IT outsourcing is a popular procurement and sourcing practice among organizations that want to, amongst a number of reasons, reduce costs, access specialized skills, develop their capacity, focus on their core competencies. As with any business practice, IT outsourcing involves risks and challenges, such as loss of control, cultural differences, and contractual disputes. Such risks can be mitigated by maintaining good relationships with the IT service providers, who are key to the success or failure of the outsourcing projects.
Relationships in IT outsourcing is the degree of mutual trust, commitment, communication, and collaboration between the client and the provider. These factors affect the quality, timeliness, and satisfaction of the IT services delivered, as well as the resolution of conflicts and problems that may arise during the outsourcing process. Relationships also impact the innovation and value creation achieved through IT outsourcing, as they enable knowledge sharing and learning between the parties.
Several studies have identified relationships as one of the critical success factors in IT outsourcing. For example, a survey of 200 IT outsourcing contracts in Europe found that relationship quality was the most important determinant of outsourcing success, followed by contract management and service quality. Another study of 111 IT outsourcing projects in China revealed that relationship quality had a positive effect on project performance and client satisfaction. Moreover, a meta-analysis of 55 empirical studies on IT outsourcing outcomes showed that relationship quality had a significant and positive impact on both technical and business performance.
Building and sustaining strong relationships in IT outsourcing does not just happen. Both parties need to invest in the relationship, and the client will typically need to take the lead. There are various practices that can be adopted, which we’ve listed below.
Sourcing relationship development practices
- Providing online and face to face training that builds the understanding and skills of those involved in ITO
- Designing effective and pragmatic procurement approaches specifically for ITO
- Selecting compatible partners based on their strategic fit, cultural fit, and reputation.
- Developing clear and realistic expectations and objectives for the outsourcing project.
- Negotiating fair and flexible contracts that specify the roles, responsibilities, and expectations of each party.
- Establishing effective communication channels and mechanisms to exchange information, feedback, and suggestions.
- Fostering trust and commitment by demonstrating honesty, reliability, and competence.
- Respecting and appreciating the differences and diversity of each party.
- Collaborating and cooperating to solve problems and overcome challenges.
By following these practices, clients and providers can enhance their relationships in IT outsourcing and achieve mutual benefits and success.