Transition Process and Performance in IT Outsourcing: Evidence from a Field Study and Laboratory Experiments

In this dissertation, complementing the strategic and economic studies on interorganizational relationships and IT outsourcing, we focus on the operational execution challenges inherent in these relationships by examining the transition stage, which starts immediately after contract signing and involves the critical transfer of knowledge, experience and routines related to outsourced activities from client to vendor firm. We focus on the transition stage due to its significance for outsourcing success, its complexity and theoretical richness, and its limited current understanding. Utilizing both a longitudinal field study and laboratory experiments to investigate transition, this dissertation generates important theoretical contributions and practical implications. In the first study (see Chapter 4), adopting a longitudinal perspective, we capture a real-life transition as it unfolds over time between a Utility company (Saturn) and a Global IT vendor (Apollo). Adopting the qualitative data analysis techniques and process theorizing guidelines, we inductively develop, explain and illustrate the transition process model consisting of three phases – transfer, adapt and routinize. For each phase, we illustrate the triggering conditions, key activities and outcomes for progression to the next phase. In the second study (see Chapter 5), building on the findings from the longitudinal qualitative field-study (Chapter 4), we focus on the transfer phase, which represents the most fundamental phase and largely determines the success of not only transition but also overall IT outsourcing relationship. To determine the influence of this phase on transition performance, we develop a novel experiment that captures outsourcing and transition scenarios in the laboratory. Using this experimental setting, we focus on understanding the relationship between transfer mechanisms (i.e. methods used to transfer knowledge, experiences and routines) and transition performance. In this study, we select the three basic and most frequently used transfer mechanisms – observation, training and manual. We find that among the three mechanisms, observation leads to the best performance. In the third study (see Chapter 6), building on the findings from the experiments (in Chapter 5), we focus on strengthening the generalizability of these findings and determining any possible moderating influences. The insights from Chapter 5 reveal that two important variables with potential moderating influence on the relationship between transfer mechanisms and transition performance are: codification and task complexity. We find that both codification and task complexity do have a moderating influence, thereby, further improving our understanding of transition performance.

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