Client-Vendor Relationships in offshore Applications Development

Abstract

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A Critical Evaluation of Failure in a Nearshore Outsourcing Project: What Dilemma Analysis Can Tell Us

“…Provision of services requires different skills to those needed in purchasing [31]. This transition approach also coincides with the evolutionary framework provided by Mirani [32] in which he demonstrated through a case study that offshore applications tend to evolve and become business critical and the client may seek to regain control by establishing a "command based hierarchy". Although for the project under consideration the service was not to be offshored -rather, the legacy system was initially to be outsourced onshorethe situation carries the similar implication of having an external provider and the notion of 'losing control'.…”

“…Comparing this approach to the earlier mentioned evolutionary framework of Mirani [32], the relationship between vendor and client often starts with contract-based assignments in which elementary level projects are outsourced to external vendors. Over a period of time the client assigns complex applications to selected vendors which cultivates network-based relationships; we argue that the relationship between Datacom and the Ministry during the course of the legacy system operation was network-based due to the complexity and nature of the relationship.…”

“…Only the readily defined payroll processing services would be contracted. Figure 4 further elaborates this process: in Stage 1, we see this reverse approach to the model of Mirani [32] being followed by the Ministry; however, in Stage 2, in a plan to reduce cost and transfer risk, the project reverts to the Mirani model through outsourcing to a new external vendor.…”

“…It could be a characteristic of outsourced Government projects that contract and network models (perhaps "in conjunction with long-term contracts" [32]) will necessarily predominate. The forms of control through a "command and control hierarchy" open to a firm [32], such as "acquiring a formal stake in a vendor organization through part or full ownership" or setting up "a captive offshore subsidiary" are usually less palatable for Government organizations.…”

“…The forms of control through a "command and control hierarchy" open to a firm [32], such as "acquiring a formal stake in a vendor organization through part or full ownership" or setting up "a captive offshore subsidiary" are usually less palatable for Government organizations. If ideological reasons do not mitigate against such arrangements, natural risk aversion or shortage of capital are often barriers.…”