will be used to analyze the date gathered by the questionnaire and evaluate the results. For the qualitative data, a qualitative data analysis software package such as NVivo will be used to assist coding, and derivation of themes, from the interview data. Conclusion The concept of partnership between the client and the vendor in IS outsourcing arrangements is the concern of this study. The aim is to test empirically the factors that impact partnership quality and as a result contribute to the success of IS outsourcing. A triangulation research approach of multiple-case study followed by a survey questionnaire will be carried out to investigate Omani organizations experience with IS outsourcing partnerships. The result of the study will provide practical implications to practitioners to better mange their partnerships as well as academic implications to researchers who are interested in the topic. References Alborz, S., Seddon, P. and Scheepers, R. (2003) A model for studying IT outsourcing relationships. Proceeding of the 7th Pacific Asia Conference on Information Systems, July 2003, Adelaide, South Australia. Bryman, A. and Bell, E. (2007) Business research methods. 2 nd ed., Oxford University Press. Fjermestad, J. and Saitta, J. (2005) A strategic management framework for IT outsourcing: a review of the literature and the development of a success factor model. Journal of Information Technology Case and Application Research, 7 (3), pp

8 Gurung, A. and Prater, E. (2006) A research framework for the impact of cultural differences on IT outsourcing. Journal of Global Information Technology Management, 9 (1), pp Kakumanu, P. and Portanova, A. (2006) Outsourcing: its benefits, drawbacks and other related issues. The Journal of American Academy of Business, 9 (2), pp Kern, T. and Willcocks, L. (2002) Exploring relationships in information technology outsourcing: the interaction approach. European Journal of Information Systems, 11, pp Kim, B. and Park, K. (2003) Satisfying different customer groups for IS outsourcing: a Korean IS company experience. Asian Pacific Journal of Marketing and Logistics, 15 (3), pp Lacity M., Willcocks, L. and Rottman, J. (2008) Global outsourcing of back office services: lessons, trends, and enduring challenges. Strategic Outsourcing: An International Journal, 1 (1), pp Lee, J. (2001) The impact of knowledge sharing, organizational capability and partnership quality on IS outsourcing success. Information & Management, 38, pp Lee, J. and Kim, Y. (2005) Understanding outsourcing partnership: a comparison of three theoretical perspectives. IEEE Transactions on Engineering Management, 52 (1), pp Lee, J. and Kim, Y. (1999) Effect of partnership quality on IS outsourcing success: conceptual framework and empirical validation. Journal of Management Information Systems, 15 (4), pp

9 Sargent, A. (2006) Outsourcing relationship literature: an examination and implications for future research. Proceedings of the 2006 ACM SIGMIS CPR conference on computer personnel research: Forty four years of computer personnel research: achievements, challenges & the future, Claremont, California, USA. Sun, S., Lin, T. and Sun, P. (2002) The factors influencing information systems outsourcing partnership- A study integrating case study and survey research methods. Proceedings of the 35 th Hawaii International Conference on System Sciences. Tafti, M. (2005) Risk factors associated with offshore IT outsourcing. Industrial Management & Data Systems, 105 (5), pp Tuten, T. and Urban, D. (2001) An expanded model of business-to-business partnership formation and success. Industrial Marketing Management, 30, pp Waheed, U. and Molla, A. (2004) Information systems outsourcing success: a client-service provider gap analysis in Pakistan. Journal of Information Technology Management, XV (1-2), pp Yin, R. (1994) Case Study Research: Design and Methods. 2 nd ed. Thousand Oaks, California: Sage Publications, Inc. 9