Reversing a relationship spiral: From vicious to virtuous cycles in IT outsourcing

Abstract

IT outsourcing (ITO) remains a popular business practice, but many buyers and suppliers of IT services are caught in a vicious relationship spiral of low trust, bad collaboration and mediocre performance. This paper describes a novel process understanding of how vicious cycles work and suggests a new method for how they can be reversed into virtuous cycles. Based on the action research and complementary system dynamics simulation, this paper demonstrates how an ineffective ITO relationship between a European Harbour Authority and its main IT supplier ITCo was formed and, later, transformed. The method, involving collaborative redesign of service workflows, applied in this action research triggered the reversal of an otherwise downward relationship spiral. Both the empirical facts from the action research data and the system dynamics simulation data are provided as evidence. We conclude the paper with conceptual and methodological contributions as well as scope for future research.

Relational governance in the ITO: the role of self-determination theory and the mediating effect of control perceived

“…Research in IT outsourcing demonstrates that relational aspects contribute significantly to the success of IT outsourcing (K€ onning et al, 2021;Kranz, 2021). However, when relationships fail, the hiring company increases IT service costs by more than 50% compared to successful relationships (Akkermans et al, 2021). This is also in line with Nepomuceno et al (2018Nepomuceno et al ( , 2020Nepomuceno et al ( , 2022 misincentive perspective by stating that increasing service costs depend on the expected returns from past low-performance agreements.…”

“…, 2021; Kranz, 2021). However, when relationships fail, the hiring company increases IT service costs by more than 50% compared to successful relationships (Akkermans et al. , 2021).…”

Relational dynamics in information technology outsourcing: An integrative review and future research directions

“…Short-term orientation concerns achieving the immediate objective of minimizing costs or increasing operational efficiency. However, environmental changes (such as new market demands) can induce a client to consider long-term relationship investments to enable innovation, enhance its market share, and create new market opportunities for both parties (Akkermans et al, 2019(Akkermans et al, , 2020Heiskanen et al, 2008;Palvia et al, 2010). Being only short-term oriented can trap the relationship in the transactional stage with little focus on long-term success, setting a premise for failure in the long term.…”

“…Relational dynamics—changes in the interfirm relationship ex‐post contract whereby initial and emerging conditions trigger partner firms to take specific actions that lead to outcomes on relationship objectives and development across stages—are salient in ITO (Akkermans et al., 2020; Heiskanen et al., 2008). ITO is the practice by which a client firm contracts a vendor to deliver IT(‐enabled) products/services that may have previously been provided in‐house.…”

The need for compelling problematisation in research: The prevalence of the gap‐spotting approach and its limitations

“…In the first article, Akkermans et al (2021) focus on reversing a relationship spiral in IT outsourcing (ITO) relationships. Based on a case study involving a European Harbour Authority and its ITO partner, the authors established a process model to describe the innovative ways out of the gridlock vicious cycles engaged in their ITO relationship.…”