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Determinants of Outsourcing Success in the Financial Industry:

The Impact of Importance

Stefan Blumenberg

E-Finance Lab

Goethe University,

Frankfurt, Germany

[email protected]

Daniel Beimborn

Chair of Information Systems

and Services

University of Bamberg, Germany

[email protected]

Sebastian F. Martin

E-Finance Lab

Goethe University,

Frankfurt, Germany

[email protected]

Branimir Brodnik

microfin GmbH

Frankfurt, Germany

[email protected]

Clemens Gunne

microfin GmbH

Frankfurt, Germany

[email protected]

Stefan Wendt

microfin GmbH

Frankfurt, Germany

[email protected]

Abstract

How does the overall importance of a particularoutsourcing deal, as perceived by the provider, affectthe quality and, subsequently, the performance of anoutsourcing relationship? This work contributes tooutsourcing research by investigating the role ofrelational governance and its drivers for achievingmore successful outsourcing relationships. We focus onthe impact of a particular contextual variable whichdescribes the importance of the outsourcing deal to thevendor, thereby turning the traditional perspective of

resource dependency theory on outsourcing upsidedown. Using a case study approach, we show thesignificance of the importance of a deal between an IToutsourcing provider and its client to both therelationship quality and overall outsourcing success.Clients whose relative deal sizes are large compared tothe providers portfolio or who offer a strategicadvantage to the provider are more likely to receivesound service quality and have a better IT outsourcingrelationship.

Keywords: importance, relationship quality,

outsourcing success, IT outsourcing.

1. Introduction

There is general agreement in outsourcing literature

that contractual governance is necessary but not

sufficient for a successful outsourcing partnership [50].

This is why various research works have tried to shed

light on a complementary element of contractual

governance, called relational governance, relationship

management or similar [53]. Relational governance is

the predominant governance mechanism associated

with exchange performance[21]. The aim of relational

governance is to raise the quality of the relationship

between outsourcer and service provider as a means for

achieving a more successful outsourcing relationship

[50]. Thus, relationship quality is an important measure

by which the performance of relational governance

may be assessed [38].

So far, most research on relationship quality has

treated this element quite superficially as a single-

dimensional construct and has failed short to clearly

differentiate between dimensionsof relationship quality

and its drivers. However, there are two notableexceptions [24, 38], which specifically differentiate

between drivers and dimensions of relationship quality.

They will serve in the following as a basis for our

work.

As for the drivers of relationship quality, there are

even fewer works that focus on those antecedents of

relationship quality. Most of these approaches focus on

variables which describe the interaction between client

and provider (i.e. communication, conflict resolution,

coordination, cooperation, and integration) [24, 31, 38].

Some other articles show the positive impact of

contractual governance on the relational elements of an

IT outsourcing arrangement [50]. All these researchapproaches are valuable for understanding the factors

that lead to a good relationship quality. However,

current literature on relational governance disregards a

central determinant of relationship quality: the so-

called contextual factors [18, 51]. In their review of

sourcing literature, Dibbern et al. conclude that IS

sourcing is an ongoing decision process, which is

influenced by changing contextual factors and

environmental forces[14].

Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009

1978-0-7695-3450-3/09 $25.00 2009 IEEE

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Although IS literature has shown the importance of

contextual factors in different organizational and

interorganizational settings [18, 19], there is only one

exception that takes into account contextual factors as

drivers for relationship quality [38]: Lee and Kim

introduced cultural compatibility as driver for

relationship quality but could not show a significant

impact [38].

Attempting to close this gap, we contribute to

relational governance literature by shedding light on

one particular and, as we will show in this paper, highly

relevant contextual factor that drives relationship

quality: the importance of the outsourcing deal to the

provider, which, in the following, we will refer to as

importance. By turning around the traditional

application of resource dependency theory on the

outsourcing domain, we propose that not only the

provider possesses resources which need to be acquired

by the client, but that the client has or represents a

valuable resource from the providers perspective, as

well.Our research question thus is: what are the relevant

facets of importance and how do they affect

relationship quality and overall outsourcing success?

From a practical viewpoint, this contingency factor

seems to be highly important, since there is

heterogeneity in the market (e.g. in terms of firm size,

deal volume, and many other factors) which will lead

the providers to not homogenously serving all of their

clients. Consequently, tackling this research question

will help to more thoroughly understand the providers

motivations and anticipate the resulting behavior in

order to take sufficient care of the contractual design

and to choose the right provider.To answer our research question, we develop and

apply a research model (sect. 2) after introducing the

methodology in section 3 to analyze eleven case

studies in the financial services industry (sect. 4).

Section 5 illustrates the limitations of our approach. We

conclude our approach and outline our further research

in the final section.

2. Research model and theoretical

foundation

The model that guides our research on better

understanding of the causes for outsourcing success ispresented in Figure 1. It consists of outsourcing success

as an endogenous variable, importance of the

relationship as exogenous variable and relationship

quality as mediating factor. The constructs and causal

relationships are derived from the literature and

discussed in the following subsections.

Figure 1. Research model

2.1. Outsourcing success

Outsourcing success has been captured by means of

many different measures in prior literature. These are,

e.g., realization of expectations [36], quantitative

measures [37] and economic, technological, and

strategic dimensions [28]. However, the most

commonly used measure to capture outsourcing success

in the literature is satisfaction [55], which is defined as

the level of fitness between the customers

requirements and outsourcing outcomes [39]. This

perception-based measure has the advantage of

enabling the assessment of the respective strategic

objectives underlying every individual outsourcing

decision. Lee and Kim [38] measure outsourcing

success by focusing on the achievement of strategic,

economic, and technologies benefits of outsourcing.

Koh et al. [35] operationalize outsourcing success as

consisting of the overall satisfaction with the

outsourcing deal and the desire to retain the

outsourcing partner.

To complement this strategy-oriented measure with

a more operations-oriented value, we follow the

argumentation of Lee and Kim [39] as well as Goles

[22] and consider the aspect of service quality received

from the provider in our investigation. The quality of a

purchased service is obviously of crucial importance

for any service delivery and for IT outsourcingrelationships in particular.

The measurement of service quality is difficult

because services tend to be intangible [45, 54],

involve simultaneous production and consumption,

and integrally involve customers in their creation[28].

Without tangible evidence to evaluate the service

quality in outsourcing relationships, researchers need to

rely mainly on subjective, perception-based measures

rather than on objective measures [46]. Parasuraman et

al. [45, 46] introduced an instrument named

SERVQUAL for measuring service quality based on

the gap between expected and experienced service

quality.Cronin and Taylor [11, 12] showed that there is no

empirical evidence that the gap between expected and

experienced service quality has to be explicitly

measured. Consequently, they develop a new

instrument called SERVPERF, which only measures

the experienced perceptions in order to capture service

quality.

Kettinger et al. [32], Pitt et al. [49] and Watson et al.

[58] showed the applicability of SERVQUAL as a

ImportanceOutsourcing

Success

Relationship

Quality

H1(+) H2(+)


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measurement tool for information systems service

quality which consists of four service quality

dimensions: reliability, responsiveness, assurance and

empathy [32]. We adopt these four dimensions of IT

service quality for our study and follow the

SERVPERF approach.

Therefore, in the following, satisfaction with the

outsourcing decision in terms of the achievement of the

individually planned goals and the received service

quality is used as a measure for outsourcing success.

2.2. Relationship quality

Most of the prior literature dedicated to this subject

is confined to a general understanding of the role of

relationship quality between client and vendor [28, 30,

33, 34, 43]. A smaller segment of the outsourcing

literature develops a deeper understanding of the

dimensions of relationship quality and its determinants

[22, 23, 24, 25, 31, 38].

Based on [24], [38] and on own, previouslypublished work [7, 8], we apply a multi-dimensional

construct consisting of commitment, communication

quality, conflict, consensus, forbearance, mutual

understanding and trust. Commitment refers to an

implicit or explicit pledge of relational continuity

between exchange partners [16, 24, 26, 38].

Communication quality describes the efficiency and

effectiveness of information exchange between partners

[7, 8]. Conflict represents the overall level of

disagreement in the working partnership [2].

Consensusis the extent of general agreement between

parties [44]. Forbearance is forgoing certain

behaviors that are not in the best interest of bothparties [42]. In the IT business alignment literature,

mutual understanding is defined as the ability of IT

and business [], at a deep level, to understand and be

able to participate in the others key processes [52].

Trust is the firm's belief that the partner firm will

perform acts that will result in positive outcomes for

the firm and not take unexpected actions that would

result in negative outcomes [2]. The development of

this multi-dimensional relationship quality construct is

described in detail in [7].

Grover et al. [28] show the importance of

partnership elements such as trust for outsourcing

success by defining partnership quality as themediating variable between the degree of outsourcing

and outsourcing success. Lee et al. [38, 39] delineate

partnership quality and demonstrate its effect on

outsourcing success. In their seminal paper about the

complementarity of relational and contractual

governance, Poppo and Zenger [50] showed the

influence of two relationship quality dimensions, trust

and open communication, on outsourcing success. Lee

et al. [39] report commitment to be one of the main

drivers of outsourcing success. Lee et al. [41] found

trust to be a highly relevant predictor of outsourcing

success. In the same vein, Goo and Nam [26] found

trust and commitment to have a positive influence on

outsourcing success.

Based on this previous literature about the positive

impact of relationship quality on outsourcing success

we pose the following hypothesis.

H1: High relationship quality is related with high

outsourcing success.

2.3. Importance

The outsourcing deal with a particular client exhibits

a certain degree of importanceto the vendor. The client

portfolio of an IT provider ideally contains multiple

firms, having different sizes, demands, and receiving

different services and volumes. The simplest argument

would be the larger the contract volume the moreimportant is the client to the provider. As we will

discuss below, there are multiple other aspects which

form this concept of importance, and we therefore

define it as the degree to which a client has significance

for a provider compared to the providers overall client

portfolio.

We believe that importance, like deal size and the

strategic importance of an outsourcing deal for a

particular vendor, is a crucial factor in an IT

outsourcing relationship since the provider will draw

special attention to this relationship. This importance

might have several facets that will be discussed in the

following. We will give a brief overview of otherfactors from literature that affect outsourcing success

and which are comparable, but not identical, to

importance. We close this paragraph by showing which

theoretical foundations can be helpful in explaining

importance.

Firm size is a frequently used control variable in

empirical research. Many papers in organizational

science focus on the linkage between firm size and

innovation [1, 13, 27] or on the influence of firm size

on the willingness to engage into cooperative ventures

[6, 10]. In the IS outsourcing context, Ang et al. [3]

could not falsify that large banks are less likely to

outsource than smaller banks [14]. In those

contributions, firm size is an absolute measure thatinfluences variables like innovation potential or

outsourcing willingness.

Furthermore, most IT outsourcing papers use

dependency as a construct influencing relationship

quality [38, 39, 40]. Usually this concept stems from

the work of Anderson et al. [2]. They compute the

dependency in a wholesale distributor/manufacturer

environment as the difference between the switching


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costs of a distributor firm minus the replacement costs

of its manufacturer firm that has to relocate its sales to

another client. We argue that Andersons et al. [2]

dependency measure is very helpful in a supply chain

context but cannot be directly transferred to an IT

outsourcing context for three reasons: first, most

outsourcing deals fall into the category of

infrastructure, application or even business process

outsourcing. Outsourcing customers rely heavily on

their IT without being able to switch the provider

during the deal period without high efforts (in many

cases, switching costs might be higher than maintaining

the current relationship). The dependency on an IT

provider is much higher than in many supply chain

relationships, therefore, the threat of lock-in is often

argued to be one of the largest strategic risks of

outsourcing (e.g. [4, 17]). The application of

Andersons et al. [2] dependency measure would

mostly result in an exceptionally high dependency

valueand would therefore not be able to evaluate an

IT outsourcing relationship. Second, Anderson et al. [2]focus only on the costs associated with dependency in

partnerships. We believe that IT providers in a sourcing

market, which gets more and more complex and

competitive, also consider strategic reasons for

choosing their clients. We pose to also integrate

strategic considerations like the marketing impact of a

certain client, the access to a not yet tapped industry

sector (from the providers point of view) or the

visibility of the providers service via a client in a

certain industry sector. Third, Andersons et al. [2]

dependency measure does not take future investments

into account. We believe that the behavior towards the

customer depends on the expectation of the provider. Ifthe provider expects to do additional business

transactions with this customer in the future, he will

pay more attention to the customer needs.

Different deal volumes as well as different strategic

motives are the basis for a balance or imbalance in the

relationship. Power dependence theory deals with

balance or imbalance in a relationship [20, 47], where

power is a property of the social relation, not an

attribute of the actor [20]. Power results from the

dependence of actors on each other, where actors can

be individuals or groups [20].

Another perspective that helps us to explain this

kind of balance is the resource dependency theory(RDT). This theory focuses on resources which are

outside of the firms control but which are needed for

successfully doing business or even for survival [48].

Consequently, the objective of firms to ensure their

resource supply without losing autonomy is the reason

for cooperation between firms [48, 57]. Applying RDT

to outsourcing research is quite uncommon (some of

the rare examples are [9, 29, 56]). Usually, it is argued

that the provider possesses resources which the

outsourcer lacks [9]. But, we can also draw the

opposite link where the outsourcer has or represents a

resource the provider is trying to get access to. One of

them is acquiring a renowned player as a reference

client in order to, e.g., get access to new markets via a

key player, another is to attract a client which has a

unique characteristics, e.g. in terms of size or

technological infrastructure, which can serve as a pilot

customer or strategic partner for testing and developing

new industry solutions.

Based on these theories we formulate the following

hypothesis:

H2: A high importance has a positive impact on

relationship quality.

3. Case study methodology and setting

3.1. Case study methodology

We test our proposed research model with multiplecase studies to explain the presumed causal links in

real-life interventions that are too complex for a

survey[59]. In order to derive sufficient results from a

case study approach, these have to be prepared,

conducted and analyzed thoroughly [59]. Following

Dub and Par [15] we identified the research question

and made it explicit. The questionnaire was refined

using a pretest1. All interviews were conducted by two

researchers. They lasted about two hours each and were

tape-recorded. The collected data was transcribed and

analyzed using MAXQDA and a self-developed case

study database, which allows for a simple but efficient

comparison of case data.Based on our research model, two researchers

encoded the transcripts independently to identify

patterns that match with theoretical propositions and

constructs.

3.2. Case studies setting

Our case study series comprised selected IT

outsourcing relationships of four German banks and

seven outsourcing providers. In each firm we

interviewed the manager(s) responsible for a particular

relationship to either a provider (in banks) or a client

(in provider firms). All interviewed providers deliver

services to the banking industry, thus, we were able tofocus solely on outsourcing relationships with financial

service providers.

1We would be glad to provide you with the questionnaire. Pleasesend an email to the first author.


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Table 1. Description of banks involved in thecase study series

Banks F1 F2 F3 F4

Financialsector

Commercialbank

Creditcooperative

Savings bank Creditcooperative

Employees > 10,000 < 1,000 1,000-5,000 1,000-5,000

Contract

runtime

2003 2013 2000 2010 2004 2009 2004 2008

Outsourcedservice

IT infra-structure,

application

hosting

Businessprocess

(credit

processing)

ITinfrastructure

Data center

Inter-

viewees

Provider

manager

Provider

manager

Provider

manager /service

manager (data

center)

Provider

manager

Providerfirm

Global ITprovider

Smallspecialized

BPO

provider (P4)

Global ITprovider (P6)

Global ITprovider (P6)

Table 2. Description of providers involved inthe case study series

Pro-

vidersP1 P2 P3 P4 P5 P6 P7

Em-ployees

1,000-5,000

1,000-5,000

>50,000

1,000-5,000

1,000-5,000

>50,000

5,000-50,000

Contractruntime

2006 2009

2002 2009

1999 2013

2000 2010

2005 2012

2001 2012

1994 ?

Pro-vided

service

IT infra-

struc-

ture

Com-

mu-

nicationinfra-

struc-ture

IT infra-

structur

e, appli-cation

manage-ment

Busi-

ness

process

Appli-cation

manage-ment

IT infra-struc-

ture

IT infra-struc-

ture,

main-

frame

Numberof

contract

exten-

sions

0 2 1 several

times

0 1 several

times

Inter-viewees

Busi-ness

manager

Accountmanager

Busi-ness

manager

Accountmanager

Accountmanager

Busi-ness

manager

Accountmanager

Client

Comm.bank

and FSP

Largecredit

coop-

erative(F2)

Largecomm..

bank

and FSP

Credit

coop-

erative

Credit

coop-

erative

Comm.

bank

and FSP

Smallcomm.

bank

As a consequence, the comparison of the banks and

the providers is supported by a very homogeneous

setting:

all companies operate in the same market;

all companies and investigated outsourcingrelationships are subject to the same outsourcing

and compliance regulations in the German

banking industry;

at the time of the case study series, all contractsalready had a minimum runtime of at least one

year;

all interviewees are very experienced withoutsourcing and were involved in all phases of the

investigated deal.The German banking system consists of three

different groups: private commercial banks, publicly

owned savings banks and credit cooperatives. The two

latter groups count for around 80% of the German

market in terms of number of institutes. Our case study

covers two credit cooperatives, one savings bank and

one commercial bank. Demographic information about

the banks is presented in Table 1.

All surveyed providers are large companies with

more than 1,000 employees or even huge and global

organizations, (with one exception (P4)) operating on

the international outsourcing market. Demographic

information about them is presented in Table 2.

4. Case study results

4.1 Importance and relationship quality

We analyzed the transcripts of the interviews to

explore the facets of importance which might influence

relationship quality. The results in terms of quotes from

the bank managers as well as from the providers are

presented in Table 3 and Table 4, respectively. They

have been translated from German to English and were

cross-checked by a second researcher to guarantee their

correct translation.

Table 3. Quotes from bank managersQuote

No.Bank Quote

QF1 F4

The provider exhibits a high level of

commitment within this relationship becausewe are of strategic importance for him. We

offer him access to our financial sector and

are one of his reference customers.

QF1 F3

In terms of the deal volume and other factorswe are relatively unimportant for our

provider. As a result, communication with the

provider is inefficient as we are onlydiscussing with lower hierarchical levels.

QF3 F2

The commitment of our provider increased

in the last years as competition does in the

BPO market. Without this increasingcompetition our provider perceived itself as a

department de luxe.

QF2 F1

We are the much more powerful part in therelationship. E.g., we are the only customer of

our provider that uses its data center rightnow. Hence, we show only little forbearance.

F4 reports to be very important for the provider.

Since the bank is a key player in its market sector, it

can offer access to this sector to the provider (QF1).


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The provider does not have any further customers in

this field. F4 argues that the provider is very interested

in acquiring more customers via the relationship with

F4. Hence, the provider shows a high level of

commitment.

F3 has totally different experiences with its provider.

This bank rates its own importance from the providers

perspective to be relatively small (QF1). Neither does

F3 represent a high deal volume nor does it offer any

other advantages to the provider. As a result, the

relationship quality is rated as being low and

communication with the provider is inefficient. The

communication does only happen on lower hierarchical

levels without the possibility to change or develop

major things.

F2 reports an increasing commitment of the provider

because of increasing competition (QF3). Its provider is

a 50% spin-off and it was the first BPO service

provider on this particular market segment in Germany

In the first years of the relationship, F2 was the only

customer of its provider. In this situation, F2 describesthe behavior of the provider to be very reluctant. The

provider did not have to fear any consequences for

restrained behavior. Neither were any competitors in

the market nor were sufficient SLAs established at this

point in time. An exogenous shock, namely the market

entry of other providers with the same offers, changed

the behavior of F2s provider, who showed a much

higher commitment then.

Table 4. Quotes from providersQuote

No.

Pro-

viderQuote

QP1 P2We offer this customer special managementattention because he is a reference

customer.

QP2 P3We show high commitment because of thespecial position as reference customer in our

portfolio.

QP3 P4

Commitment, in this case, correlates with

relevance of the customer. We are in astrategic alliance with him.

QP4 P3

The importance of the relationship

[strategic alliance] for both parties leads to amutual lenience.

QP5 P1

We are highly committed because this

customer is very important for us in terms ofthe deal volume.

QP6 P6

Based on our IT infrastructure our

customer delivers services to nearly every

company in the [German] financial industry.A failure of our IT services would be

immediately visible for every organization.

This is why we are that much committed.

QP7 P7

We are hyper-committed because this

customer is one of only a few mainframe

customers [in Germany].

F1 has an interesting relationship with its provider.

Both the deal volume and the contract runtime are

extraordinary high. The provider invested in an

expensive data center for its customer and is

contractually allowed to run applications of other

customers in this facility. But, so far, the provider did

not acquire any other customers and could not reach

economies of scale. Hence, the customer regards itself

to be in a powerful position and thus shows only little

forbearance (QF2).

Both P2 and P3 regard their customers to be very

important because they are reference customers in the

financial industry (QP1 and QP2). Both relationships

are highly visible in the market as both providers

advertise their association with their customers. For P4

there is also another highly relevant factor to provide

its customer with an extra portion of attention (QP3).

The relationship between P4 and his customer is

evaluated by P4 to be a strategic alliance. P4 is a spin-

off of this particular customer who also provides the

highest deal volume, compared to P4s other

customers. Both P4 and its customer jointly develop

products and have implemented an ongoing process

optimization. P3 argues in a comparable vein. Theirrelationship with the customer is considered to be a

strategic alliance in terms of the longevity of the liaison

and the closeness of cooperation (QP4). As a result of

this closeness and longevity, P3 believes the

relationship to be highly forbearing. However, there are

also other, much more simple reasons, why providers

exhibit high commitment. P1 offers his customer

special attention because it has a very high deal volume

(QP5). P6 has another explanation for its high

commitment towards its customer. This financial

service provider is highly visible in the market as it

provides services to nearly every company that requires

pre-transaction financial customer information. Thishigh market visibility has a massive impact on the

providers commitment (QP6). Beside these relational

factors, the provider also accommodated this customer

by agreeing upon process oriented service level

agreements (SLAs). Albeit this provider is one of the

big playersin the market, process-oriented SLAs are

a new development that have been accepted by the

provider because of the customers importance. P7

provides mainframe solutions to its customer. Since

this customer is one of only a few mainframe clients in

Germany, P7 regards itself to be hyper-committed

(QP7).

The above quotes about the link between importanceand relationship quality document the support of both,

banks and providers, for our first hypothesis which

states a positive relationship between the importance of

banks and relationship quality (H1). Banks with high

relevance for their providers (in terms of e.g. strategic

considerations like visibility in the market as reference

customer or economic considerations like the deal

volume) are expected to have a better relationship

quality than banks that are less important.


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4.2. Relationship quality and outsourcing

success

We want to briefly shed some light on the impact of

relationship quality and outsourcing success with the

available data from our sample.We found that all providers rated the outsourcing to

be successful. However, this evaluation is hardlyreliable, since the provider is acutely threatened by the

self-evaluation bias. This is why we only take the

answers of the customers into account. Table 5

illustrates the results for the banks in our sample. Banks

with a high importance for their customer tend to have

a good to very good relationship quality and, in turn,

rate their outsourcing arrangement to be successful.

Only F4 does not support this reasoning. Although the

importance of F4 for his provider is high, the

relationship quality is evaluated as medium.

Table 5. Comparison of importance,

relationship quality and outsourcing successfor banks

Bank Importance Relationship

Quality

Outsourcing

Success

F1 High Medium to high High

F2 High High High

F3 Low Low Low

F4 High Medium High

A closer look at this case helps to explain the

discrepancy between both values. F4 has a very

contract-oriented, formal relationship with its provider:

We have reached a point where we say: we firstset-up the contract and only then comes the

service.(Service manager, F4)

F4 has implemented a sophisticated control system

and, in case of errors, the bank insists on contractually

agreed-upon penalties, even if these are minor faults

without impact on the operations.

Yes, we do use control mechanisms. Every piece

of information flows into a performance measurement

system that we have built. And I can always track if

the output we agreed upon with our service provider

stays within the planned parameters both,

quantitatively as well as qualitatively. [] We have a

sophisticated penalty system, which reacts quitesensitively [to contract violations]. [] [The

provider] must often pay penalties. At the end of the

day, its all about money. The provider doesnt do

this for us because were good friends. He wants to

earn money. And [penalties] hurt him most.

(Provider manager, F4)

As a result, the relationship is not very trustful and

forbearing. Therefore, the overall relationship quality is

medium while outsourcing success is still perceived by

the bank as high.

As far as the available data from the cases allows us

to draw a conclusion, the results support the findings

from previous literature that highlight the positive

correlation of relationship quality and outsourcing

success, as described in H1.

5. Limitations

Generalization of our work is limited as we tested

our model with only eleven case studies, which stem

from the same industry and business context. However,

we assume that they can also be transferred to other

industries since they cover a wide range of outsourcing

relationships (from IT infrastructure outsourcing to

BPO) and different organizational/legal relationships

between outsourcer and IT provider. Large associations

of public savings banks and credit cooperatives, which

cover almost 80% of the German banks, are a

particularity of the German banking industry. Since

these banks have usually outsourced their IT to joint

data centers, the effect of having no competition (and

thus no market-oriented incentives on the provider

side) will be quite strong. By contrast, in our case study

series we have analyzed almost only relationships

where industry-external IT providers are engaged

(except in case of F2). Therefore, the transferability of

our German findings to other countries will not be

restrained by this particularity. Moreover, since our

research tried to emphasize a better understanding and

a broader conceptualization of importance, we did

not examine an overall model which tries to

incorporate each facet that might be relevant foroutsourcing relationship quality. Hence, there can be

other explanations for the differences in service quality

and relationship quality. Nevertheless, since the first

results were promising, we have already started to

collect more cases. Doubtless, there are many other

factors which impact relationship quality and

outsourcing success like, for instance, a thorough

outsourcing contract, regular information exchange,

and a control system in place [24, 38]. As the goal of

this research approach was the analysis of importance

as a driver of relationship quality and, implicitly of

outsourcing success, the other relevant impact factors

of relationship quality were omitted here.

6. Conclusion and further research

In this paper, we defined importance as the

significance of a customer from the providers point of

view compared to its overall customer portfolio and we

showed the impact of importance on relationship

quality. Relationship quality, in turn, is positively


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related with outsourcing success. IT outsourcing clients

whose importance in the providers portfolio is high are

more likely to experience a good relationship quality

and, thus, a successful outsourcing relationship.

Based on eleven case studies in the German

financial industry, we found importance to be a two-

dimensional factor. Both banks and providers report

about economic and strategic dimensions of

importance. The surveyed banks regard economic

factors to be more relevant than strategic reasons.

Providers, in turn, rate both dimensions equally

important.

The economic dimension covers high deal volumes

(QF1, QP4, QP5), the severity of loss of a customer for

a provider (QF2, QP3, QP7) and increasing

competition in the providers market (QF3).

The strategic dimension consists of the client being a

reference customer (QP1, QP2), the potential access to

a new market sector within the German three pillar

banking system for the provider (QF1) and the market

visibility of the delivered services (QP6, QP4).These two dimensions of importance mainly

influence commitment, which is a relationship quality

dimension. Interestingly, six of the seven investigated

providers frankly report that they show higher

commitment for customers that are regarded to be

important whereas only half of the banks perceive an

impact of their own importance on providers

commitment. Another dimension of relationship quality

that is influenced by importance is forbearance. Here,

the results are ambiguous. One provider reports a very

lenient relationship with its customer because of the

high importance of the relationship for both parties.

Instead, one bank claims to behave less forbearingwhen the provider regards this customer as highly

important.

From a theoretical perspective, these results

contribute to the specification of contextual variables in

the IT outsourcing relationship literature. So far, the

comparable contextual variable dependency is formed

on a cost basis, based on the supply chain-related works

from Anderson and Narus [2]. Based on power

dependency theory and resource dependency theory,

we argued that in an IT outsourcing context the relative

dependency should be evaluated by means of the

importance of the deal to the portfolio of the providerand by means of strategic advantages offered by the

client to the provider. In doing so, we turned around the

traditional application of the resource dependency

theory on outsourcing, where the importance of the

providers resources from the clients perspective is in

the line of focus.

As a managerial implication, we recommend banks

who are considering IT outsourcing to choose a

provider with a deal portfolio compatible to the

prospective deal size. However, if the client offers the

provider a strategic advantage, the client may even

choose a provider with a portfolio of relatively large

deals and may still expect a good relationship quality.

If neither substantial economic nor the strategic

argument of importance can be found on the customer

side, the results suggest that the outsourcing firm has to

carefully evaluate the potential relationship and to rely

much more on contractual governance than on

relational mechanisms. In these cases, expecting a

partnership-style relationship may be wishful

thinking and be not more than a pious hope. Moreover,

firms should be aware that this issue could affect their

decision to outsource at all, since there might be a too

high threat of service debasement due to moral hazard

[5].

Our further research will collect more cases in order

to better control for this multivariate impact. Moreover,

we have also started to conduct a quantitative study,

surveying IT outsourcing relationships in the German

banking industry.

7. Acknowledgement

This work was developed as part of a research

project of the E-Finance Lab, Frankfurt am Main,

Germany (www.efinancelab.com). We are indebted to

the participating universities and industry partners.

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