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Managing IT Outsourcing Relationships to Enhance Outcomes:
Cases in a Cross-cultural Context
By
Wei Wu
A thesis submitted in fulfilment of requirements for the
degree of
Master in Information Studies
The University of New South Wales
2006
Dedicated to my parents, grandparents,
Professor Angèle Cavaye
and Professor Dubravka Ćećez-Kecmanović
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Acknowledgement
This thesis can not be completed without the generous support of many people.
First and foremost, I would like to express my sincere gratitude to my supervisors,
Professor Angèle Cavaye and Professor Dubravka Ćećez-Kecmanović for their
indispensable guidance, feedback and encouragement. I am deeply appreciative of the
time, dedication, and general all-round wisdom they have shown to the thesis.
I owe a special debt of gratitude to my Chinese supervisor from Fudan University,
Professor Lihua Huang, who kindly helped me to get access to the case organisation in
this study. My heartfelt thanks also go to Professor Xiongwen Lu, Dr. Chen Zhang, Dr.
Xianghua Lu, Yun Yang, and Linlin Shao who helped me approach the potential
informants. I am deeply indebted to all the informants who gave generously their time
to participate my research project. The collection of data for this study would not have
been possible without co-operation and support of these persons.
I would like to acknowledge Associate Professor John D’Ambra, Dr. Geoff Dick,
Vincent Pang, Stuart Jones and two anonymous reviewers for their constructive
comments and advice on this research during the 16th Australasian Conference on
Information Systems at Sydney.
In addition, I am grateful for the amending assistances from Jason and Christy, who
read an early draft and provided me with several suggestions for improvement.
Last, but certainly not least, I am forever indebted to my family for their unwavering
love, understanding and support when it was most required.
Thank you all!
Wei Wu
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Abstract
Information Technology (IT) outsourcing is a serious option available to modern
managers aiming to enhance the competitive position of an organisation through IT. An
emerging trend is the focus on relationship management in IT outsourcing, imploring
organisations to look past tactical objectives and concentrate on strategic outcomes. In a
global economy business sponsors are connecting with overseas vendors in IT
outsourcing in an attempt to accelerate realisation of benefits. This complicates
outsourcing arrangements, because cross-cultural differences may add to the complexity
of fostering relationships.
This study examines how to manage IT outsourcing relationships in a cross-cultural
context to enhance IT outsourcing success. Due to the exploratory nature of this study,
interpretivist case studies were adopted. The researcher investigated three IT
outsourcing cases within one Chinese organisation. One case has a vendor with a
western cultural background and the other two with a Chinese cultural background. The
main data were collected through interviews with key managers in the case organisation,
complemented by secondary data (such as published reports, internal documents). Some
additional data concerning the cross-cultural differences were also collected from the
two Chinese vendors and another western vendor who provided corporate strategy
consulting services to the case organisation.
Analysis of data showed that a good contract implementation, the established trust and
the acknowledgement of vendor’s high value were recognised as the three
distinguishing characteristics of a satisfactory IT outsourcing relationship. In managing
relationships the outsourcing company emphasised not only contract implementation
but even more importantly communication with vendors, recognition of mutual interests,
establishment of social/personal bonds, and appropriate allocation of project resources.
It was shown that the relationship management practices influenced the dynamics of a
relationship as well as the outcome of an IT outsourcing project. Furthermore, the
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relationship management in IT outsourcing was found to be culture-sensitive. Cultural
differences affected the perceptions of and attitude towards the contract, modes of
communication, the establishment of social/personal bonds, and the appropriateness of
invested resources. By demonstrating that companies with different cultural background
held different perceptions of relationship management practices and had different
understandings of the nature and dynamics of the relationships, this study contributes to
the understanding of relationship management in IT outsourcing, especially when
cultural differences among the parties are involved. These findings also have practical
implications for IT outsourcing involving global and partner-based alliances.
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List of publications by thesis author
The work presented in this thesis has resulted in the following formal publication:
Wei, W. (2005). Carrying out contract successfully ends up with an IT Outsourcing
failure: Relationship Management Cases of IT Outsourcing in a Cross-Cultural Context.
In proceeding of the 16th Australasian Conference on Information Systems, Sydney,
Australia, December.
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Table of Contents
Table of Contents ................................................................................. v
1. Introduction ..................................................................................... i
1.1 Background to the research problem.......................................................................... 2 1.2 Justification for the research....................................................................................... 4 1.3 Methodology used in this thesis ................................................................................. 5 1.4 Definitions of major terms used in this thesis ............................................................ 6 1.5 Delimitations of the scope of the research.................................................................. 7 1.6 Thesis structure........................................................................................................... 8 1.7 Chapter summary ..................................................................................................... 10
2. Literature Review .........................................................................11
2.1 IT outsourcing .......................................................................................................... 12 2.1.1 What is IT outsourcing? .................................................................................................. 12 2.1.2 Why outsource IT? .......................................................................................................... 14 2.1.3 Change of IT outsourcing research issues over time ....................................................... 19
2.2 Managing IT outsourcing relationships.................................................................... 24 2.2.1 The nature of relationships in IT outsourcing.................................................................. 24 2.2.2 The evolvement of relationships in IT outsourcing ......................................................... 26 2.2.3 The impact of relationship in IT outsourcing .................................................................. 27 2.2.4 The governance of relationships in IT outsourcing ......................................................... 28
2.3 Cross-cultural differences......................................................................................... 35 2.3.1 What is culture?............................................................................................................... 36 2.3.2 Different levels of culture................................................................................................ 37 2.3.3 Cross-cultural management ............................................................................................. 39 2.3.4 Cross-cultural differences in IS ....................................................................................... 40
2.4 Managing IT outsourcing relationships in a cross-cultural context.......................... 432.5 Gaps in the literature ................................................................................................ 44 2.6 Research problem and research questions ................................................................ 46
2.6.1 Research problem ............................................................................................................ 46 2.6.2 Research questions .......................................................................................................... 47
2.7 Chapter summary ..................................................................................................... 48
3. Research Methodology .................................................................49
3.1 Epistemological stance of this research: Interpretivism ........................................... 50 3.2 Research strategy adopted for this study: Case studies ............................................ 52
3.2.1 Justification of case studies strategy................................................................................ 52 3.2.2 Different types of case studies......................................................................................... 55
3.3 Case design............................................................................................................... 56 3.3.1 Multiple-case design........................................................................................................ 57 3.3.2 Number of cases .............................................................................................................. 58 3.3.3 Embedded cases............................................................................................................... 58
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3.3.4 Unit of analysis................................................................................................................ 58 3.3.5 Selection of case organisation ......................................................................................... 59 3.3.6 Case selection .................................................................................................................. 61
3.4 Data collection.......................................................................................................... 63 3.4.1 Source of data .................................................................................................................. 64 3.4.2 Data collection process.................................................................................................... 66
3.5 Data analysis............................................................................................................. 68 3.5.1 Data analysis strategies.................................................................................................... 68 3.5.2 Data analysis process....................................................................................................... 71
3.6 Quality in the interpretive case studies..................................................................... 72 3.7 Ethical considerations of the case study research..................................................... 73 3.8 Chapter summary ..................................................................................................... 73
4. Background to cases and single case descriptions....................75
4.1 Approach to presentation of the data analysis .......................................................... 76 4.2 Description of the case organisation......................................................................... 77
4.2.1 Organisational background of DE Company................................................................... 78 4.2.2 IS development within DE Company .............................................................................. 79 4.2.3 Phase 1: Stage 1 of CIMS project (1995-1997) ............................................................... 80 4.2.4 Phase 2: Stage 2 of CIMS project (1998-2001) ............................................................... 83 4.2.5 Phase 3: outsourcing phase (2002-present) ..................................................................... 87 4.2.6 Summary of DE’s IS development .................................................................................. 90
4.3 Case 1 – PDM case: description and within-case analysis ....................................... 91 4.3.1 Description of the PDM case........................................................................................... 91 4.3.2 Within-case analysis of the PDM case ............................................................................ 95
4.4 Case 2 – HR case: description and within-case analysis ........................................ 102 4.4.1 Description of the HR case............................................................................................ 102 4.4.2 Within-case analysis of the HR case.............................................................................. 106
4.5 Case 3 – CRM case: description and within-case analysis..................................... 111 4.5.1 Description of the CRM case......................................................................................... 111 4.5.2 Within-case analysis of the CRM case .......................................................................... 117
4.6 A summary of the three IT outsourcing cases ........................................................ 123 4.7 Chapter summary ................................................................................................... 124
5. Findings from cross-case comparison .......................................126
5.1 Cross-case analysis of research question one ......................................................... 127 5.1.1 The dynamics of the relationship................................................................................... 128 5.1.2 Characteristics of an IT outsourcing relationship .......................................................... 130 5.1.3 Contribution of each characteristic to establishing a satisfactory IT outsourcing
relationship.................................................................................................................. 135 5.2 Cross-case analysis of research question two......................................................... 138
5.2.1 The perception of project outcomes of IT outsourcing.................................................. 138 5.2.2 The influence of relationship management on the project outcomes............................. 142
5.3 Cross-case analysis of research question three....................................................... 149 5.3.1 Perceived attitudes towards the contract........................................................................ 150
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5.3.2 Perceived modes of communication.............................................................................. 158 5.3.3 Perceptions of mutual interests...................................................................................... 162 5.3.4 Perceptions of social/personal bonds............................................................................. 167 5.3.5 Perceptions of project resources .................................................................................... 172 5.3.6 Summary of the cultural differences in relationship management................................. 179
5.4 Chapter summary ................................................................................................... 179
6. Conclusions ................................................................................180
6.1 Summary of the study............................................................................................. 181 6.2 Discussion of findings ............................................................................................ 183
6.2.1 The nature of a satisfactory IT outsourcing relationship ............................................... 183 6.2.2 The impact of relationship management........................................................................ 188 6.2.3 Cross-cultural differences in relationship management................................................. 191
6.3 Conclusions about research problem...................................................................... 195 6.4 Contribution of this research .................................................................................. 200
6.4.1 Contributions to theory.................................................................................................. 200 6.4.2 Implications for practice................................................................................................ 202
6.5 Limitations of this research .................................................................................... 203 6.5.1 Limitations associated with the research design............................................................ 203 6.5.2 Limitations associated with the generalisability of the findings.................................... 204
6.6 Suggestions for future research .............................................................................. 205 6.7 Chapter summary ................................................................................................... 207
References….....................................................................................208
Appendix A - Copies of interview guides used for data collection .229
Appendix A 1.1 Chinese version of interview guides used for interview with Senior Executives from DE Company...................................................... 230
Appendix A 1.2 Chinese version of interview guides used for interview with Project Participants from DE Company ................................................... 232
Appendix A 1.3 Chinese version of interview guides used for interview with vendors ..................................................................................................... 235
Appendix A 2.1 English translation of interview guides used for interview with Senior Executives from DE Company...................................................... 237
Appendix A 2.2 English translation of interview guides used for interview with Project Participants from DE Company ................................................... 240
Appendix A 2.3 English translation of interview guides used for interview with vendors ..................................................................................................... 244
Appendix B - Interviewees selected for this research ....................247
Appendix C - Interviews conducted for this research.....................248
Appendix D - Archival documents for this research........................249
Appendix E - Emerging categories, sub-categories and
codes/themes after coding.........................................251
List of Figures
Figure 1.1: Structure of Chapter 1…………………………………………………..1
Figure 2.1: Structure of Chapter 2………………………………………………....11
Figure 2.2 The evolution of outsourcing issues………………………………….. 19
Figure 2.3: Four-stage offshore outsourcing model……………………………… 27
Figure 2.4: Three levels of uniqueness in human mental programming…………. 36
Figure 2.5: The “Onion diagram”: manifestations of culture at different levels…. 38
Figure 2.6: Research framework…………………………………………………. 48
Figure 3.1: Structure of Chapter 3………………………………………………... 49
Figure 3.2: Hermeneutic circle………………………………………………….... 51
Figure 3.3: Three cases in the case organisation………………………………..... 63
Figure 4.1: Structure of Chapter 4………………………………………………... 75
Figure 4.2: Three phases of DE Company’s IS development……………………. 80
Figure 4.3: DE’s IS Development projects and their business impact…………… 91
Figure 4.4: The organisational structure for the PDM project…………………… 94
Figure 4.5: The progress of the PDM project…………………………………….. 95
Figure 4.6: The organisational structure for the HR project……………………..105
Figure 4.7: The progress of the HR project……………………………………... 106
Figure 4.8: The organisational structure for the CRM project…………………...114
Figure 4.9: The progress of the CRM project…………………………………… 116
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Figure 5.1: Structure of Chapter 5………………………………………………....126
Figure 5.2: Possible influence of relationship management on project outcomes in DE Company………………………………………………………..149
Figure 6.1: Structure of Chapter 6…………………………………………………180
Figure 6.2a: Relationship management framework (high level diagram)…………..196
Figure 6.2b: Relationship management framework (detailed diagram)…………….197
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List of Tables
Table 2.1: IT outsourcing benefits identified in the literature…………………. 16
Table 2.2: IT outsourcing risks identified in the literature…………………….. 18
Table 2.3: The change in focus on IT outsourcing issues……………………... 23
Table 2.4: IT outsourcing - implementing structure and its references……….. 32
Table 4.1: Subsystems developed at the second stage of the CIMS project…... 86
Table 4.2: Summarised description of the three cases………………………… 124
Table 5.1: The dynamics of the relationship for three IT outsourcing cases….. 129
Table 5.2: A comparison of the relationship characteristics for three IT outsourcing cases…………………………………………………... 132
Table 5.3: A comparison of the performance of relationship characteristics with the perception of the IT outsourcing relationship…………….. 136
Table 5.4: A comparison of project outcomes for three IT outsourcing cases... 140
Table 5.5: A comparison of emerging themes and arguments regarding the influence of the relationship management in three IT outsourcing cases………………………………………………………………... 143
Table 5.6: A comparison of perceived attitudes towards the contract in three cases……………………………………………………………….. 151
Table 5.6a: A comparison of contract characteristics in three cases…………… 154
Table 5.6b: A comparison of the perceived role of contract in three cases…….. 154
Table 5.6c: A comparison of the attitude towards the work outside the contract in three cases……………………………………………… 156
Table 5.7: A comparison of perceived modes of communication in three cases………………………………………………………………... 159
Table 5.7a: A comparison of where and when to communicate in three cases… 160
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Table 5.7b: A comparison of the manner of communication in three cases……. 161
Table 5.8: A comparison of perceptions of mutual interests in three cases…… 163
Table 5.8a: A comparison of the communication about mutual interests in three cases……….…………………………………………………. 165
Table 5.8b: A comparison of the realisation of the mutual interests in three cases………………………………………………………………... 166
Table 5.9: A comparison of perceptions of social/personal bonds in three cases…………………………………………………………………168
Table 5.9a: A comparison of the existing social/personal bonds in three cases... 170
Table 5.9b: A comparison of the attitudes towards establishing social/personal bonds in three cases………………………………………………… 171
Table 5.10: A comparison of perceptions of project resources in three cases….. 174
Table 5.10a: A comparison of the overall impression of project resources in three cases………………………………………………………….. 176
Table 5.10b: A comparison of the perceptions of invested human resources in three cases………………………………………………………….. 177
Table 6.1: Cross-cultural implications to relationship management………….. 199
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1. Introduction
This research focuses on how best to manage the information technology (IT)
outsourcing relationships to enhance the outcome of an IT outsourcing project in a
cross-cultural context.
This chapter first sets the scene for the research and presents the research problem and
three research questions (Section 1.1). In subsequent sections, the research is justified
(Section 1.2) and the methodology used in the thesis is briefly described (Section 1.3).
Finally, definitions of major terms used throughout the thesis are provided (Section 1.4),
the delimitations of scope are outlined (Section 1.5) and the thesis structure is presented
(Section 1.6). The structure of Chapter 1 is shown in Figure 1.1.
Background to the research problem with the presentation of the research problem and research questions
(Section 1.1)
Justification for the research (Section 1.2)
Brief description of the research methodology (Section 1.3)
Definitions of major terms (Section 1.4)
Delimitations of the research scope (Section 1.5)
Thesis structure (Section 1.6)
Figure 1.1: Structure of Chapter 1
(Developed for this research)
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1.1 Background to the research problem
Organisations apply knowledge, assets and resources to create strategic opportunities
and respond to competitive threats (Sambamurthy et al., 2003). IT outsourcing can help
organisations focus on their core business, reduce costs, increase efficiencies and
enhance organisational responsiveness (Quinn and Hilmer, 1994). Organisations should
not perform activities that are outside their core competencies, because others can
generally do such functions better, less expensively, or faster (King, 2004). This has
attracted much attention from practitioners (e.g., Gartner, 2005; ZDNet, 2005;
DiamondCluster, 2005) as well as academics (e.g., Willcocks and Kern, 1998; Hsu et al.,
2004; Lee et al., 2004).
Recent market indicators give a sense of the scope of IT outsourcing and the size of the
IT outsourcing phenomenon. More than 50 percent of companies are expected to use IT
outsourcing in 2006 (King, 2004), and 33 percent of companies intend to increase their
use of IT outsourcing in 2006 (ZDNet, 2005). According to a report released by Gartner
(2005), the global IT outsourcing market is forecast to reach $253.1 billion by 2008, up
from $180.5 billion in 2003 at a 7.2 % compounded annual rate. The Asia-Pacific
region is one of the growth leaders compared to other regions, at a compounded annual
growth rate of 10.1% from 2003 through 2009. The region is forecast to see IT
outsourcing revenue reach $14.9 billion in 2009, up from $8 billion in 2003 as more
companies improve services to end-users (Gartner, 2005). By 2008 China is expected to
move ahead of South Korea to become the second largest IT services market in Asia-
Pacific, behind Australia (Gartner, 2004). The percentage of companies who expected to
establish outsourcing operations in China in the next 3-5 years has surged to 40% in
2005 from 8% in 2004 (DiamondCluster, 2005).
The growth has prompted strong interest from academics. IT outsourcing research
issues are varied but focus on one (or a combination) of the following: the extent to
which IT functions are outsourced, the duration of the outsourcing, and the type of
relationship (Lee et al., 2004). Research enthusiasm for IT outsourcing can be traced
back to 1989 when Eastman Kodak handed over its data centre operations to IBM in a
10-year, $250 million deal. Research on IT outsourcing continues to be relevant as
growing interest in global and partner-based alliances, especially offshore IT
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outsourcing, urges the research community to update cumulative research findings to fit
the current context.
IT outsourcing offers executives a good opportunity to leverage internal and external
resources to improve business focus, free up resources, share risks and gain access to
top-shelf capabilities (Corbett, 1996). An IT outsourcing arrangement implies the
development of an inter-organisational relationship, which in turn implies a dependency
between the organisation that is outsourcing and the vendor providing the outsourced
functionality (Willcocks and Kern, 1998; Cheon et al., 1995; McFarlan and Nolan, 1995;
Kern and Willcocks, 1996). As such, IT outsourcing entails cultivation of an inter-
organisational relationship between customer and vendor (Lee et al., 2004). A good
relationship with the vendor is key to mitigating risks which include opportunism of
vendors, fast changing technology and uncertainty in the business environment.
Regarding the management of outsourced IT activities, recent researchers have focused
on the impact of partnerships on outsourcing success (Lee et al., 2004). The outcomes
of most early IT outsourcing initiatives were disappointing (Hirschheim and Lacity,
2000; Lacity and Willcocks, 1998). A lack of attention to the on-going relationship with
the vendor probably contributed to limited success (Lacity, 2000).
The globalisation phenomenon has meant that outsourcing contracts have become larger
in scope and in size. Organisations are advised to use ‘global outsourcing’ principles, by
picking best-in-world external vendors, as a means to improve competitiveness (Mol et
al., 2005). Cultural factors can confound efforts to cope with the complexity of
relationship management (Niederman, 2005). Different cultures support different sets of
management beliefs and practices, particularly when whose cultures reflect
fundamentally different conceptions of reality (Chen and Partington, 2003). However,
few publications have taken the factor of culture into consideration when examining
relationship management in IT outsourcing practice.
Information technologies are continually changing and improving. The specific
technology issues surrounding IT outsourcing agreements necessarily make them more
complex and fluid than an ordinary contract (McFarlan and Nolan, 1995). The dynamic
features of the information technology may add further complexity to relationship
management in outsourcing arrangements.
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To address the aforementioned issues, the central research problem identified for this
thesis is How can an IT outsourcing relationship be managed to enhance the outcome
of an IT outsourcing project in a cross-cultural context?
With this in mind, three research questions are formulated:
RQ 1 What are the distinguishing characteristics of a satisfactory IT outsourcing
relationship?
RQ 2 How does relationship management influence the outcome of an IT
outsourcing project?
RQ 3 To what extent do cross-cultural differences affect relationship management
in IT outsourcing?
These research questions are developed in detail at the end of Chapter 2.
1.2 Justification for the research
In the discipline of Information Systems (IS), IT outsourcing is an established topic area
with a rich research base. While described by some researchers as a mature topic
(Lacity and Willcocks, 2000), research on specific IT outsourcing issues is still high in
demand. As the Editor-in-Chief of the MIS Quarterly, King (2004) argues IT
outsourcing is, and will likely continue to be, a hot professional and political topic and a
major determinant of the future of IT.
Recent new technologies such as utility computing and Web services promise to reduce
costs further, while simultaneously increasing organisations’ IT agility (Thickins, 2003).
These technologies are likely to breathe new life into business process outsourcing
(Hagel and Brown, 2001). This means the topic of IT outsourcing remains relevant.
It is difficult for organisations to achieve complex solutions in the rapidly changing
world of IT; in particular, it is hard to achieve outcomes without considering some form
of outsourcing (Lee et al., 2003). Many organisations are either evaluating or are
actively involved in IT outsourcing. A growing concern, though, is the management and
ensuing development of what many researchers call the “outsourcing partnership” (Kern,
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1997). Some research concerning IT outsourcing relationships is available (Klepper,
1994; 1995; McFarlan and Nolan, 1995; Willcocks and Choi, 1995; Willcocks and Kern
1998; Lee et al., 2004). However, more research needs to be done.
In a global economy, outsourcing relationships often involve offshore vendors (Robb
2000). This complicates outsourcing arrangements, because the relationship can be
greatly affected by cultural factors (Mol et al., 2005; Niederman, 2005).
This study integrates theoretical concepts from economic, social and strategic
disciplines, which form the components of IT outsourcing relationship management,
with existing research on cultural differences. This enables the development of a
conceptual framework for understanding how relationship management enhances the
outcome of an IT outsourcing project in a cross-cultural context.
The study explores relationship management for IT outsourcing and the relevance of
studying IT outsourcing in a cross-cultural context. As such, the current research
contributes to both these areas of the literature.
Chapter 2 provides a detailed literature review of the IT outsourcing area and identifies
gaps in the literature where a contribution can be made.
1.3 Methodology used in this thesis
Relationship management in IT outsourcing is complex and there is not much published
research about the management of an IT outsourcing relationship in a cross-cultural
context. As such, this research is exploratory in nature. A major method of exploratory
research is the use of case studies. The epistemology of the research is interpretivism.
Therefore, the specific type of case study selected for this research is interpretive case
studies, which is selected as appropriate for this research.
For the purpose of addressing the research problem, this research investigated three IT
outsourcing cases in one Chinese organisation in the manufacturing industry. The
manufacturing organisation outsourced several application development projects to
different vendors. For this study three outsourcing projects were selected: one with a
Western vendor and the other two with Chinese vendor. By analysing and comparing
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the management of those different projects, insights into relationship management in a
cross-cultural context were obtained.
The method of embedding projects in one outsourcing organisation is useful, as it
helped control industry and the size of the IT outsourcing organisation, which might
greatly influence the nature of relationship management. It also reduces the problem of
different definitions and different perceptions of the outcome of an IT outsourcing
project among different customer organisations. Furthermore, it is efficient in terms of
resources required.
The main source of data was interviews with senior executives and key project
participants in the case organisation. These interviews explored the characteristics of a
satisfactory relationship, the influence of the relationship management to the outcome of
projects, with a strong emphasis on how cultural factors impact relationship
management. While it was not feasible to conduct enquiries in all of the three vendor
companies, some additional data regarding the cultural differences were collected
through brief interviews with the two Chinese vendors and another Western vendor of
the case organisation. This Western vendor provided strategy consulting services to the
case organisation in 2002. All interviewees were employees who were directly involved
in IT outsourcing relationship management practice in one or several projects.
Secondary data sources were also used, including published reports and archival
documents for triangulation.
Chapter 3 provides a comprehensive description and justification of the research
methodology.
1.4 Definitions of major terms used in this thesis
It is critical to clarify some key terms. The key terms in this study are: IT outsourcing,
relationship management in IT outsourcing, and culture.
IT outsourcing
In this study, the broad definition of IT outsourcing adopted is the definition used by
Loh and Venkatraman(1992, p. 58): “a decision taken by an organisation to contract-out
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or sell the organisation’s IT assets, people and/or activities to a third party vendor, who
in return provides the services for a certain time period and monetary fee.”
IT outsourcing can potentially include anything from a simple application customisation
to the leasing of an entire computer department. For the purpose of this research the
narrow definition of IT outsourcing is adopted where IT outsourcing refers specifically
to application development. Application development includes “packaged commercially
available software, customisation services, and developing custom applications”
(Murthy, 2004, p. 545).
Relationship management in IT outsourcing
Relationship management in IT outsourcing is defined as “post-contract management of
an IT outsourcing venture which requires both sides to look beyond the traditional arm-
length supplier-buyer type arrangements and to move more toward a partnering
operating within the spirit of the contract” (Kern, 1997, p. 37).
Culture
The focus of the study is an IT outsourcing arrangement between two partners who may
be from two different national cultures. Culture “is a fuzzy set of attitudes, beliefs,
behavioural norms, and basic assumptions and values that are shared by a group of
people, and that influence each member’s behaviour and his/her interpretations of the
meaning of other people’s behaviour” (Spencer-Oatey, 2000, p. 4). It is expected that
different values and beliefs will reflect different conceptions of relationship
management practice.
Chapter 2 provides further detail about these main terms and explains why these
definitions were adopted for this research.
1.5 Delimitations of the scope of the research
The delimitations of scope are acknowledged as follows:
Firstly, IT outsourcing service varies from IT infrastructure maintenance to fully
integrated enterprise systems. This research examines the most common service,
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applications development, supplied by vendors. Other services are not targeted in this
study.
Secondly, there are lots of factors that influence the outcome of an IT outsourcing
project, including the outsourcing decisions and the selection of vendors. This research
focuses on relationship management and its contribution to the outcome of an IT
outsourcing project. Thus, for the purpose of this research, other factors, which may
also contribute to the outcome of an IT outsourcing project, are ignored.
Thirdly, the main data set in this research was collected from the customer respective,
while the outcome of an IT outsourcing project through relationship management is also
determined to a significant extent by the vendor. During the major stage of data
collection the researcher had no access to the vendors, but in the late stage of research
there was an opportunity to conduct a few interviews. Limited data regarding the culture
issues were obtained nearly one month before the proposed thesis submission date.
While the focus of this research was on IT outsourcing relationship management from
the outsourcing company’s perspective, comparatively small input from the vendors is
considered a limitation.
Fourthly, the findings of this study are, of course, based on a limited sample of IT
outsourcing cases from one country and a single industry, so generalisation to other
industries and other contexts can only be of a theoretical nature.
Finally, the empirical research takes place in China and the empirical data are present in
Chinese. The translation into English was cautiously conducted to retain the original
meaning of the text. The research findings have to be carefully interpreted, especially
when identifying cross-cultural implications.
1.6 Thesis structure
The thesis follows a six-chapter structural framework.
Chapter 1 presents a synopsis of the research topic and the motivation for this study.
The need to research into the management of IT outsourcing relationships in a cross-
cultural context is justified. Definitions of the key terms adopted in this research and
delimitations of the research scope are acknowledged.
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Chapter 2 reviews the main areas of literature that are relevant to the research questions:
IT outsourcing; managing IT outsourcing relationships; cross-cultural differences; and
managing IT outsourcing relationships in a cross-cultural context. The chapter notes
that considerable attention has been given to the question of IT outsourcing, but not
enough attention has been paid to relationship management in IT outsourcing which
occupies a larger and larger portion of time of IS managers now. Little existing
literature has taken account of cross-cultural factors while global collaboration in IT
outsourcing has become an evident trend in the real world. Last, the research problem
and research questions are identified to address the research gap in the existing literature.
Chapter 3 introduces, justifies and details the research methodology used in the
empirical component of the study. The methodology chapter depicts a comprehensive
research process from taking an interpretive stance, adopting a case study strategy,
collecting data from interviews and archival documents, and analysing data in the light
of interpretive research guidelines. In addition, the validity and reliability of the adopted
research method as well as some ethical considerations are briefly discussed.
Chapter 4 and Chapter 5 present the research findings of this study.
Chapter 4 explores the context of the data used for addressing the research problem. The
approach to presentation of the data analysis for Chapter 4 and Chapter 5 is clarified at
the beginning. Then the selected case organisation is described as well as its IS
development history. The three cases identified from the case organisation are
introduced in turn.
Chapter 5 presents the major research findings regarding the three research questions.
Findings are generated through the cross-case comparison of the three cases. Arguments
about the distinguishing characteristics of a satisfactory relationship, the influence of
relationship management to the outcome of IT outsourcing projects, and the cross-
cultural differences in the relationship management are provided. Also, how these
arguments derived from the data analysis are presented.
Chapter 6 summarises the whole research project by addressing the research problem
and answering the three research questions. The conclusion chapter also compares the
research findings with extant literature, and discusses the contributions and implications
9
of these findings for academics as well as practitioners. The limitations of the research
and potential future research areas are also suggested.
1.7 Chapter summary
This chapter laid the foundation for the thesis. It started with describing the background
of IT outsourcing, relationship management in IT outsourcing, and managing IT
outsourcing relationships in a cross-cultural context. From the background description,
the research problem and three research questions were derived. Resolving this research
problem is the target of this research. Next, the chapter justified why the research into
the management of IT outsourcing relationships in a cross-cultural context is necessary
and meaningful. Finally，the methodology adopted for this study was briefly clarified,
key terms were defined, and the delimitation of the scope was acknowledged.
The next chapter reviews the existing literature related to the research problem and
identifies the research questions.
10
2. Literature Review
This chapter reviews and synthesises existing literature about the parent and immediate
disciplines relevant to the research problem: How can an IT relationship be managed to
enhance the outcome of an IT outsourcing project in a cross-cultural context?
The background for the study is provided by the literature on IT outsourcing and on
cultural differences. Firstly, IT outsourcing (Section 2.1) and the management of IT
outsourcing (Section 2.2) are explored. Then cross-cultural differences (Section 2.3) are
investigated. Next, the literature about the immediate discipline, managing IT
outsourcing relationships in a cross-cultural context (Section 2.4), is examined. Chapter
2 concludes with a discussion of gaps in the literatures (Section 2.5) which leads to the
presentation of the research problem and research questions (Section 2.6). Figure 2.1
shows graphically the structure of Chapter 2.
IT outsourcing (Section 2.1)
Managing IT outsourcing relationships (Section 2.2)
Cross-cultural differences (Section 2.3)
Managing IT outsourcing relationships in a cross-cultural context (Section 2.4)
Gaps in the literature (Section 2.5)
Research problem and research questions (Section 2.6)
Figure 2.1: Structure of Chapter 2
(Source: Developed for this research)
11
2.1 IT outsourcing
This section reviews the existing literature on IT outsourcing which is the background
area of this study. First, what IT outsourcing means (Sub-section 2.1.1) is introduced.
Then, why IT should be outsourced (Sub-section 2.1.2) is explained. Last, the change of
IT outsourcing research issues over time (Sub-section 2.1.3) is explored.
2.1.1 What is IT outsourcing?
Few companies can achieve world-class capability in every facet of their business. The
crucial challenge facing top management is to consider the “make or buy” decision
about support functions in the business, in order to focus on a robust set of
competencies enabling them to seize new opportunities and weather rapid changes. The
IT support function is one which contains many activities which can potentially be
outsourced.
As early as the 1960s and 1970s, time sharing, which involves purchasing computer
time, was very popular (Barthelemy and Geyer, 2005). This appears to be the early form
of IT outsourcing. By the end of the 1980s, a maturing vendor market meant that
organisations could choose to devolve complete responsibility for the delivery of much
of their IT services to external organisations (Lacity and Hirschheim, 1993). IT
outsourcing distinguishes itself in three areas from then on (Barthelemy and Geyer,
2005, p. 533): “First, outsourcing is no longer restricted to small and medium-sized
companies that do not possess their own IT infrastructure. Larger companies also resort
to it. Second, companies outsource an increasingly large range and depth of services.
Third, personnel and equipment are frequently transferred to the vendor.” In the 1990s,
IT outsourcing had been dubbed a management fad, but it also became the trend of the
industry (Benko, 1992). Until recently, the concept of IT outsourcing was still a hot
issue generating headlines in newspapers and magazines.
Because of the complexity of IT outsourcing issues, scholars and journalists use a range
of other terms to describe this amorphous concept (Bartell, 1998). Other terms used
include: out-tasking (Kaplan, 1995), rightsourcing (Widger, 1996) or rightsizing
(Hoplin, 1993), alliances (Ender and Kathleen, 1994), partnerships (Lacity, 1993;
Martinsons, 1993), the “new” subcontracting (Peters, 1992), “marriage” (Appleton,
12
1996) and “addition by subtraction” (Spee, 1995). This research consistently uses the
term “IT outsourcing”.
The existing literature provides a range of definitions or descriptions of IT outsourcing.
The broad definition of IT outsourcing adopted in this research is articulated by Loh and
Venkatraman (1992): IT outsourcing is “a decision taken by an organisation to contract-
out or sell the organisation’s IT assets, people and/or activities to a third party vendor,
who in return provides the services for a certain time period and monetary fee” (Loh
and Venkatraman, 1992, p. 336). This definition includes a useful range of IT services
and at the same time illustrates the diversity and breadth of services to be covered under
an outsourcing agreement.
In fact, IT outsourcing is an “umbrella term” that covers the entire gamut of information
services, from the development of a simple applications program to the leasing of an
entire computer department (Apte, 1990). The common functions of IT that are
outsourced can be classified under four groups (Murthy, 2004, p. 545):
• IT Infrastructure includes data centres, end-user PCs, core IT services such as E-
mail, Internet, portals to manage data and documents, connecting networks
(LANs, WANs), information security, helpdesk, data backups, and disaster
recovery.
• Maintenance means the maintenance work of legacy applications.
• Applications development includes development of packaged commercially
available software, customisation services, and developing custom applications.
• Everything refers to complete IT outsourcing including developing and
maintaining of proprietary applications/products, customer service centres and
IT infrastructure.
For the purpose of this research I focus on the third of these: the outsourcing of
applications development. The reasons for focusing on applications development are as
follows. This research focuses on the cross-cultural outsourcing relationships.
Applications development demands a high degree of interaction and involvement in the
dynamics of the requirements of service provisioning. Unpredictable changes in
applications development require a high degree of relationship management between the
customer and the service provider (Beulen et al., 2005, pp 138-139). The risk of conflict
13
in culture, language, communication, and managing scope changes is the strongest in
applications development projects compared with other IT outsourcing projects. The
differences in organisational goals and structures, the distance involved, as well as the
inability to use hierarchies which help in internal IS development in the application
development project, make the relationship difficult to manage (Sabherwal, 2003). In
addition, application development is the most often seen service in IT outsourcing
arrangements. Therefore, in an attempt to gain valuable insights into relationship
management, this research takes applications development as the service content for IT
outsourcing.
2.1.2 Why outsource IT?
IT outsourcing is a choice that affects organisation-wide resource allocation policies and
asset management practices. It modifies the organisation’s boundaries as a legal entity
and generally involves top management decision-makers. The benefits and risks of IT
outsourcing have been frequently discussed in the extant literature (e.g., Aubert et al.,
1998; McFarlan and Nolan, 1995; Quelin and Duhamel, 2003). The pros and the cons
jointly contribute to the final decision of whether an organisation chooses to outsource
its IT functions.
Benefits of IT outsourcing
There is evidence that outsourcing contributes positively to market value (Rappaport,
1986; Alexander and Young, 1996, Hayes et al., 2000). Prior to the Kodak deal, the
universal perception of outsourcing was that only smaller companies who could not
manage in-house operations resorted to outsourcing in order to lower their operation
costs (Khosrowpour, 1995). However, the Kodak-IBM arrangement gave outsourcing
respectability and encouraged large companies to look beyond tactical objectives and
concentrate on strategic outcomes (Bartell, 1998).
The drivers of IT outsourcing can be divided into two categories: cost drivers and core
competence drivers.
Cost drivers (mainly including cost saving and cash needs): the most frequently cited
benefit of IT outsourcing is cost saving which comes out of the economic considerations
(Carmel and Agarwal, 2002; Lacity and Willcocks, 1998). It is believed that an outside
14
vendor can provide the same level of service at a lower cost than the internal IS
department. The often cited rationale is that the vendor typically has better economies of
scale, tighter control over fringe benefits, better access to lower-cost labour pools, and
more focused expertise in managing IT (e.g., Lacity et al., 1994). It must be
acknowledged, however, that cost reduction through IT outsourcing is controversial,
especially because the vendor often maintains an identical infrastructure in terms of
equipment and personnel and has to make a profit through the arrangement (Lacity and
Hirschheim, 1993). Nevertheless, empirical evidence (e.g., Alper and Saharia, 1995;
Lacity et al., 1994; Loh and Venkatraman, 1992; McFarlan and Nolan, 1995) suggests
that IT outsourcing is still perceived by managers to be a means to reduce IT costs.
Core competence drivers (mainly including improved business focus, shared risks and
extending technical capabilities): the potential for outsourcing to increase strategic focus
has received heightened attention as organisations have emphasized their core
competencies (Hemel and Prahalad, 1996; Quinn, 1999). Essentially, the argument is:
“if there is no strategic value in performing the function internally, outsource it!”
(Tereska, 1990, p. 54). If IT outsourcing enables greater focus on strategic priorities,
outsourcing may become increasingly important to building more agile organisations
capable of competing in the global economy (Quinn and Hilmer, 1994). IT outsourcing
vendors develop a core competency in IT management and can build and leverage best
practices because, unlike the customer organisation, IT management is the vendor’s
core business (Levina and Ross, 2003). By delivering their core competency to
customers, vendors free customer organisations to focus management attention on their
unique core business (Ross and Westernman, 2004).
Table 2.1 summarises the major benefits of IT outsourcing and identifies the IS
literature that discusses the individual benefits.
15
Table 2.1: IT outsourcing benefits identified in the literature
IT outsourcing benefits Summary explanation References
Cost saving
Ability of the vendor to provide the same level of service at lower costs.
Alper & Saharia (1995); Arnett & Jones (1994); Beaumont & Sohal (2004); Carmel & Agarwal (2002); Harland et al. (2005); Lacity et al. (1994); Loh (1994); Loh & Venkatraman (1992); McFarlan & Nolan (1995); Palvia (1995); etc.
Cost drivers
Cash needs Large initial payment by the vendor for the organisation’s IT assets is attractive to organisations that have liquidity needs.
Beaumont & Sohal (2004); Harland et al. (2005); Lacity et al. (1994); McFarlan & Nolan (1995); etc.
Improve business focus
Simplify the management agenda by focusing on core activities and outsourcing no core activities.
Cross (1995); Lacity et al. (1994); Levina & Ross (2003); McFarlan & Nolan (1995); Palvia (1995); Ross & Westernman (2004); Slaughter & Ang (1996); etc.
Core Competence driver
Extend technical capabilities
Outsourcing provides access to expertise not available in the organisation.
Arnett & Jones (1994); Beaumont & Sohal (2004); Cross (1995); Grover et al. (1994); Harland et al. (2005); Lacity et al. (1994); Loh & Venkatraman (1992); McFarlan & Nolan (1995); Palvia (1995); Slaughter & Ang (1996); Teng et al. (1995); etc.
(Source: Adapted from Smith et al., 1998, p. 64)
Risks of IT outsourcing
When organisations transfer an internal capability to an outside party, they lose some
control over that capability (Henderson, 1990). Enthusiasm for outsourcing has been
16
countered by concerns caused by such loss of control. The two primary concerns of risk
in outsourcing are “to outsource the right things” and “to outsource them the right way”.
More specifically, four major types of risks have been highlighted in prior literature
(e.g., Alexander and Young, 1996; Aubert et al., 1998; Earl, 1996; Lacity and
Hirschheim, 1993; Quelin and Duhamel, 2003): uncertainty risks, hidden cost risks,
strategic risks, and vendor risks.
Each of these risks will be briefly explained below.
Uncertainty risks. Changes in the customer’s market and changes resulting from new
technologies lead to new expectations, new costs, and eventually new metrics for
service (Quelin and Duhamel, 2003). There is a risk that customers and vendors sign
contracts that do not necessarily meet future needs (Barthelemy and Geyer, 2000; Lacity
and Hirschheim, 1993). This risk encompasses the uncertainty about the long-term
viability of contractual arrangements (Quelin and Duhamel, 2003).
Hidden cost risks. There is a transition process involved when moving from internal
provisioning to outsourcing. It may involve moving applications to a new environment
or linking outsourced and internal applications, or transitioning technical staff to a
vendor (Alexander and Young, 1996; Earl, 1996). Transition risks refer to
organisational change challenges in the transition process (Quelin and Duhamel, 2003).
For instance, employees may fail to adapt to new processes, culture, technology, or
employee arrangements, leading to the hidden costs (Aubert et al., 1998; Barthelemy,
2001).
Strategic risks. For the most part, organisations want to outsource non-strategic
capabilities while retaining strategic capabilities (Venkatraman, 1997). Strategic risks,
for example, result from possible misjudgement of what is really strategic, as many
business processes are tightly linked with IT (Quelin and Duhamel, 2003). Also,
capabilities that are non-strategic today may become strategic tomorrow (Christensen et
al., 2002). Unintentional outsourcing of a strategic capability inevitably reduces
strategic integration and agility.
Vendor risks. A vendor may have difficulty in managing subcontracted capabilities
(Alexander and Young, 1996; Earl, 1996). Vendor risk can increase if the vendor is
17
small, new, or dependent on future scale to make its business model work (Quelin and
Duhamel, 2003). Particularly with new technologies, vendors sell capabilities that have
not yet been developed. When assessing the potential of a new technology, it is difficult
to predict technical and organisational challenges (Aubert et al., 1998; Quelin and
Duhamel, 2003).
Table 2.2 summarises the main risks identified in the literature.
Table 2.2: IT outsourcing risks identified in the literature
IT outsourcing risks Summary explanation References
Uncertainty risks Changes in the customer’s market and changes resulting from new technologies lead to new expectations, new costs, and eventually, new metrics for service.
Barthelemy & Geyer (2000); Beaumont & Sohal (2004); Dulmin & Mininno (2003); Harland et al. (2005); Lacity & Hirschheim (1993); etc.
Hidden cost risks The organisation might have costs when moving applications to a new environment or linking outsourced and internal applications, or transitioning technical staff to a vendor.
Alexander & Young (1996); Aubert et al. (1998); Barthelemy (2001); Beaumont & Sohal (2004); Harland et al. (2005); Earl (1996); Lacity & Hirschheim (1993); etc.
Strategic risks The possible misjudgement of what is really strategic and the unintentional outsourcing of a strategic capability might reduce strategic integrality and agility.
Alexander & Young (1996); Aubert et al. (1998); Beaumont & Sohal (2004); Doig et al. (2001); Earl (1996); Harland et al. (2005); Khosrowpour et al. (1996); Martinsons (1993); Quinn & Hilmer (1994); etc.
Vendor risks The vendor has challenges in technical and organisational capabilities of managing the subcontracted staff.
Alexander & Young (1996); Aubert et al. (1998); Beaumont & Sohal (2004); Dulmin & Mininno (2003); Earl (1996); Harland et al. (2005); Quelin & Duhamel (2003); etc.
(Source: Adapted from Quelin and Duhamel, 2003, p. 657)
18
2.1.3 Change of IT outsourcing research issues over time
IT outsourcing is not a new phenomenon, but, when tracing the literature over the past
three decades, research issues on IT outsourcing have shifted over time, reflecting
changes in practice (Lee et al., 2003). Figure 2.2 shows the evolution of outsourcing
issues over time. Each of these issues will be briefly discussed below.
The choice between internally developed technology and its external acquisition
The impact of outsourcing;
Make or Buy. Most of the early literature on IT outsourcing focused on acquisition
(Buchowicz, 1991). The most important debate concerned whether IT activities should
be performed by outside vendors or remain in-house. Organisations regarded IT as a
commodity and considered how to acquire it effectively (Lee et al., 2003). Therefore,
the make-or-buy decision between internally and externally developed technologies was
the main research issue during the 1980s.
Motivation. Loh and Venkatraman (1992) identified the announcement of Eastman
Kodak’s outsourcing of IT services to IBM as being pivotal in encouraging
consideration of IT outsourcing, labelling this “the Kodak effect”. From then on, the
Well-designed contract to reduce expected contingencies
Scope
Performance
Insource or
Outsource
Contracts (formal)
Partnership (informal)
Motivation
Make or Buy
Degree of outsourcing; Period of outsourcing; Number of vendors; Outsourcing types
User and business satisfaction; Service quality; Cost reduction
Trade-off between contingent factors in outsourcing
Key factors for outsourcing partnership; Effective way for building partnership
Global IT outsourcing
A more complex international marketplace for IT outsourcing
Figure 2.2: The evolution of outsourcing issues
(Source: Adapted from Lee et al., 2003, p. 85)
19
interest in IT outsourcing surged and outsourcing emerged as a key method of managing
information systems. As a result, the potential benefits and risks of IT outsourcing
became a major research topic (Lee et al., 2003).
Scope. As IT outsourcing grew popular in various industries, debates started to move
from “whether or not to outsource” to “how much to outsource” (Lacity and Hirschheim,
1995). Lacity et al. (1996) argued for selective outsourcing, and Lacity and Hirschheim
(1995) argued for limiting the scope of contracts to periods for which needs can
reasonably be foreseen. However, Deloof (1997) opposed their ideas and pointed out
that the customer organisation might experience heavy costs associated with
coordinating the work of different vendors. Organisation might also find that, because
their selectively outsourced contracts were small in relation to the vendors’ other work,
they had little leverage (McFarlan and Nolan, 1995). Not all researchers were in
agreement about the issues of scope.
Performance. Then the literature turned to the discussion of effective outsourcing
performance. Measures, such as efficiency, user and business satisfaction, service
quality and cost reduction were used for assessment in many studies, but a comparison
of these studies revealed multiple and conflicting results (Lee et al., 2003). The
discrepancies were attributed to the specific nature of the outsourcing projects.
Insource or outsource. Despite many outsourcing success stories, a number of studies
reported that outsourcing did not always yield desired outcomes, and, moreover,
insourcing sometimes yielded more benefits (Chapman and Andrade, 1998; Feeny and
Willcocks, 1998a; Lacity and Hirschheim, 1995; Reponen, 1993). The focus on
insourcing was recognised as a backlash of the rapid evolution of IT outsourcing (Lee et
al., 2003).
Contracts and partnership. In spite of the uncertainties around IT outsourcing, it was
still enmeshed into many organisational strategic plans (Lee et al., 2003). Research in
late 1990s started to focus on relationship management in IT outsourcing, encouraging
organisations to look past tactical objectives and to concentrate on strategic outcomes.
The research issues (contracts and partnership) spell out two elements of relationship
management in IT outsourcing (Saunders et al., 1997; Willcocks and Kern, 1998).
Contracts specify the relationship between outsourcing customer and vendor in terms of
20
rules, agreements, and exceptions in a formal manner. Partnership complements the
contract and focuses on trust, commitment and mutual interest in an informal manner.
As customer-vendor relationships have “moved to the middle” (Clemons et al., 1993), a
variety of contractual arrangements has emerged, ranging from tight contracts to
partnerships (Barthelemy and Geyer, 2005). An effective relationship has become a key
predictor of outsourcing success (Lee and Kim, 1999). The literature addressing these
two research issues is reviewed in Section 2.2.
Global IT outsourcing. In many ways, the global IT outsourcing phenomenon was a
natural extension of the outsourcing phenomenon that had occurred throughout the
1990s (Weber, 2004). But the main reasons that drive global IT outsourcing are two-
fold. On the one hand, direct costs of labour vary around the world and are typically
lower in developing countries and this explains some of the trend toward the preference
of international IT work outsourcing (Niederman, 2005). On the other hand,
international outsourcing organisations open up a much larger pool of vendors and can
pick ‘best-in-world’ vendors (Quinn and Hilmer, 1994). Implementing both or either of
these two preferences has important consequences for the strategy, structure and
performance of organisations (Mol et al., 2005). There are a number of positive
consequences associated with global IT outsourcing. For instance, global IT outsourcing
allows for a wider search and more competition among vendors leading to higher levels
of efficiency (Mol et al., 2005); by sourcing globally from the best vendors available,
organisations can increase the value of the products that they produce while
simultaneously reducing the cost of the final delivered product (Fawcett and Scully,
1998); and the extent of global IT outsourcing seems to be positively related to the
organisation’s global market share. In contrast there are also arguments against global
outsourcing. The main concerns relate in particular to the increased transaction and
logistics costs and governance costs. For instance, Mol et al. (2005) suggest
organisations may find it difficult to govern international relationships effectively
because of language, cultural and institutional differences or simply because of large
distances; Kotabe (1992) also states the efficiency advantages from global IT
outsourcing might turn into effectiveness disadvantages in the long run because of these
potential concerns; and the fixed entry cost for foreign outsourcing is significant and
related with the organisation’s human skills and foreign business experience (Tomiura,
2005). Hence, when the IT marketplace transcends national boundaries, organisations
21
are dealing with a much more intriguing and complex environment than ever before
(King, 2005).
Table 2.3 summarises the change in focus on IT outsourcing issues along with theories
from the literature.
22
Table 2.3: The change in focus on IT outsourcing issues
Outsourcing issue
Summary explanation References
Make-or-Buy The choice between internally developed technology and its external acquisition
Buchowicz (1991); Looff (1995); Martin & McClure (1983); Sharkey (1983); Weston (1981); etc.
Motivation The impact of outsourcing
Bahli & Rivard (2001); Grover & Teng (1993); Lacity & Hirschheim (1993); Loh & Venkatraman(1992, 1995); Looff (1995); Smith et al. (1998); etc.
Scope (option)
Degree of outsourcing; period of outsourcing; number of vendors; outsourcing types
Deloof (1997); Grover & Teng (1993); Gupta & Gupta (1992); Lacity et al. (1996); Lacity & Hirschheim (1995); McFarlan & Nolan (1995); etc.
Performance User and business satisfaction; service quality; cost reduction
Grover et al. (1994, 1996); Jurison (1995); King & Malhotra (2000); Lacity et al.(1995); Lacity & Hirschheim (1993); Lacity & Willcocks (1998); Lee (2001); Lee & Kim (1999); Loh & Venkatraman (1995); Willcocks et al. (1995); etc.
Insourcing/
Outsourcing
Trade-off between contingent factors in outsourcing
Chapman & Andrade (1998); Feeny & Willcocks (1998a); Lacity & Hirschheim (1995); Reponen (1993); etc.
Contract Well-designed contract to reduce expected contingencies
Brandon & Halvey (1990); Bryson & Ngwenyama (2000); Fitzgerald & Willcocks (1994); Halvey & Melby (1996); Kern & Willcocks (2000); Klepper (1994, 1995); Lacity et al. (1995); McFarlan & Nolan (1995); Saunders et al. (1997); etc.
Partnership Key factors for outsourcing partnership; Effective way for building partnership
Applegate & Montealegre (1991); Fitzgerald & Willcocks (1994); Grover et al. (1996); Kern & Willcocks (2000); Klepper (1994); Lacity & Willcocks (1998); Lasher et al. (1991); Lee (2001); Lee & Kim (1999); McFarlan & Nolan (1995); Quinn (1999); Sabherwal (1999); Willcocks et al.(1998); Willcocks & Choi (1995); etc.
Global IT
outsourcing
A more complex international marketplace for IT outsourcing
Agrawal & Thite (2003); Carmel and Agarwal (2002); Kaiser & Hawk (2004); Kern & Willcocks (2000); King (2005); Lacity & Willcocks (2000); Mol et al. (2005); Niederman (2005); Quinn and Hilmer (1994); Ramanujan & Lou (1997); Tomiura (2005); Weber (2004); etc.
(Source: Adapted from Lee et al., 2003, p. 87)
23
2.2 Managing IT outsourcing relationships
This section reviews the existing literature on managing IT outsourcing relationships
which is highly relevant to this research topic. First, the nature of the relationship in IT
outsourcing (Sub-section 2.2.1) is explored and the evolvement of relationships in IT
outsourcing (Sub-section 2.2.2) is described. Then, this section investigates the impact
of the relationship in IT outsourcing (Sub-section 2.2.3). Lastly, the governance of
relationships in IT outsourcing (Sub-section 2.2.4) is introduced.
2.2.1 The nature of relationships in IT outsourcing
IS research has identified relationships as consisting of two components: the formal
outsourcing contract and the informal partnership. Willcocks and Kern (1997) used the
UK Inland Revenue Service to illustrate that an effective IT outsourcing arrangement
incorporated both contractual and non-contractual elements. Their paper argued that the
non-contractual relationship grew out of, and came to adapt to, the contract. Sabherwal
(1999) used 18 case studies to demonstrate that trust-related mechanisms as well as
contractual (he used the label structural) mechanisms needed to be in place to control
activities (a theme originated by Ang and Beath, 1993). Barthelemy (2003) used survey
data drawn from 50 IT outsourcing efforts to suggest that both aspects are the key to
success. The greater the contractual hazard, the more likely the partnership is preferred
over the contract. Operations managed through the contract essentially perform well on
the cost dimension; focus on the partnership enhances the performance dimension.
Recently, Barthelemy and Geyer (2005) addressed a new kind of IT outsourcing
relationship, quasi-outsourcing, which is distinguished from conventional outsourcing
(i.e. a contract with an outside vendor). Quasi-outsourcing involves creating a
subsidiary and transferring all or part of the IT to it. The basic idea is to transform an
internal IT department into an associated entity empowered to behave like an external
vendor. They argued that, as quasi-outsourcing entails fewer contractual hazards,
organisations are more likely to set up their own subsidiary than transfer their IT to an
outside vendor. Hence they can benefit from the high-powered incentives of a market
relationship while simultaneously keep a stronger control over the outsourcing activity
through equity ownership of the subsidiary company (Barthelemy and Geyer, 2005;
Grover et al., 1996).
24
Previous research has classified the conventional relationship between organisations
into different types based on different theories.
Using transaction cost theory, an inter-organisational relationship is classified as either
transactiona-l or partnership-based (Henderson, 1990; Fitzgerald and Willcocks, 1994).
A transactional style of relationship develops through the formal contract in which the
rules of the game are well specified; the failure to deliver on commitments by either
party can be resolved through litigation or penalty clauses in the contract. In contrast,
the requirements of a partnership style relationship include risk and benefit sharing, the
need to view the relationship as a series of exchanges without a definite endpoint, and
the need to establish a range of mechanisms to monitor and execute its operations
(Henderson, 1990).
Based on strategy theory, four types of outsourcing relationships are proposed in order
to categorise the diverse patterns of outsourcing: support, reliance, alignment, and
alliance (Nam et al., 1996). According to Nam et al. (1996), the support pattern
corresponds to the traditional IT vendors’ service and the most primitive type of
outsourcing relationships. Vendors are usually restricted to non-core IT activities, and
the size of the contract is small. The reliance pattern corresponds to the most popular
form of outsourcing reported in the 1990s. IT functions outsourced are mostly non-core
activities, and cost reduction is one of the major motivations. Length of the contract is
longer than the support pattern. The alignment pattern has been second only to support
type in popularity. Vendors are not significantly involved with customer organisations’
IT operations but with more strategic IT functions. The alliance pattern is based on
mutual relationships and the contract is usually longer than with other types of
relationships. Outside vendors not only substitute for in-house IT operations but also are
completely responsible for highly strategic IT activities.
Based on residual rights theory, which is part of a rich literature on governance, three
forms of relationship governance are identified: independent (hierarchy), arm’s-length
(market), and embedded (network) (Lee et al., 2004; Williamson, 1994). In a hierarchy
relationship, minimal outsourcing is conducted with a buy-in contract in short term
duration (Lee et al., 2004). In a hierarchy resources are acquired externally, but
managed internally, and organisations minimise dependence on an external entity for
critical organisational resources and competencies (Pfeffer and Salancik, 1978). In the
25
market category, relationships commence with a detailed specification of each party’s
obligations, and control of unspecified obligations vests with the provider (Uzzi, 1997).
It is used in selective outsourcing with a medium-term contract (Lee et al., 2004). The
outcome of the relationships is typically cost efficiency through competitive pricing of
services (Baker, 1990). In the network arrangement, the relationships are strong,
thereby enabling organisation-like knowledge transfer. The strength and stability of the
relationship derives in large part from both parties being committed to a long-term
relationship (Dwyer et al., 1987). It is often applied to comprehensive outsourcing with
an unspecified contract (Lee et al., 2004).
2.2.2 The evolvement of relationships in IT outsourcing
Time is a critical dimension in the development of relationships. While time introduces
an element of risk in relationships, time also facilitates cooperation among self-
interested parties (Coleman 1990). Hence, how IT outsourcing relationships evolve over
time is another issue addressed in the literature. A few papers discuss frameworks to
distinguish different stages of relationship development. For instance, Dwyer et al.
(1987) proposed a model for a customer-vendor relationship developmental process
consisting of four stages: awareness, exploration, expansion, commitment, and
dissolution. Ring and van de Ven (1994) proposed a process framework wherein the
inter-organisation relationship evolves through sequences of negotiation, commitment,
and execution. Each stage includes repeated interactions and depends on certain initial
conditions and adjustment activities (Doz, 1996; Sabherwal, 2003). Carmel and
Agarwal (2002) established a four-stage maturity model for off-shore IT outsourcing
based on interviews with twenty executives from thirteen organisations. The four stages
are: bystanders (no outsourcing), pilot/experimenters, cost focus, and strategic
consumers of vendor capabilities.
Similarly, Reid (2003) used a four-phase strategy, shown in Figure 2.3. The model
suggests that in the pilot phase a limited number of projects should be executed to
demonstrate viability. In the ramp-up phase, a large number of projects can be
outsourced. In the stabilisation phase, offshore resources can be increased to attain
maximum cost benefits. The maturity phase is the culmination of the stabilisation phase
26
where the use of offshore resources in projects is seamlessly built into the organisation’s
governance model (Murthy, 2004).
Pilot Ramp Stabilize Mature 0 6 Month 1 year 2 years
Gainey and Klaas (2003) argue that, while an outsourcing arrangement might begin as
an arms-length relationship disciplined only through market-based mechanisms, over
time it might be transformed through a social exchange process towards a partnership.
Sabherwal (2003) stated customers would pull the outsourcing relationship toward a
hierarchy structure, characterised by informal mutual adjustment, while vendors would
pull the relationship toward a market structure, characterised by standards, plans, and
formal mutual adjustment. This research on the evaluation of the IT outsourcing
relationship over time helps to explain the dynamics of outsourcing relationships.
Figure 2.3: Four-stage offshore outsourcing model
(Source: Murthy, 2004, p. 545; Reid, 2003)
2.2.3 The impact of relationship in IT outsourcing
Lacity and Hirschheim (1993) conclude that the outsourcing relationship involves
conflicts of interests between vendors and customers, and is not always a ‘partnership’
as promoted in the trade press and by vendors. In contrast, McFarlan and Nolan (1995)
report a number of cases where partnership was achieved. They suggest organisations
should be careful in the selection of vendor, pay attention to the structuring of the legal
relationship, ensure mechanisms for contract flexibility and establish standards and
mechanisms for control. They conclude that best results would occur when customer
and vendor operated “less as a contract and more as a strategic alliance” (McFarlan and
Nolan, 1995, p. 20). Klepper (1994) also suggests developing a partnering relationship.
These papers identified the importance of partnership to ultimate IT outsourcing success.
This research agrees with the mainstream of the literature that claims a partnership
could be achieved. Therefore, Kern’s (1997, p. 37) definition is adopted: the
relationship management in IT outsourcing is the “post- contract management of an IT
27
outsourcing venture which requires both sides to look beyond the traditional arm-
lengths supplier-buyer type arrangements and to move more toward a partnering
operating within the spirit of the contract” (Kern, 1997, p. 37).
Subsequent research has tried to define the concept of IT outsourcing partnerships more
clearly. For instance, Grover et al. (1996) proposed measures of “partnership”
(including trust, communication, satisfaction and co-operation). They also established
that where higher levels of partnership exist, organisations have more positive outcomes.
However, when examining different services, their analysis only held true for systems
operations that are low in asset specificity. Despite this, Grover et al. (1996) concluded
that fostering a long-term interactive relationship based on partnership is critical to
achieving the greatest benefits from outsourcing.
Using the same instrument, Lee and Kim (1999) examined 36 vendor-customer pairs to
test the hypotheses, exploring the relationship between vendor judgments about the
relationship-quality and customer perceptions of outsourcing success. Their results
indicate that relationship quality may serve as a key predictor of outsourcing success,
which confirms the argument of Grover et al. (1996). Based on his own work, Lee
(2001) emphasized the importance of knowledge sharing through the outsourcing
partnership as a complement to his previous work.
Therefore, previous IT outsourcing research has already demonstrated that the quality of
relationships with vendors has significant impact on the outcome of IT outsourcing
projects.
2.2.4 The governance of relationships in IT outsourcing
Several articles have articulated the skills and competencies organisations would need
to manage the post-contract relationship in IT outsourcing (e.g., Bensaou and
Venkatraman, 1996; Feeny and Willcocks, 1998a; Kern and Willcocks, 2000). But
basically, the governance of relationships requires implementing structures and building
trust (Barthelemy, 2003). Each is briefly discussed in turn.
28
Implementing structures
Relationship management plays a crucial role in balancing an organisation’s reliance on
formal and legal procedures (contract management, formal bargaining, formal legal
contract, and role interactions) with informal and inter-personal norms (e.g., informal
sense making, psychological contract, and personal interactions in relationship
management) (Shi et al., 2005). This balance is the foundation to establish an
implementing structure in an IT outsourcing project and understand the relationship
management practice (Kern and Willcocks, 2000). Analysis of the existing literature on
organisation theory (e.g., Faulkner, 1995; Musgrave and Anniss, 1996), inter-
organisational relationship theory (White and Levine, 1961; Oliver, 1990), marketing
theory (Cunningham, 1980; Ford, 1980; Anderson and Narus, 1990) and IS theory
(Henderson, 1990; Konsynski and McFarlan, 1990; Bensaou and Venkatraman, 1996)
elicits a list of recurring key concepts: contract, communications, mutual interests,
social/personal bonds, and project resources. These concepts help formulate an
implementing structure and reflect the balance that Shi et al. (2005) addressed. Each
concept will be now discussed below and its references will be listed in Table 2.4.
Contract. Many customer organisations get IT outsourcing services through signing
detailed and lengthy agreements with their vendors. This phenomenon shows that it is
necessary to have a formal mechanism through which these services can be coordinated
and synchronised (Shi et al., 2005). Feeny and Willcocks (1998b) proposed that contract
facilitation should act as this kind of mechanism to ensure the success of IS outsourcing.
Fundamentally, contract facilitation is an action-oriented competence with a purpose to
manage contract negotiation, execution, and conflict resolution (Shi et al., 2005). It is a
response to the bounded rationality of human beings that results in incomplete contracts
(Hart and Moore, 1988), which demands continuous adjustments from all involved
parties. Feeny and Willcocks (1998b) also indicated that while contract facilitation
works to make things happen, contract monitoring is the capability of an organisation to
protect its business’s contractual position over time. Fundamentally, contract
monitoring is an action-oriented competence that provides the necessary performance
measurement process and final performance information for the diagnosis of problems
and the prescription of solutions in managing customer and vendor behaviours (Shi et
al., 2005). Both contract facilitation and monitoring will generate many interaction
opportunities at individual, team, and organisational levels between IT outsourcing
29
vendors and customers (Shi et al., 2005). Active management efforts have to be geared
towards operationalising the contract (Willcocks and Kern, 1998).
Communication. Better communication might lead to greater trust which helps to avoid
conflicts, facilitate solutions to problems, and reduce uncertainty levels (Aiken and
Hage, 1968; Easton, 1992). Within the context of IT outsourcing projects, the
importance of communication is expected to be magnified since the customer and
vendor are separated by organisational boundaries, cultures and policies (Lander et al.,
2004). Repeated communication over time develops a rich pool of information about the
service provider, enabling more accurate assessments of future behaviour (Granovetter
1985). It is believed that frequent and accurate communication is essential to building
levels of socially-oriented trust in inter-organisation relationships (Shapiro et al., 1992).
Trust borne of communication in IT outsourcing settings should improve the ability of
actors from both organisations to work toward shared goals (Lander et al., 2004).
Mutual interests. The initial motivation behind the willingness to make cooperative
efforts by both parties may be purely self-interested in nature. Both customer and
vendor are taking efforts to understand the common areas of interests when initiating an
IT outsourcing project (Das and Teng, 2001). Establishing mutual interests helps to
improve cooperation by sharing the risks and rewards of the venture equally (Willcocks
and Kern, 1998). A variety of mechanisms, including regular meetings and
communications, could be used to increase the number of joint dealings and increase
familiarity with the common objectives. They also provide an efficient way to
communicate project expectations for both parties (Langfield-Smith and Smith, 2003),
thereby encouraging trust (Browning et al., 1995; Chiles and McMackin, 1996).
Social/personal bonds. Establishing social/personal bonds is a kind of interpersonal
behaviour which is identified as an organisation’s capability to cooperate with other
organisations (Nelson, 1991). The capability to manage social/personal bonds refers to
the ability to adopt strategies for interacting and working with other people in the
workplace (Joseph et al., 1996) and the ability to develop a personal social network
(Sawyer et al., 1998). Social/personal bonds established between individuals in the
customer and vendor organisations increase familiarity and trustworthiness, thus
determining the raison d’etre for the flourishing of the relationship. In order for deep
and personal ties to emerge, parties must interact extensively over time in a way that
30
allows each party to demonstrate their concern for each other (Gulati, 1995; Lewicki
and Bunker, 1996). In cross-functional environments, this capability to develop and
maintain relationships with others is especially crucial (Bassellier and Benbasat, 2004 ).
Project resources. Many IT outsourcing services must be tailored to meet the unique
needs of the customer organisation (Noe, 1999), so obtaining such services from a
vendor may require the vendor to make an asset-specific investment (Gainey and Klaas,
2003). An investment has value only if the customer organisation continues its
relationship with the vendor. Hence, it is thought to expose the vendor to an increased
risk of opportunistic behaviour (Williamson, 1983). The project resources include the
allocation of service delivery experts, thereby subjecting them to the day-to-day
authority of the customer (Lacity and Willcocks 1998). Finally, partnerships rely on
complementary resources (Dyer and Singh 1998) and voluntary resource allocations so
as to benefit the partnership (Khanna et al., 1995). Both the customer and vendor show
their level of commitment to the relationship through their investments of project
resources, including knowledge and time (Johanson, 1994).
Table 2.4 summarises the implementing structure and its references.
31
32
Table 2.4: IT outsourcing - implementing structure and its references
Implementing structure
Reference
Contract Brandon & Halvey (1990); Bryson & Ngwenyama (2000); Feeny & Willcocks (1998b); Fitzgerald & Willcocks (1994); Halvey & Melby (1996); Hart & Moore (1988); Kern & Willcocks (2000); Klepper (1994, 1995); Lacity et al. (1995); McFarlan & Nolan (1995); Saunders et al. (1997); Shi et al. (2005); Willcocks & Kern (1998); etc.
Communications Aiken & Hage (1968); Blois (1999); Easton (1992); Granovetter (1985); Jones & George (1998);Lander et al.(2004); McKnight et al. (1998); Nelson & Cooprider (1996); Sabherwal (1999); etc.
Mutual interests Browning et al. (1995); Chiles & McMackin (1996); Das & Teng (2001); Langfield-Smith & Smith (2003); Willcocks & Kern (1998); etc.
Social/personal
bonds
Bassellier & Benbasat (2004); Gorgone et al. (2002); Gulati (1995); Joseph et al. (1996); Lee et al. (1995); Lewicki & Bunker (1996); Nelson (1991); Sawyer et al. (1998); Todd et al. (1995); Willcocks & Kern (1998); etc.
Project
resources
Dyer & Singh (1998); Gainey & Klaas (2003); Johanson (1994); Khanna et al. (1995); Lacity & Willcocks (1998); Willcocks & Kern (1998); Williamson (1983); etc.
(Source: Developed for this research.)
Building trust
Trust is important in situations where there is risk (Coleman, 1990; Luhmann, 1979;
Sako, 1992) and it has the capability of reducing the possibility of opportunistic
behaviour (Axelrod, 1984; Birnberg, 1998; Bradach and Eccles, 1989). Therefore, trust
is often associated with relationship management and project outcomes in the existing
literature of IT outsourcing (e.g., Barthelemy, 2003; Grover et al., 1996; Sabherwal,
1999; Saunders et al., 1997; Willcocks and Kern, 1998).
Trust is associated with relationship management, as trust helps to strengthen the
relationship between partners, makes the relationship more durable in the face of
conflict and encourages interactions between partners involving knowledge exchange
33
and promotion of each other’s interests (Johanson and Mattsson, 1987). In addition,
trust may increase the predictability of mutual behaviour through each party honouring
commitments and allowing partners to deal with unforeseen contingencies in mutually
acceptable ways (Sako, 1992, p. 37). Several researchers have noted the link between
trust and information requirements (e.g., Creed and Miles, 1996; Luhmann, 1979;
Tomkins, 2001; Wicks et al., 1999). There is an inverse relationship between
willingness to trust and the need for information (Wicks et al., 1999). The provision of
information is certainly important in outsourcing relationships, where the sharing of
information and the generation of performance information is common (Langfield-
Smith and Smith, 2003).
Three definitions of trust relevant to managing IT outsourcing relationships exist in the
existing literature (Sako, 1992):
• Contractual trust is based on the moral standard of honesty, and rests on an
assumption that the other party will honour the agreement, whether the
agreement is in writing or not (Sako, 1992; van der Meer-Kooistra and
Vosselman, 2000).
• Competence trust focuses on perceptions of ability and expertise, and is the
‘expectation of technically competent role performance’ (Barber, 1983, p. 14).
In inter-organisation relationships, competence trust relates to a partner’s ability
to perform according to the specified agreement or contract (Nooteboom, 1996).
• Goodwill trust can be defined as perceptions of a partner’s intention to perform
in one’s objectives (Nooteboom, 1996; Ring and Van de Ven, 1992). Goodwill
trust is associated with integrity, responsibility and dependability (Das and Teng,
2001).
These forms of trust may be present to some extent in the early stages of an outsourcing
relationship; they can also develop further over time (Langfield-Smith and Smith, 2003).
34
Three stages of trust are identified in the extant literature to exhibit the trust
development process in the relationship management (Lewicki and Bunker, 1996;
Shapiro et al., 1992):
• Deterrence-based trust is the lowest level of trust and exists when both parties
can be trusted to keep their word (Lander et al., 2004; Shapiro et al., 1992).
Strategies such as repeated, concurrent interactions, multifaceted relationships
and reputation are useful in building deterrence-based trust (Shapiro et al., 1992).
• Knowledge-based trust as the second level of trust is based on the predictability
of the other party developed through knowing the other sufficiently well that
their behaviour is predictable (Lewicki and Bunker, 1996). Regular
communication and courtship (i.e. good research before a relationship is
engaged) are important mechanisms within the knowledge-based phase of trust
development (Shapiro et al., 1992).
• Identification-based trust is the final and highest level of trust. It is developed
when one party has “fully internalised the other’s preference” (Shapiro et al.,
1992, p. 371). Joint products and goals, mutual interest, a common name,
proximity and shared values are helpful to develop identification-based trust
(Shapiro et al., 1992).
Trust is also associated with project performance in the existing literature (e.g.,
Calderon et al., 2002; Fukuyama, 1995; Gainey and Klaas, 2003; Knack and Keefer,
1997).
Gainey and Klaas (2003) believed trust was highly related to customer satisfaction. The
following arguments illustrate why trust is associated with customer satisfaction:
• First, trust is likely to allow the vendor to better serve customer needs (Gainey
and Klaas, 2003). Tacit knowledge plays a key role in much of training and
development and, as such, vendors may sometimes have difficulty explaining
the rationale behind their recommendations (Connor and Prahalad, 1996). As
35
such, when there is limited trust, an organisation may be less likely to fully
utilise vendor expertise – thus affecting the quality of the services provided and,
in turn, customer satisfaction.
• Second, socially-oriented trust is likely to reduce opportunistic behaviour (e.g.,
cutting the resources devoted to servicing a customer) by the vendor (Gainey
and Klaas, 2003). This is because behaving opportunistically where socially-
oriented trust exists introduces psychological cost that is often sufficient to
reduce the temptation to behave opportunistically (Bradach and Eccles, 1989).
• Third, to the extent that trust constrains opportunistic behaviour, it may reduce
the time spent by customers monitoring vendor action (Gainey and Klaas, 2003).
A key component of customer satisfaction relates to whether a vendor can be
relied upon to complete required duties without continual monitoring
(Parasuraman et al., 1991).
Fukuyama (1995) argued that a high level of trust inherent in a national culture could
affect the economic performance by lowering transaction costs, which, in turn, can
promote efficiency and, thus lead to a more positive project outcome. Knack and Keefer
(1997) showed that subjective measures of trust had a significant impact on aggregate
economic performance. They argued that the relationship between trust and growth was
relatively large in developing countries. Similarly, Calderon et al. (2002) used
subjective trust data for a cross-section of countries to demonstrate that, in countries
with lower law enforcement or lower creditor protection, trust played a more important
role in performance.
2.3 Cross-cultural differences
This section reviews the existing literature on cross-cultural differences, which is
another background area of this study. First, this section explains what culture is (Sub-
section 2.3.1). Then, the different levels of culture are described (Sub-section 2.3.1).
Last, the cross-cultural management and cross-cultural differences in IS (Sub-section
2.3.3 and Sub-section 2.3.4) are discussed.
2.3.1 What is culture?
“Culture” in everyday language is often used loosely to mean “civilisation” such as
education and art. However, in social anthropology, “culture” implies shared values that
underpin the shared manner of working. Hofstede (1991, p. 5), who is famous for her
culture research, defined culture as “the collective programming of the mind which
distinguishes the member of one group or category of people from another”. She further
explains the concept of “collective programming” by suggesting that culture should be
distinguished from human nature and from an individual’s personality. As shown
graphically in Figure 2.4, human nature is inherited with one’s genes in a manner
universal to all human beings; personality is one’s unique personal set of mental
programs which are partly inherited and partly learned; in contrast, culture is learned in
early childhood, derived from social environment and so shared by a specific group or
category of people.
Inherited and learned Specific to individual Personality
Culture Specific to group or category Learned
Human Nature Universal Inherited
Figure 2.4: Three levels of uniqueness in human mental programming
(Source: Hofstede, 1991, p. 6)
36
37
Based on Hofstede’s (1991) research, Spencer-Oatey (2000, p. 4) extends the concept of
culture, and states: “Culture is a fuzzy set of attitudes, beliefs, behavioural norms, and
basic assumptions and values that are shared by a group of people, and that influence
each member’s behaviour and his/her interpretations of the meaning of other people’s
behaviour.” This research adopts Spencer-Oatey’s definition because this definition
explains not only what culture is, but also the function which culture performs in
everyday life. The interpretive role of culture, as introduced by Spencer-Oatey, is
especially important when considering cross-cultural interaction (Dahl, 2003).
2.3.2 Different levels of culture
Culture consists of various levels. Cultural differences manifest themselves in several
ways. Hofstede (1991)’s model regards culture as an onion. The outer level
encompasses the inner level, as it depends on the inner level, or is a result of the inner
level. As such, the system can be peeled, layer by layer, in order to reveal the content.
Figure 2.5 displays the “onion diagram”. At the core of the model are values, which
form the most hidden layer of culture. According to Hofstede (1991), these values are
among the first things children learn, not consciously, but implicitly. Therefore,
Hofstede (1991) emphases that values cannot be directly observed by outsiders but
inferred from the way people act under various circumstances.
Practices Values
Rituals Heroes
Symbols
Figure 2.5: The “Onion diagram”: manifestations of culture at different levels
(Source: Hofstede, 1991, p. 9)
The core layer is encircled by three more clearly observable layers. They are rituals,
heroes and symbols. Rituals are collective activities, technically superfluous in reaching
desired ends, such as ways of greeting and paying respect to others. Heroes are persons,
alive or dead, real or imaginary, who possess characteristics which are highly prized in a
culture, such as admired persons who serve as models for behaviour. Symbols are words,
gestures, pictures or objects that carry a particular meaning which is only recognised by
those who share the culture, such as a jargon in a language or flags (Hofstede, 1991).
The three layers are subsumed under the term “practices”, because they are visible to an
outsider and can be cautiously interpreted to reveal the core value content of the culture.
There is significant debate about what level of analysis is desirable for the concept of
“culture” (Dahl, 2003). As the definition of culture implies, people unavoidably belong
to a number of different groups and categories so that it is difficult to set a distinct level
of analytic unit that makes up any one culture. The existing literature (e.g., Hofstede,
1980; 1991; Schwartz, 1994; Smith and Bond, 1998; Trompenaars, 1993) shows its
preference to national boundaries as the level of resolution, and countries as the unit of
analysis (Dahl, 2003). The reasons are summarised as follows:
38
39
Firstly, using nationality as a criterion is a matter of expediency, because it is easier to
obtain data for nations than for organic homogeneous societies (Hofstede, 1991). The
use of nationality is therefore avoiding unnecessary duplication and removes ambiguity
in the research process, as the nationality of a person can usually be established easily
(Dahl, 2003).
Secondly, many empirical results support the notion that people from the same country
are similar in almost all respects of value systems, which makes the effect of nationality
differences stand out unusually clearly (Dahl, 2003; Hofstede, 1991; Smith and Bond,
1998).
At the same time, it is important to point out that the term “culture” in the management
literature is not limited to the national level, but has become popular as describing the
organisational context (Dahl, 2003). Field research shows that national cultures differ
mostly at the level of basic values, while organisational cultures differ mostly at the
level of the more superficial practices: symbols, heroes and rituals (Dahl, 2003;
Hofstede, 1991). More precisely, organisational cultures are composed of practices
rather than values influencing the perceptions of practice, so they can be managed by
simply changing the practices. The values of employees can hardly be changed by an
employer, because they were acquired when the employees were children (Hofstede,
1991). Therefore, national cultural differences may have a more profound effect on
business behaviour.
2.3.3 Cross-cultural management
Many cross-cultural studies have shown that different national cultures support different
sets of management beliefs and practices, especially when those cultures reflect
fundamentally different conceptions of reality (Chen and Partington, 2004). For
example, matrix organisational structures have been found to work less effectively in
Nepal than in Western countries due to the greater bureaucratic orientation of Nepalese
managers (Pant et al., 1996). Great cultural diversity has been identified among
40
managers from ten European countries in relation to their conceptions of the function of
management (Laurent, 1983). Asian countries have been reported to have a tendency to
develop personal relationships with their business partners before getting down to the
specifics of negotiation (Pheng and Leong, 2000). In contrast, Americans like to get to
the point more quickly and directly even though such an approach may embarrass
someone personally and publicly (Foster, 1992).
Among these studies of cross-cultural management, some pieces of research specifically
address the incongruent management beliefs between Chinese culture and Western
culture, which is relevant to this research context. For instance, Tse et al. (1988)
investigated decision making in four simulated international marketing situations with
executives from China and Canada. Findings suggest that Chinese companies highly
value long-term exchange relationships, restricted competition, and unquestioned
respect for leaders. Pheng and Leong (2000) studied a real case of an international
construction project in China with a US-based vendor. This study reports that the
Chinese company emphasised the attributes of friendship, mutual interests and the
importance of mutual trust during the initial stages of negotiation more than its Western
counterpart. Chen and Partington (2004) also investigated construction project
management work in the contexts of Chinese culture and UK culture. This study
highlights the fundamental differences in conception of the meaning and significance of
different forms of relationship in the project, as well as other perspectives such as
conflict resolution, organisational structure preference and attitude to uncertainty.
2.3.4 Cross-cultural differences in IS
The amount of IS literature focusing on cross-cultural issues has grown substantially
over the past decade, particularly in publications such as the Journal of Global
Information Management and the Journal of Global Information Technology
Management (Niederman, 2005). The three dominant models addressing national
41
cultural differences referred to in the IS discipline are those of Hofstede (1980; 1991),
Trompenaars (1993) and Schwartz (1994).
The most influential study on national cultures was conducted by Hofstede (1980). Her
work was based on a comparison of the values of matched samples (employees and
managers similar in all respects except nationality) working in 53 national subsidiaries
of the IBM Corporation. This analysis indicates four dimensions of national culture:
• Individualism vs. Collectivism (ID) – whether a society emphasises individual
autonomy as opposed to responsibility to the group.
• Masculinity vs. Femininity (MA) – how far roles in society are differentiated
between men and women.
• Power distance (PD) – the extent to which inequality is accepted by the less
powerful people in society.
• Uncertainty avoidance (UA) – the level of concern about law and order in a
society.
A fifth dimension, long-term vs. short-term orientation (LT), was added later, based on
a study of students in 23 countries using a questionnaire prepared by the Chinese Value
Survey in Hong Kong (Hofstede, 1991). Data show that China is distinctly different
from Western countries on dimensions ID, PD and LT.
Trompenaars (1993) identified seven dimensions of culture. Five can be grouped in one
category: relationships with people (universalism vs. particularism, individualism vs.
communitarianism, neutral vs. emotional, specific vs. diffuse, and achievement vs.
ascription). The sixth dimension concerns attitudes to time and the seventh attitudes to
the environment. Trompenaars’(1993) seven dimensions have been described as
“conceptually related” to some of Hofstede’s (1980; 1991) dimensions.
Schwartz’s (1994) model is based partly upon Hofstede’s (1980; 1991) and Kluckhohn
and Strodtbeck’s (1961) work. The two basic dimensions in the model are conservatism
42
vs. autonomy (affective and intellectual) and self-enhancement (hierarchy and mastery)
vs. self-transcendence (egalitarian commitment and harmony). The study arranges value
types and broad dimensions into a continuum of values representing the relationship
between personality and cultural factors. Schwartz (1994) suggests that there are two
broad cultural archetypes of societies with different assumptions about life and work:
contractual cultures and relationship cultures.
The work of Hofstede (1980; 1991), Trompenaars (1993) and Schwartz (1994) has
alerted us to the importance of cultural differences, but has also been criticized as
somewhat simplistic (Walsham, 2002). For instance, Myers and Tan (2002) suggest that
the heterogeneity of national culture makes it difficult to relate national cultural values
to work-related actions and attitudes. Walsham (2002) states there is no significant
analysis of detailed work patterns and inadequate attention to the dynamic nature of
culture when adopting Hefstede’s (1991) model. Spencer-Oatey (2000) also argues the
interpretive role of culture is important when considering cross-cultural interaction or
reaction towards products created in a different cultural context.
A classic study showing the limits of using Hofstede’s (1980; 1991) dimensions for
predicting responses to IT implementation was Robey and Rodriguez-Diaz’s (1989)
paper. In this paper, the authors used case studies to show that a US organisation could
more successfully implement a major new information system in a second Latin
American country based on learning from more difficult experiences in the first. While
the experience in the first country would support the view that cultural differences make
implementation of information technology more difficult, the second implementation
showed that being an organisation headquartered in a culturally different country did not
prohibit the development of a culturally sensitive approach to such implementation.
Recent research adopting the interpretive role of culture is that of Trauth (1999; 2000).
This work examined the management of IT workers in an American-Irish cross-cultural
work environment as part of a detailed longitudinal study of the information economy in
Ireland.
43
Therefore, rich insights on how national cultural differences influence business
behaviour can be gained by adopting an interpretive perspective.
2.4 Managing IT outsourcing relationships in a cross-cultural
context
Culture is an important feature that influences IT outsourcing relationships, especially
when the geographic distribution of vendor resources continues to change in the
phenomenon of globalisation.
Some researchers collect data on IT outsourcing relationships in different countries and
compare these data. For instance, Han and Choe (1994) compared the IT outsourcing
relationships in Korea with those in Japan and then argued that the Korean organisations
tend to place a high value on long-term relationships than Japanese organisations
because Korean people have stronger family-, region-, and alumni-based ties and are
more likely to use such ties in economic activity.
Lacity and Willcocks (2000) compare practitioner responses in the UK and the US
regarding many aspects of IT outsourcing. Although the practice of outsourcing is
largely similar in the US and UK, there are some notable differences listed by the
authors that may represent cultural preferences or variation in scale and size of projects,
reflecting economic differences by country. Kern and Willcocks (2000) provide more
detail about outsourcing in the UK, finding that contracted relationships are more
rigorously held in the UK than in the US.
Ramanujan and Lou (1997) describe a US oil company contracting for IT maintenance
support outsourced from an overseas vendor. After an evaluation period the outsourcing
program was continued at a significantly reduced level.
Much has been written about ‘cultural’ risk factors, but how to manage or define these
risks is not well identified in the extant literature of IT outsourcing relationships (Kumar
44
and Palvia, 2002). Moreover, even fewer papers examine how cultural differences
influence the cross-cultural collaborations which have become the recent trend of IT
outsourcing. The few existing papers in IS literature are that of Barrett et al. (1997),
Meadows (1996), Sahay and Krishna (2000), and Walsham (2002).
Meadows (1996) considered the collaborations between the customers who have local
vendors and the customers who have overseas vendors. Findings suggest that the
organisations use the module-based rather than time-based division of labour when
facing a cross-national vendor. Integration by discrete modules with the overseas
vendors is found to be more effective than passing work to the overseas partners in a
“round-the-clock” arrangement (Meadows, 1996).
Sahay and Krishna (2000) described a case study of a software outsourcing venture over
several years from a Canadian multinational to an Indian software house. Cultural
contradiction was reported to produce conflict initially, but the relationship showed
signs of maturing after both sides had gained an increased understanding of the other’s
culture. Walsham (2002) also took an interpretive stance to describe cross-cultural
differences in software outsourcing projects. Two cases (i.e. a US-India project and a
Jamaica-India project) were selected to examine the work patterns. Findings suggest
that different ways of representing space between US developers and the Indian users
resulted in a resistance from Indian users to the implementation of the GIS (geography
information system). Hands-on approaches adopted by Indian managers to control
subordinates were viewed as an “adult-child” approach and were perceived as
inappropriate by Jamaican participants. Barrett et al. (1997) similarly described cross-
cultural collaborations in software outsourcing projects between US companies and
Indian companies, examining the forms of partnership and coordination mechanisms.
2.5 Gaps in the literature
Despite the apparent widespread use of outsourcing, outsourcing theory is still in its
infancy (Bartell, 1998). The antecedents, outcomes, characteristics, and mediators of IT
45
outsourcing have not been clarified so far. For one thing, the results reported in the
literature are inconsistent, thereby limiting the generalisability of findings from one
setting to another. In addition, outsourcing activities in a range of different
organisations are hard to compare with each other due to organisational idiosyncrasies,
environmental complexity and uncertainty.
The contract specifying the relationship between outsourcing vendors and their
customers has been focused on in the literature as a central issue in outsourcing. Little
academic research on relationship management in IT outsourcing has been published.
Existing studies of IT outsourcing relationships have some shortcomings:
• Firstly, the majority of the studies are propositional only: they use illustrative
cases to add weight to an argument or theoretical propositions, rather than to
generate or confirm theory. IS literature needs research to build theory about
relationship management in IT outsourcing.
• Secondly, a deficiency of unidimensional inquiry in terms of relationship
management for IT outsourcing is evident. Specifically, the nature of IT
outsourcing relationships varies significantly with strategic intent, contract size,
IT characters and even vendor background. Therefore, different approaches and
processes for relationship management are required in different outsourcing
situations.
• Thirdly, initial intent or arrangements are likely to change over the course of IT
outsourcing contracts as business and technology both evolve at high speed.
Prior static treatment of relationship management issues forfeits the chance to
capture the dynamic nature of IT outsourcing needs.
• Fourthly, extant literature has identified many factors at work to influence the
degree to which relationship management work produces desirable outcomes of
IT outsourcing within any given domestic market. But the issues become more
complex when tendencies are compared between practitioners of multiple
46
countries or when projects involve participants from multiple cultural
backgrounds.
Global and partnership-based alliances represent the latest trend in IT outsourcing
practice (Lee et al., 2003). Few studies take cross-cultural factors into consideration
when examining outsourcing arrangements. Even less of the IS literature, even the
subset dedicated to global information management, takes the interpretive role of
culture to examine cross-cultural interactions. However, a large body of information on
offshore IT vendor management turns up through internet searching. It appears to be an
issue of great interest to practitioners. Current newspaper articles and consultant reports
reflect such interest.
Hence, the issue of the management of IT outsourcing relationships in a cross-cultural
context is a relevant topic for research. The current research aims to start addressing this
gap in existing research.
2.6 Research problem and research questions
This section defines the overarching research problem and the specific research
questions to be addressed.
2.6.1 Research problem
The research problem to be addressed in this study was identified by reviewing
academic literature on IT outsourcing and is aimed at addressing a gap in the existing
literature. The overarching research problem is:
How can an IT outsourcing relationship be managed to enhance the
outcome of an IT outsourcing project in a cross-cultural context?
47
This problem is addressed from the perspective of the customer organisation that is
outsourcing its IT. The management issues perceived by the IT outsourcing organisation
are the focus of this research.
2.6.2 Research questions
Three specific research questions have been identified. The first research question aims
at in-depth understanding of the main research concept: the IT outsourcing relationship.
RQ 1 What are the distinguishing characteristics of a satisfactory IT outsourcing
relationship?
The second research question examines the way in which relationship management
contributes to the outcome of an IT outsourcing project:
RQ 2 How does relationship management influence the outcome of an IT
outsourcing project?
The last research question adds the cross-cultural issue to the context of relationship
management:
RQ 3 To what extent do cross-cultural differences affect relationship management
in IT outsourcing?
The research problem and the research questions are portrayed in the research
framework (Figure 2.6).
48
Overarching Research Problem: How can an IT outsourcing relationship be managed to enhance the outcome of an IT outsourcing project in a cross-cultural context?
Manage
2.7 Chapter summary
This chapter reviews the extant literature that is highly relevant to the research problem.
Four areas of literature were identified and then explored respectively: IT outsourcing,
the management of IT outsourcing, cross-cultural differences, and managing IT
outsourcing relationships in a cross-cultural context. After charting the direction the
literature has taken and highlighting the important and influential pieces of research
work, this chapter describes the research gaps identified from the existing literature. In
order to fill in the research gaps, the research problem and research questions for this
study were addressed and explained. They were also summarised and portrayed in a
research framework.
The next chapter will introduce and justify the research methodology adopted in the
empirical component of this research.
IT outsourcing relationship
Question 1
Outcome of IT outsourcing project
Question 2
Question 3
Cross-cultural differences
Figure 2.6: Research framework
(Source: Developed for this research)
3. Research Methodology
This chapter provides an overview of the research methodology identified as
appropriate for the research questions.
First, the epistemological stance of the research is discussed (Section 3.1). Then, the
research strategy adopted for this study is explained (Section 3.2). Next, the case design
(Section 3.3), data collection (Section 3.4) and data analysis (Section 3.5) for this
research are described. Lastly, quality issues of the interpretive case study research are
acknowledged (Section 3.6) and ethical issues are considered (Section 3.7). Figure 3.1
summarises the chapter structure.
Epistemological stance: Interpretivism (Section 3.1)
Research strategy: Case studies (Section 3.2)
Case design (Section 3.3)
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Quality of interpretive case studies (Section 3.6)
Ethical consideration
Data collection (Section 3.4)
Data analysis (Section 3.5)
(Section 3.7)
Figure 3.1: Structure of Chapter 3
(Source: Developed for this research)
50
3.1 Epistemological stance of this research：Interpretivism
This research examines how to manage IT outsourcing relationships in a cross-cultural
context. The philosophical paradigm must be appropriate for the research problem and
the research goal. Therefore, it is essential to make clear what philosophical
assumptions my research were based on and what assumptions I, as the researcher,
made when approaching the research problem.
Interpretivism was considered as the most appropriate approach for this research. From
the interpretivist point of view, what distinguishes human action from the movement of
physical objects is that the former is inherently meaningful (Schwandt, 2000). To say
that human action is meaningful is to claim either that it has a certain intentional content
that indicates the kind of action it is and/or that what an action means can be grasped
only in terms of the system of meanings to which it belongs (Fay, 1996).
The relationship management practice or behaviour we could observe in IT outsourcing
cannot be separated from its social context and the intentions of the actors. The aim of
this research was to capture the subjective consciousness or intent of the IT outsourcer’s
action from the “inside” when they are managing the IT outsourcing relationships. The
epistemological stance this research adopted was empathic identification. Empathic
identification is principally concerned with getting ‘inside the head’ of an actor to
understand what he or she is up to in terms of motives, beliefs, desires, thoughts, and so
on (Collingwood, 1946; 1961; Dilthey, 1958; Schwandt, 2000).
This epistemological stance for this study is relatively conservative in nature and lies at
the heart of what is known as “objectivism”. The concept of objectivism was defined by
Collingwood (1946; 1961), and specified by Outhwaite (1975) and Schwandt (2000).
In this study the contribution of human subjectivity (i.e., intention) to knowledge is
emphasized as the interpretivists normally do, without thereby sacrificing the objectivity
of knowledge. In other words, the researcher as an inquirer believes it is possible to
transcend or break out of his/her historical circumstances in order to reproduce the
meaning or intention of the actor. Method, correctly employed, is a means that enables
interpreters to claim a purely theoretical attitude as a disinterested observer. That does
not necessarily deny the fact that, in order to understand the relationship management
process in IT outsourcing, I behaved as an inquirer might have to, as a methodological
requirement, entering into the real life of others.
The procedure or method of this epistemology can draw on the concept of hermeneutic
circle. The process is portrayed as: “in order to understand the part (the specific
sentence, utterance, or act), the inquirer must grasp the whole (the complex of intentions,
beliefs, and desires or the text, institutional context, practice, form of life, language
game, and so on), and vice versa” (Schwandt, 2000, p. 193). Figure 3.2 shows how the
hermeneutic circle works.
What is to be interpreted (The part: specific sentence, utterance, or act)
Revise the interpretationGrasp the whole situation
(The whole: institutionalcontext)
What is to be understood
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The hermeneutic circle was applied to this research to reflect the adopted
epistemological stance.
Figure 3.2: Hermeneutic circle
(Source: Developed for this research)
52
3.2 Research strategy adopted for this study: Case studies
This section describes the appropriate research strategy adopted for this study. A
research strategy is a general plan of how a researcher goes about answering the
research questions that have been set (Saunders et al., 2003). Among the several specific
research strategies indicated in the interpretivism paradigm, case studies were chosen as
appropriate for this study. More specifically, interpretive case studies were applied in
this research. Hence, this section first explains why the case studies strategy is
appropriate for this study. Then it proceeds with the depiction of what kinds of case
studies are specifically adopted in this research.
3.2.1 Justification of case studies strategy
The case study, as a research strategy, encompasses specific techniques for collecting
and analysing data, directed by clearly stated theoretical assumptions. The case studies
make the capture and understanding of context possible and can be used to achieve a
variety of research aims (Pare and Elam, 1997). Comparing with other methods in
qualitative research, the case study aims to understand the case in depth, and in its
natural setting, recognising its complexity and its context. It has a holistic focus, aiming
to preserve and understand the wholeness and unity of the case (Punch, 1998).
In this research, case studies were adopted to understand how the IT outsourcing
relationships can be managed in cross-cultural contexts to enhance the performance of
IT outsourcing projects. With this research problem as the holistic research focus, the
background of the case organisation, the project context of each IT outsourcing case,
and the cultural environment of each project were also investigated so that the
complexity of the cases could be recognised and the cases in their natural setting could
be understood in depth. More specifically, six determining situations are explored to
justify the case study strategy.
53
Main strategy in the interpretivist paradigm. According to Walsham (1993), case studies
provide the main vehicle for research in the interpretive tradition.
Given the interpretive stance adopted (Section 3.1) in this study, the researcher
attempted to use case studies to derive her constructs by an in-depth examination of
how relationships of IT outsourcing were managed in a cross-cultural context or
between partners of the same cultural background. Themes or categories emerged that
hopefully were closely linked to the experiences of the relevant project participants
from the IT outsourcing cases.
Addressing the “how” and “why” questions. The primary condition for selecting a
research methodology is determining the type of research questions being posed (Emory
and Cooper, 1991). “How” and “why” questions favour the use of the case study
strategy (Yin, 1994).
In this study, the researcher aimed to understand how an IT outsourcing relationship is
managed in a cross-cultural context. The case study strategy was preferred to address
such kind of research questions.
Focus on contemporary events. Yin (1994) defines a case study as an empirical inquiry
that investigates a contemporary phenomenon within its real-life context, especially
when the boundaries between phenomenon and context are not clearly defined.
This research dealt with the cross-cultural relationship management in IT outsourcing,
which is a contemporary research issue in the globalisation environment. The research
phenomenon could not be studied outside the research context in which it occurred. The
case study strategy was chosen because of its advantages in creating novel and profound
insights into the research topic in the context of cross-cultural collaboration.
No control over the events by the researcher. A case study strategy is especially useful
in situations where the researcher has no control over the events as they unfold (Yin,
1994).
54
Relationship management in IT outsourcing in a cross-cultural context is an existing
phenomenon in practice and a current trend in the historical development of IT
outsourcing (refer to Chapter 1). The researcher had no control over relationship
management events in the IT outsourcing arrangements of an organisation.
Exploratory nature of the research. Case studies are useful when a phenomenon is broad
and complex, and where an existing body of knowledge is insufficient (Benbasat et al.,
1987). Darke et al. (1998) also sensibly suggest that the use of case studies in research
is useful in newer, less well-developed research areas, particularly where examination
of the context and the dynamics of a situation are important.
Relationship management in IT outsourcing is a complex topic and there is not much
published research about the management of an IT outsourcing relationship in a cross-
cultural context. Therefore, this research is exploratory in nature. A major method of
exploratory research is the use of case studies. Besides, the researcher aimed to capture
the dynamic nature of the relationship management in a cross-cultural context. Case
study strategy was selected as appropriate for this research.
Limited resource support and the restricted time frame. In academic research, the case
studies strategy is often confused with the ethnographic method. Yin (1994)
distinguishes ethnographies from case studies in that the former take a long period of
time to conduct and require very detailed observation in the everyday life of the
research participants. By contrast, case studies are conducted within a defined time
frame and do not necessarily imply the use of ethnographic techniques.
This research was conducted for the purpose of the research masters degree program
where limited resource support was available and a restricted time frame was defined.
Therefore, the case studies rather than the ethnographic method were deemed
appropriate for this study.
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3.2.2 Different types of case studies
Case studies can be categorised in many different ways. Cavaye (1996, pp 227-228)
argues that, “case research can be carried out taking a positivist or an interpretive stance,
can take a deductive or an inductive approach, can use qualitative and quantitative
methods, can investigate one or multiple cases; it can also be an unstructured,
interpretive, inductive investigation of one case; lastly it can be anything in between
these two extremes in almost any combination.”
In this sense, case studies conducted for this research were interpretive, inductive and
semi-structured.
Stake (2000) also distinguishes three types of case study: intrinsic, instrumental and
collective. An intrinsic case study is done when the case is unique and for the purpose
of its intrinsic interest rather than building theories. Instrumental case study is selected
to provide insights or to develop an existing theory. Collective case studies extend the
instrumental case study to cover several cases to learn more about the phenomenon,
population and general condition.
Case studies in this research were identified as instrumental case studies based on
Stake’s (2000) categorisation, because the particular cases selected were of secondary
interest, they played a supportive role, and they facilitated our understanding of how IT
outsourcing relationships should be managed in a cross-cultural context.
In contrast to interpretive case studies, positivist case studies emphasise the importance
of testing hypotheses when conducting case studies. In an interpretive case study, the
researcher analyses, interprets and theorises about the phenomenon against the backdrop
of a theoretical framework. Although the research process in qualitative research is
inductive, Merriam (1998, p. 49) notes that most interpretive case studies inherently
moulded or changed existing theory in that, firstly, data were analysed and interpreted
in light of the concepts of a particular theoretical orientation; and, secondly, findings
56
were usually discussed in relation to existing knowledge with the aim of demonstrating
how the present study has contributed to expanding the knowledge base.
An interpretive case study can generate both qualitative and quantitative types of data
and the two types inform each other (Bryman, 2001). Interpretive case studies could
also be regarded as ideographic research, which is concerned with a process being
researched in depth (Tsoukas, 1989), and intensive research, whose aim is to generate
understanding of a phenomenon by studying in-depth a small number of cases (Minger,
2003).
This study does not aim to test any hypotheses, as the literature on the management of
the IT outsourcing relationships in a cross-cultural context is less than sufficient for
hypothesis generation. The IT outsourcing activities in a range of different organisations
vary with the organisational idiosyncrasies and environmental complexity. It is regarded
as inappropriate to take findings of other research into this study for testing. This
research intends to analyse and interpret the thoughts and actions of the project
participants when they managed the IT outsourcing relationships. The insights were
generated in the light of the existing theory and the findings from the case analysis were
hoped to expand the current knowledge on the relationship management of IT
outsourcing and cross-cultural differences. The interpretive case studies are thereby
deemed an appropriate strategy for this research.
3.3 Case design
Having identified the interpretive case studies strategy as the one used in this research,
this section explains the case design of this study. An early decision about case design
involves the choice of using a single case or multiple cases, and the identification of the
number of cases. A more comprehensive case design includes cases configuration and
selection. This study adopted a multiple-case design (Yin, 1994) and three cases were
used to explore the research topic. The following issues relating to case design are
discussed in sub-sections:
57
• Multiple-case design (Sub-section 3.3.1)
• Number of cases (Sub-section 3.3.2)
• Embedded cases (Sub-section 3.3.3)
• Unit of analysis (Sub-section 3.3.4)
• Selection of case organisation (Sub-section 3.3.5)
• Case selection (Sub-section 3.3.6)
3.3.1 Multiple-case design
Yin (1994) pointed out that a single case can provide a full and rich description of a rare
phenomenon and contribute to knowledge. However it can not verify findings that
might be the result of idiosyncrasies of the research setting (Cavaye, 1996). The current
study aims to address how the IT outsourcing relationships can be managed in a cross-
cultural context to enhance the performance of IT outsourcing projects. The cultural
differences in managing an IT outsourcing relationship found in a single case might be
caused by the idiosyncrasies of the selected IT outsourcing project. If the single-case
design was adopted for this study, it would become even harder to achieve theoretical
saturation.
In contrast, the multiple-case design enables cross-case comparison and verifies
findings derived from different cases. In order to build robust theories, this study
examines the relationship management practice in different IT outsourcing cases to
triangulate evidence and verify research findings. Also in order to explore the
relationship management in a cross-cultural context, this study filled in the theoretical
categories through illustrating different cases with the IT outsourcing management
between partners of the different cultural background and between partners with the
same cultural background. The multiple cases were selected to examine relationship
management practice in different types of project performance. Thereby, the multiple-
case design was preferred as it could greatly improve the degree of theoretical saturation
for this study as opposed to a single case approach.
58
3.3.2 Number of cases
There is no specific ideal number of cases to be used in case study research. Perry (1998)
suggests that the widest accepted range falls between two to four as the minimum, and
ten, twelve or fifteen as the maximum. Eisenhardt (1989) asserts random selection of
cases (synonymous with sampling logic) is neither necessary nor desirable. The size of
sample depends on what you want to find out, how the findings will be used and what
resources (including time) you have for the study (Patton, 1990). In the current masters
degree thesis, time was a constraint. Therefore a small number of cases were decided
upon.
3.3.3 Embedded cases
For the purpose of addressing the current research questions, this research investigated
several IT outsourcing cases in one organisation. The outsourcing organisation
(customer) outsourced several areas of its IT functionality. A number of vendors
supplied the functionality. Some of the vendors had the same cultural background as the
outsourcing organisation, while the other vendors did not. In this sense, each
outsourcing arrangement is identified as one case; and all cases are embedded in one
case organisation.
The benefits of embedding multiple cases in one organisation are manifold. It helps
control for industry and size of the case organisation, which might influence the nature
of relationship management. All cases linking to one customer organisation of IT
outsourcing reduces the problem of incomparability in a range of case organisations.
Furthermore, it is efficient in terms of resources required.
3.3.4 Unit of analysis
Because this study examined pairs of relationship between customer and vendor in IT
outsourcing arrangements, each case was identified as an IT outsourcing project. More
59
specifically, all the projects were information systems development projects. A project
could vary from development of a range of information services to development of a
small billing application. Appropriate outsourcing cases could be clearly identified by
the existence of a legal contract between the case organisation and its vendors. By
comparing the management of the different projects, insights into relationship
management in a cross-cultural context could be obtained.
3.3.5 Selection of case organisation
The DE Company (pseudonym) in China was selected to provide the required cases for
the purpose of this research. The case organisation, DE Company, is a traditional state
owned company in the mechanism industry located in an east coast city of China. It
manufactures diesel engines to serve the Chinese domestic market primarily. It has been
engaged in developing IS for more than ten years. In recent years, the company has
adopted an IT outsourcing strategy to improve its business focus and hence to cope with
the ever-increasing competition in the industry. It outsourced several application
development projects to both local vendors and overseas vendors. The high executives
of DE Company have a pre-existing relationship with the Management School of Fudan
University in China where the researcher graduated. Through the former Fudan
supervisor of the researcher, DE Company permitted the access of the researcher to the
organisation resources and helped the researcher conduct this study in their organisation.
The research design of the embedded cases makes it crucial to select an appropriate
organisation in a relevant industry which could provide information-rich cases that are
valuable, important, interesting and high quality (Eisenhardt, 1989). The scope and
breadth of the study influence the selection of the case organisation (Brief and Dukerich,
1991). The research design impacts on the decision of selection (Eisenhardt, 1989). In
addition, the feasibility of sufficient access to the targeted interviewees and to
information resources is another important consideration in determining the selection of
60
case organisation (Patton, 1990). In the light of these guidelines, some criteria for
selecting the case organisation for this research were set:
Rich case content (Eisenhardt, 1989). Try to choose an organisation in the relevant
industry that can offer rich case data.
The manufacturing industry was selected because this industry has experienced intense
competition over the last decade. The gains in efficiency of the manufacturing industry
have become essential to the long-term viability of companies. The manufacturing
industry normally involves a variety of decision patterns, reactions, effects and
consequences, which may generate rich case content for this research.
Magnitude of the research (Brief and Dukerich, 1991). The scope and breadth of this
study was defined early in the introduction chapter when the research area was
identified.
The IT outsourcing service in this study refers specifically to the outsourcing of
application development services. Also, this research mainly focused on a service
recipient who was receiving the IT outsourcing services rather than providing the
service. The empirical study should take place in China and the data should be collected
from the Chinese market. Therefore, the selected organisation should be the Chinese
customer organisation which outsourced the application development projects to the
outsider vendors.
Research design (Eisenhardt, 1989). The benefits of embedding multiple cases have
been articulated in the previous paragraph of this sub-section.
To comply with the research design, the case organisation should provide a
representative group of IT outsourcing projects. Some of its vendors had the same
cultural background as the case organisation and other vendors had different cultural
backgrounds.
61
Feasibility of sufficient access (Patton, 1990). Research access is the foremost concern
for all kinds of studies to make the research design feasible and subsequently make the
research happen.
When selecting case organisations, the researcher had to take into consideration whether
the organisation agreed to permit access by the researcher and whether the interviewees
were willing to share their perceptions of the relationship management.
All the company names used throughout this thesis are disguised. The interviewees
from the case organisation requested I suppress all the information which might disclose
the identities of their vendors or disclose the identity of their organisation. They
explained that the request of suppressing their vendors’ identities complied with the
confidentiality agreement signed between their organisation and its vendor before each
IT outsourcing project, while the request of suppressing the identity of their
organisation derived from the concerns for disclosing their commercial secrets. The
researcher promised to keep all the interview recordings, field notes and archival
documents in a secure place and use pseudonyms or approximate data if necessary in
any thesis or other publication in response to their requests.
The descriptions of the case organisation will be detailed in Chapter 4.
3.3.6 Case selection
Three projects of application development outsourcing were identified as three
different cases. These projects are the outsourcing projects of Product Data
Management system (PDM project), Human Resource information system (HR project),
and Customer Relationship Management system (CRM project). The three IT
outsourcing projects were outsourced to three outside vendors from the year of 2002 to
2003. The vendor of the PDM project is a Western company based in the US; the
vendors providing outsourcing services for the HR project and the CRM project are
62
Chinese. In addition, the three IT outsourcing cases had different project outcomes. The
criteria for case selection in this study are explained in the following paragraphs.
The research design for this study requires that cases should be selected from the case
organisation. The selection of cases primarily relies on theoretical sampling (Eisenhardt,
1989); that is, cases are selected for theoretical reasons, not statistical reasons. Looking
for critical cases is one strategy for selecting theoretical samples (Patton, 1990). As
Eisenhardt (1989) notes, cases may be selected to fill theoretical categories and provide
examples of polar types. Cases that could generate meaningful, highly quality data
should also have the priority for selection (Patton, 1990). Specific criteria for selecting
appropriate cases from the case organisation are:
Theoretical sampling (Eisenhardt, 1989; Patton, 1990). The objective of theoretical
sampling is to uncover a range of possibilities that are theoretically relevant to the
research questions.
In order to examine the management of IT outsourcing relationships in a cross-cultural
context, the IT outsourcing projects with both Western vendors and Chinese vendors are
required. Insights about how to manage the IT outsourcing relationship in a cross-
cultural context might be generated through the comparison of those two groups of
cases.
Cases of polar types (Eisenhardt, 1989). Given the limited number of cases, it makes
sense to choose cases such as polar types in which the process of interest is
transparently observable (Pettigrew, 1988).
Thereby, the IT outsourcing cases selected from the case organisation had better have
various project outcomes. These kind of polar types are especially useful in observing
the different management practices of IT outsourcing projects which might turn out to
be different outcomes. This is of great importance to address the research questions.
Possibility of generating highly valid data (Patton, 1990). Selecting cases that can
generate high quality data (i.e., meet high quality requirements) is another determining
factor.
In this research, all the IT outsourcing cases are expected to have occured recently
within three years. This is because when interviewees are required to retrieve their
experience of managing the IT outsourcing relationships, the influence of arbitrary or
incorrect recollections of the outsourcing project could be decreased to some extent
given the fact that these projects were concluded not long ago.
Figure 3.3 shows the three IT outsourcing cases studied for the purpose of this research.
Detailed information about each case is presented in Chapter 4.
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3.4 Data collection
This section is concerned with how data collection was conducted in the field. The
process of data collection for this research followed a set of principles proposed by
Klein and Myers (1999) and Eisenhardt (1989). Some data collection strategies were
applied to ensure the research followed the protocol for interpretive case studies rather
than positivist case studies.
Case organisation: DE Company
PDM Project HR Project CRM Project
Western vendor: PT Company
Chinese vendor: NG Company
Figure 3.3: Three cases in the case organisation
(Source: Developed for this research)
Chinese vendor:SQ Company
Case 1 Case 2 Case 3
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3.4.1 Source of data
Due to time and access constraints, direct observation of the three IT outsourcing
projects or researcher participation was not feasible in this research. Therefore,
interviews and historical reconstruction from archival documents were used in this
research.
Interviews
Interview guide. In order to guarantee the best use of the limited time available in an
interview situation and meanwhile retain flexibility, three brief interview guides were
developed and customised for three different categories of interviewees (presented in
Appendix A 1.1, Appendix A 1.2 and Appendix A 1.3). These three categories of
interviewees are the executives of the case organisation (i.e. DE Company), the project
participants of the case organisation (i.e. DE Company), and the project participants of
the vendors.
The questions in the interview guide were semi-structured with a list of themes that
were relevant to the research problem, although these varied from interview to interview
depending on the categories of the various interviewees. All the actual questions were
worded in Chinese which is the working language of all the interviewees. The first
section of the interview guide normally started with a short description of the research
aim including asking permission to tape-record the interview. The researcher promised
to suppress the interviewee’s name in order to encourage the interviewees to talk freely
during the interview. Then, descriptive questions such as some demographic questions
were asked to learn about characteristics of the interviewees, company background and
settings of each IT outsourcing project. Then, structural questions followed in separate
sections relating to the research issues. The interview questions concluded with the
contrast questions to encourage interviewees to verify some key points and address any
further insights which they felt might be appropriate to the research problem.
65
Several interview approaches. In order to encourage interviewees to talk freely about
their prior experience with IT outsourcing relationships and their perceptions or views
of the relationship management, several approaches were used to avoid data bias in this
research. First, interviews were tape-recorded after gaining permission from the
interviewees. Confidentiality and anonymity were promised prior to interviews to
eliminate interviewees’ concerns and anxieties. Second, questions were designed
intentionally to be as open-ended as possible. In this way interviewees discussed
subjects freely and were not restricted to the interview protocol. Third, some pre-
established questions were asked of all interviewees in order to allow comparison or
confirmation across interviewees.
Selection of interviewees. The interviewees were selected based on theoretical sampling
strategy. The researcher wished to include particular categories, or a range of categories,
from which the researcher can generate data which will help develop the theory (Mason,
2002). Contrasting types of interviewees who provide useful perspectives include
people in the centre of events, the leader in charge and the subordinate who follows
(Neuman, 2003).
This study used theoretical sampling to select the interviewees. In the phase of formal
interviews with the customer organisation, key employees who were directly involved
in IT outsourcing relationship management practice in one or several projects were
targeted. For each case, at least three types of interviewees were identified, taking the
view from senior executives, IT experts and information system users respectively. In
the phase of informal interviews with the vendors, the individuals who participated in
the projects with DE Company were selected. The details of interviewees are presented
in Appendix B.
As explained in Chapter 1, Section 1.5, this thesis focused on relationship management
from the customer perspective. Hence, the main data were collected from the customer
organisation (i.e. DE Company). Limited data were from the vendors’ side. As a result,
nine in-depth interviews were conducted with seven employees from the customer
66
organisation, including six face-to-face interviews and three telephone interviews. Three
informal and brief interviews were conducted with the three project participants from
the vendor’s side. Each interview lasted between 1–3 hours. Four interviews agreed to
tape-recording, while the other eight declined. The details of the interviews the
researcher conducted for this study are presented in Appendix C.
Archival documents
The strengths of archival documents can be that they are stable enough to endure
repeated review, are unobtrusive in the sense of not being created as a result of the case
studies, are exact enough to contain details of events, are broad in coverage (i.e. long
time span) and settings, and are precise or quantitative (Yin, 1994). However, the
difficulties in accessibility due to privacy reasons and bias of author or incomplete
collection are the main weaknesses for this source of evidence (Yin, 1994). Therefore,
archival documents were taken as a complementary source of evidence to confirm the
interview data or provide a context for interview data.
Archival data in the form of published reports, internal documents including minutes of
meetings, company brochures, website material, and annual reports of recent years were
collected from the case organisation (i.e. DE Company) and public websites in this
research. Descriptions of the archival documents collected in this study are provided in
Appendix D.
3.4.2 Data collection process
In interpretive case studies, timing of data collection is not always under the
researcher’s control (Spitler, 2002). The Klein and Myers (1999) guidelines are highly
valuable to interpretive case studies because they allow the researcher to maintain
flexibility without losing sight of the overall research goal.
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Data collection for this study had to be adjusted as the research progressed. The original
plan was to interview those involved in the IT outsourcing project in the case
organisation before February 2005. In fact, interviewing was conducted in four stages
because new demands on data collection arose as the research progressed (refer to
Appendix C).
In the first stage, the researcher interviewed two high-level executives in China in
January 2005 and collected documents from public websites or the interviewees to
understand the organisation history, its owner structure, product-service offering,
culture, specialised vocabulary, and the IS development history of the case organisation.
Familiarising herself with the context allowed the researcher to make additional
judgments about research design and data collection strategies.
In the second stage, after appropriate cases were identified, the face-to-face interviews
were conducted with key case project participants in the case organisation in China.
Then the collected data and the preliminary data analysis were brought back to Australia
in February 2005 and initial data analysis was commenced. The need to add the third
case was identified, as the researcher sensed the collected data were not sufficient
enough to generate valid findings.
In the third stage, three telephone interviews regarding the third case were conducted in
August 2005. This case is of value to illustrate another polar type of IT outsourcing
project: a project that is more successful than the PDM project, but less than successful
than the HR project. The data collected from the third case helped the researcher
improve understanding as to how the case organisation managed the IT outsourcing
relationships with the Chinese vendors. However, when the researcher tried to address
the research questions using the findings generated from the data collected from the
customer organisation, the need to gain some insights from the vendor side became
essential, especially some insights about the perceptions of the cultural differences in
the relationship management.
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In the fourth stage, two brief interviews were successfully conducted with the HR
vendor and the CRM vendor in February 2006. The impossibility of gaining access to
the vendor of the PDM project forced the researcher to make a compromise. Another
Western vendor of the case organisation was identified; this vendor was willing to
provide insights from the perspective of the Western company. This vendor offered
strategy consulting services rather than IT outsourcing services to DE Company, but it
had the experience of relationship management with DE Company. The three interviews
were specifically used to cross-check the research findings about the cultural differences
in relationship management.
3.5 Data analysis
The analysis of case study evidence is often considered to be the most difficult and most
poorly developed aspect of case study methodology (Eisenhardt, 1989). It makes high
demands on a researcher’s ability to think, judge, decide, and interpret wisely.
Increasingly, the literature provides guidelines and suggestions to assist in the analysis
of case study data. The following part of this section examines the data analysis
strategies and data analysis process.
3.5.1 Data analysis strategies
Data analysis strategies are described from two perspectives: a macro perspective and a
micro perspective.
From a macro perspective
Two general steps can be identified from the macro perspective (e.g., Eisenhardt, 1989;
Sabherwal, 2003; Yin, 1994): within-case analysis and cross-case analysis.
Within-case analysis. Within-case analysis uses the rich insights available in each case,
which can best be obtained from thorough immersion into the transcripts for that
69
particular case (Sabherwal, 2003). Within-case analysis typically involves detailed case
study write-ups for each case (Eisenhardt, 1989). These write-ups are often simply pure
descriptions, but they are central to the generation of insight (Gersick, 1988； Pettigrew,
1988) because they help the researcher to condense the large amount of data in the early
stage.
For the purpose of this current research, the detailed case descriptions are given in
Chapter 4 as the result of within-case analysis.
Cross-case analysis. Cross-case analysis compares across cases, which requires a more
macro view of each case, and cannot be effectively obtained from detailed transcripts
and notes (Sabherwal, 2003). Cross-case analysis is where the researcher needs to
exhibit analytical skills and capabilities (Perry, 1998) and thus should comprise the
majority of the content of the data analysis section. Three tactics are suggested by
Eisenhardt (1989, p. 540): “the first tactic is to select categories or dimensions, and then
to look for within-group similarities coupled with inter-group difference; the second
tactic is to select pairs of cases and then to list the similarities and differences between
each pair; the third tactic is to divide the data by data source”.
These strategies were used in the data analysis process of the current research to
improve the likelihood of accurate and reliable theory building. The cross-case analysis
for this research is detailed in Chapter 5.
From a micro perspective
From a micro perspective, data analysis for each case generates themes through the
process of coding. Coding represents the operation by which data are broken down,
conceptualised, and put back together in new ways (Strauss and Corbin, 1990).
According to Strauss and Corbin (1990), three types of coding are identified: open
coding, axial coding, and selective coding.
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Open coding refers to the part of analysis that deals with the labelling and categorising
of phenomena as indicated by the data (Strauss and Corbin, 1990). The product of
labelling and categorising is a set of themes, which are the basic building blocks in
theory construction.
In this study open coding was first performed on the hardcopies of data. Data were
initially broken down by different research issues. While reading the transcripts
concerning each research issue, the comments of interviewees were highlighted. The
highlights help segment the data into relevant and meaningful pieces of text, or units
(Tesch, 1990). Subsequently, data relating to similar incidents were grouped together
and given the same conceptual label. The process of grouping themes at a higher, more
abstract, level is termed categorising (Strauss and Corbin, 1990).
Axial coding puts data back together in new ways by making connections between a
category and its sub-categories (i.e., not between discrete categories which is done in
selective coding) (Strauss and Corbin, 1990).
In this research, all codes/themes, which are the smallest unit of analysis, together with
sub-categories and categories, were organised in a table (presented in Appendix E). This
table presents the labels of codes/themes and categories, provides the descriptions of
each label, and links to each piece of original text from the raw data. The relationships
of codes/themes, sub-categories and categories are exhibited in a hierarchy structure in
this table.
Selective coding involves the integration of the categories that have been developed to
form the initial theoretical framework. It deals with the relationships among discrete
categories (Strauss and Corbin, 1990). “Since the analyst cannot readily keep track of
all the categories, properties, hypotheses, and generative questions that evolve from the
analytical process, there must be a system for doing so. The use of memos constitutes
such a system. Memos are not simply ideas. They are involved in the formulation and
revision of theory during the research process.” (Corbin and Strauss, 1990, p. 10).
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In this research, the researcher used pieces of original texts, codes, memos, and case
summaries and linked between them. This helped the researcher decontextualise the
interviewees’ comments and then recontextualise them. In other words, they enabled the
researcher to take the interviewees’ comments out of their original context and present
them in a different context.
The approach to presentation of the data analysis is provided in Chapter 4. Excerpts
from the interview transcripts are presented with the findings from the data analysis in
Chapter 4 and Chapter 5, so that readers are able to judge for themselves the validity of
the data analysis in this research.
3.5.2 Data analysis process
Overlapping data analysis with data collection not only gives the interpretive researcher
a head start in analysis but, more importantly, allows interpretive researchers to take
advantage of flexible data collection (Eisenhardt, 1989). Adjustments are allowed to be
made to data collection instruments, such as the addition of questions to an interview
guide (e.g., Harris and Sutton, 1986).
In this study, familiarity with the context helped the researcher design a more relevant
interview guide and the early analysis of the face-to-face interviews allowed the
researcher to make additional adjustments to the research design and the interview guide
during the telephone interview stage. For instance, a new focus on the expectation
around the relationship of parties that signed the contract was added after the research
contextualising stage. Similarly, the first two research questions were simplified more
or less based on the feedback of face-to-face interviews in the second stage.
In addition, interview transcripts and archival documents were analysed systematically.
This made it possible to gain an increasingly deep understanding of each interviewee’s
viewpoint and perspective. The links and contradictions within and across interviews or
cases were generated through iterative reading and analysing.
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As all the interviews were conducted in Chinese, only the relevant part of the interview
transcripts was finally translated into English by the researcher. About 30% of the total
amount of data was translated. The condensed transcripts in English involve about five
pages for each interview. The English version of interview transcripts was shared with
other experienced researchers and industry practitioners in workshops to check whether
there were other interpretations available and whether the analysis made sense.
Amendments were made after consulting the experts.
3.6 Quality in the interpretive case studies
The criteria for judging the quality of the interpretive case studies differ from those of
traditional ones that positivists normally hold. Merriam (1998) mentioned that
constructs of reliability and validity are not necessarily applicable to interpretive
research. Subjectivity can be considered a threat to valid inferences in interpretive
research. To ensure rigor in theory-building from cases, the researcher applied strategies
to improve reliability, validity and authenticity.
In the interpretive case studies, reliability means dependability or consistency in
conducting research, collecting and interpreting data (Neuman, 2003). Reliability was
improved by using a case study research protocol and database during the stage of
crafting instruments and protocols of this research.
Validity means truthfulness and refers to the relation between constructs and data
(Neuman, 2003). As to this study, strategies such as triangulation (using multiple data
sources and multiple perspectives from interviewees to confirm emerging findings and
multiple units of analysis) and examination by experienced academics (i.e., the
supervisors of the researcher) were applied to enhance validity. Besides this, one should
be cautious when translating these transcripts from Chinese to English.
Authenticity for qualitative researchers is more important: authentic accounts give a fair,
honest and balanced interpretation of social life that is true to the experiences of people
73
being studied (Neuman, 2003). In order to improve authenticity, the researcher’s
epistemological stance, and theoretical orientation, regarding this study were clarified.
3.7 Ethical considerations of the case study research
Ethical considerations are important in any research that employs human subjects
(Emory and Cooper, 1990). The primary purpose of research ethics is to protect all
parties involved from harm and adverse consequences resulting from involvement in the
research (Emory and Cooper, 1990; Patton, 1990).
In this research strict ethical procedures were applied throughout the research process.
For instance, participation was voluntary and participants were fully informed regarding
the nature of the research. Permission of tape-recording during the period of interviews
was sought in advance. The researcher maintained confidentiality of all commercially
sensitive documents, even though many were not under non-disclosure protection. At all
times the interviewees’ right of privacy was respected. The researcher adhered to ethical
codes of the University of NSW Human Research Ethics committee. The potential
ethical problems were addressed with careful planning and attention to detail. The
ethical impact of this research was evaluated as minimal by the Human Research Ethics
Advisory panel of UNSW.
3.8 Chapter summary
This chapter gives a comprehensive picture of how this research was conducted. The
epistemological stance this research takes is interpretivism. Case studies were adopted
as the research strategy for this research. More specifically, the interpretive case studies
were deemed appropriate for this research. Then, three cases were identified and all the
cases are embedded in one organisation in China. This case organisation is the customer
who received the IT outsourcing services. Data were collected from the interviews and
archival documents, both at the customer side and the vendor side. The data analysis
followed the guidelines for the interpretive studies. In order to improve the quality of
74
the interpretive case studies, some strategies were applied in this research. Finally, the
ethical considerations were also acknowledged.
The next chapter presents the description of the case organisation and the three IT
outsourcing cases.
4. Background to cases and single case descriptions
This chapter categorises and presents the data obtained from the three cases, and
summarises the findings from within-case analysis.
The chapter proceeds as follows. First, the approach to presentation of the data analysis
is outlined (Section 4.1). This approach is also used in the next chapter (Chapter 5
Cross-case analysis). Then, the details of the case organisation are provided to set an
institutional context for the three cases (Section 4.2). Next, a description of the three
cases provides an overview before more detailed within-case analysis of each individual
case (Section 4.3 to 4.5). Last, the three IT outsourcing cases are summarised in a
number of ways. The structure of Chapter 4 is shown in Figure 4.1.
Approach to presentation of the data analysis (Section 4.1)
Description of the case organisation
Description of the three cases and within-case analysis
(Section 4.2)
CRM case HR case PDM case (Section 4.5)(Section 4.4)(Section 4.3)
A summary of the three IT outsourcing cases (Section 4.6)
Figure 4.1: Structure of Chapter 4
(Source: Developed for this research)
75
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4.1 Approach to presentation of the data analysis
The case study analysis procedures, including data analysis methods, were discussed in
Chapter 3. This section describes the approach to presenting the analysis of the collected
data and presenting the interpretation of the findings from the data analysis. The
following issues are discussed in detail: approach for organising the data, data
presentation, use of quotes, presentation syntax, and confidentiality.
Approach for organising the data. The data collected from the field incorporates twelve
interviews and twelve archival documents, totalling some 300 pages of text. Techniques
such as computer-aided text analysis are suggested to deal with large volumes of
information in qualitative research textbooks (e.g., Yin, 1994). However, the archival
documents in this research unfolded in a clear-cut structure and the interviews normally
proceeded in good order and hence were easy to compare with each other. When the
researcher attempted to explore a specific issue, it did not take time to target the
appropriate texts from the empirical materials. There were seldom occasions that
required collecting information from lots of scattered sources. Therefore, the approach
of computer-aided analysis was not a necessity in this research and was taken over by
traditional approaches of manual analysis by the researcher to organise the qualitative
data from the field.
Data presentation. The most common responses to research questions were summarised
by theme. These themes were identified from open coding to represent the same
meaning which might be expressed in various ways. The themes evolved into a stable
set of categories that denoted more abstract concepts. The properties (characteristics)
and dimensions (range) of each category are identified to unite certain influences
beneath a single conceptual heading (Goulding, 1999). Where necessary, the categories
were further broken down into subcategories to attach greater explanatory power to
concepts which might relate to a particular phenomenon or to answer such questions as
‘when’, ‘where’, ‘why’, ‘how’ and ‘with what’. In addition, figures and tables are often
77
used to summarise findings or provide visual comparison across cases. The themes,
categories and properties/dimensions developed for this research are presented in
Appendix E.
Use of quotes. Themes, categories and properties/dimensions are underpinned by data
evidence and are supported by selected quotes from the interviews. The use of quotes in
presenting the findings increases the transparency of reporting research; i.e. it allows the
reader to trace the researcher’s steps from the data collection to the presentation and
interpretation of the results (Sandelowski, 1994). Quotes were purposefully selected to
enhance understanding of specific themes or categories.
Presentation syntax. The syntax in presentation accounts for the context of time and
place. Normally, the findings are expressed in the past tense, reflecting that the data was
collected in the past (in January 2005, August 2005 and February 2006). But where the
situation had not changed when the thesis was being written up, or when the patterns
and themes are introduced as a theory, the present tense is used because they still exist
now (in late 2005 and early 2006).
4.2 Description of the case organisation
The three cases studied for this research concern IT outsourcing projects undertaken by
one organisation: DE Company. In order to understand the three cases and analyse the
data appropriately, it is important for the researcher (and the reader) to understand the
organisational and historical context of the case organisation. This section first reviews
the organisational background of DE Company and briefly discusses the company’s IS
development history. Three phases of IS development at DE Company are identified
and it is during the last phase that the three selected cases were implemented. These
three phases are discussed respectively along with the business environment of each
phase. Lastly, a summary of the IS development in DE Company is presented.
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4.2.1 Organisational background of DE Company
The case organisation, DE Company, is a state-owned diesel engine manufacturer
founded in the late 1940s (STO_DE, 2005). The company is headquartered in Shanghai.
The company became the domestic market leader in the 1950s after successfully
producing the “model 6135” diesel engine which was the most advanced diesel engine
of its time (STO_DE, 2005). In the early 1990s, the Chinese government restructured
the company and publicly listed it on the Shanghai Stock Exchange (STO_DE, 2005).
The Chinese government maintained a little over 50 percent ownership and the
remainder was privatised (ANR_DE, 2004). DE Company employed approximately
4,000 staff and had a turnover of ￥4 billion (about 0.5 billion US$) in sales revenue
during the 2004 financial year (ANR_DE, 2004). DE Company is regarded as a typical
state-owned corporation in China.
Benefiting from high domestic demand, in 2004 DE Company’s sales grew and its
profits increased sharply compared to 2003 (ANR_DE, 2003; 2004). However, due to
tough competition within the industry, its leadership in some market segments (such as
mechanical engineering and marine engineering) were threatened or eroded by its
competitors. After China’s entry to the World Trade Organisation (WTO), DE
Company faced increasing competition from overseas. However, DE Company had
some competitive advantages in the development of new products because of lower
operational costs than its overseas competitors (ISH_DE, 2004). Even so, senior
managers believed that it was necessary for DE Company to change its work practices
and to improve performance with the aid of IT. It was hoped that the introduction of
new information systems would provide new opportunities to increase efficiency,
reduce costs and improve product quality (ISH_DE, 2004).
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4.2.2 IS development within DE Company
DE Company first started to use computers in the 1980s. Before 1995, the use of
computers was restricted to limited areas such as a computer-aided design (CAD)
system in the department of product design (PPF_DE, 2004). The concept of
information systems (IS) had not been established in the company until 1995, when the
Chinese government initiated and promoted the “CIMS project” among big state-owned
companies nationally (PPF_DE, 2004). CIMS refers to Computer Integrated
Manufacturing System. The government sought to select some big state-owned
companies to trial and fund this CIMS project. The experience of big companies
involved in IS was expected to diffuse along the supply chain so that information
technology innovation would be promoted throughout the industry in China. DE
Company was selected as one of the first companies to embark on the project trial.
From 1995, there was rapid IS development within DE Company (PPF_DE, 2004).
It is possible to identify three distinguishing phases for DE Company’s IS development:
the introduction of CIMS Stage 1 from 1995 to 1997; the introduction of CIMS Stage 2
from 1998 to 2001; and the outsourcing phase from 2002 to the present. Figure 4.2
shows the three phases.
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Each phase is discussed in detail in the following sections.
4.2.3 Phase 1: Stage 1 of CIMS project (1995-1997)
In the mid-1990s, DE Company applied for government funding to carry out the “CIMS
project”. The proposal was approved by the National Science Committee one year after
the application was submitted (PPF_DE, 2004). Hence, in 1995 DE Company started to
implement the first stage of CIMS.
External environment
In 1995 Chinese enterprises started to be aware of the concept of information systems
(IS). In order to speed up adoption of IS, the Chinese government decided to establish a
fund for encouraging large state-owned companies to adopt information systems.
Although China was changing to a market-oriented economy, its economy was still
largely centrally planned. The Chinese government still took a leading role in directing
state-owned companies to implement new technologies for industry use. At that time,
DE Company had been a listed company on the Shanghai stock exchange for several
Stage 1 of CIMS(Computer Integrated Manufacturing System)
Phase 1 Phase 3 Phase 2
Stage 2 of CIMS (Computer Integrated Manufacturing System)
Outsourcing of three IT projects
95 96 97 98 99 00 01 02 03 04 05 06 Year
Figure 4.2: Three phases of DE Company’s IS development
(Source: Developed for this research)
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years. It had become imperative for DE Company to improve its internal operations so
that the requirements for a listed company could be met. Using IS to improve
management efficiency and effectiveness became an important strategy for many listed
companies in China.
At that time, the machinery industry that DE Company was operating in, particularly the
diesel engine market, was booming with the rapid development of China’s economy
(ISH_DE, 2004). This attracted many new entrants to the industry and benefited the
rapid expansion of existing participants. More than ten companies had the capabilities to
challenge the leadership of DE Company at that time (ISH_DE, 2004). In addition,
many diesel engine manufacturers formed alliances with auto manufacturers, which
changed the nature of competition in the machinery industry. Furthermore, environment
regulators increasingly compelled manufacturers to provide diesel engines with greater
energy conservation and less pollution. DE Company was unable to adapt quickly to the
changes and lost its leading position in the industry (ANR_DE, 1995; ISH_DE, 2004).
Internal environment
Although DE Company successfully changed its governance structure to meet the
requirements of a listed company, its internal operation remained outdated (ISH_DE,
2004). Collection and analysis of manufacturing data was still performed manually.
This caused delayed information feedback, misunderstanding in communication, and
difficulties in collaboration. Senior executives were not able to make a fast and
appropriate decision due to incomplete and inaccurate information. The manual
approach to managing the design data led to a long product design cycle. This resulted
in a high rejection rate for the finished product (ISH_DE, 2004).
IS project(s)
At the first stage of the CIMS project, the primary task of DE Company was to establish
reliable infrastructure and electronic management of some key data with the aid of
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several interconnected computers (ISH_DE, 2004). DE’s executives did not know that
IS could facilitate cross-functional collaboration and hence did not address such
functionality in the first stage of the project. However, management of DE Company
were now aware that IS helped improve management efficiency (ISH_DE, 2004).
DE Company implemented an engineering information system project and a
management information system project. Each project got financial support of ￥9
million (approximately 1.2 million US$) from the government (PPF_DE, 2004). The
two systems were planned to be integrated with each other in order to remove
bottlenecks in manufacture scheduling, product design and product manufacturing.
There were more than 20 employees working in the IS department of DE Company
during this period (ISH_DE, 2004). Most had no prior experience in developing
information systems. China lacked quality software for engineering management or
product design or the software packages available were not suited to the unique
requirements of DE Company. Therefore, senior executives decided to jointly develop
the information systems with LC Software Company and J University which had a
CIMS research centre (PPF_DE, 2004). LC Software Company was a local software
provider located in north China while J University was a prestigious university that
specialised in engineering.
Outcomes of the IS project(s)
The first stage of the CIMS project was concluded with the successful adoption of five
subsystems: bill of material information system (BOM system), production schedule
system, sales information system, inventory control system and financial information
system. DE Company jointly developed the first four subsystems with its partners; the
last one, financial information system, was directly bought from LC software company.
Among the five subsystems, the inventory control system was received most positively
from the end-users in DE Company (ISH_DE, 2004). It greatly improved the
efficiencies in inventory and supplier management. However, the BOM system did not
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work well, especially when design data needed frequent change upon the request of
customers (ISH_DE, 2004). The production schedule system was only applicable in the
manufacture of DE’s “135-model” diesel engine (which is one of the company’s four
manufacturing lines). This was due to software design problems with the BOM system
(ISH_DE, 2004).
Despite its limited success, the first stage of the CIMS project nevertheless passed the
final CIMS evaluation and gained positive feedback from the government in 1997
(PPF_DE, 2004). All the employees of DE Company acknowledged that they had learnt
a lot and accumulated much experience in information systems development from their
involvement in this project (ISH_DE, 2004).
4.2.4 Phase 2: Stage 2 of CIMS project (1998-2001)
Having completed the first stage of the CIMS project, DE’s proposal for the second
stage was approved quickly by the government in 1998 (PPF_DE, 2004). The main
objective of the second stage of the CIMS project was to tailor the subsystems to better
fit the work style of end-users and integrate some subsystems to strengthen
collaboration between different departments. This phase of work was undertaken by
DE’s own IT staff.
External environment
In the late 1990s, the Chinese government took steps to stimulate domestic demand
(ISH_DE, 2004). Competition in the machinery industry intensified. Customers
demanded higher performance and greater reliability from diesel engines. Foreign
competitors started to consider entering China’s market after China entered the World
Trade Organisation (WTO) in 2001 (ISH_DE, 2004). DE Company realised that in the
long run domestic manufacturers of diesel engines would be seriously threatened by
multinational companies despite the disadvantages they had in price and post-sales
service.
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The industry ranking of DE Company fell again in 1999 (ANR_DE, 1999; ISH_DE,
2004). The main reason was attributed to its slow response to market changes and
inefficient internal management (ISH_DE, 2004).
Internal environment
In 2000, DE Company developed an emergency plan to address its internal management,
business expansion and new product development strategies (ISH_DE, 2004).
Management saw IS as an enabler to improve internal management efficiencies and to
shorten the life cycle of new product development. They created a new IT department
that was given comprehensive executive powers. The newly structured IT department
was authorised to coordinate with other departments in developing information systems
(PPF_DE, 2004).
IS project(s)
During the first stage of CIMS, DE Company had already developed some isolated
subsystems which supported the business operation to some extent. Having worked with
these subsystems for three years, DE’s employees gradually got familiar with IS and
identified new requirements for upgrading these subsystems (ISH_DE, 2004). In the
first months of 1999, IT employees strived to customise and extend existing
functionalities; but later on they came to realise the importance of establishing an
overall system architecture to help integrate isolated subsystems (ISH_DE, 2004). With
the help of Machinery and Computers Company, a local system provider that mainly
services the machinery industry, a system platform named “3S2000 system” was
developed to partly solve the problem of interconnectability in the year of 2000
(ISH_DE, 2004). A financial information system, which was initially bought during the
first phase of IS development, was implemented successfully at this stage. New
functionalities were also developed by DE’s IT employees in response to the new
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requirements identified by end-users. However, the business processes of DE Company
remained unchanged during the second stage of the CIMS project (ISH_DE, 2004).
Outcomes of the IS project(s)
The second stage of the CIMS project was concluded with the successful
implementation of the subsystems which supported most key business processes within
DE Company (KBP_DE, 2003). Some of the subsystems from the first stage of CIMS
were upgraded while others were developed during this second stage (KBP_DE, 2003;
ISH_DE, 2004; ISP_DE, 2002). Table 4.1 summarises the subsystems and the key
business processes they support.
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Table 4.1: Subsystems developed at the second stage of the CIMS project
Subsystem Key business processes supported
Upgrading or new development
Computer-aided design (CAD) system
Product design Upgrading
Bill of material (BOM) system Product engineering Manufacturing scheduling
Upgrading
Production schedule system Manufacturing Upgrading
Document management system Product design Product engineering Sales management
New development
Inventory control system Inventory management Upgrading
Financial information system Financial management Upgrading
Sales information system Sales management Upgrading
Supplier management system Supplier management New development
Manufacturing management system Manufacturing New development
3S2000 system All business processes New development
(Source: Developed for this research)
The subsystems helped DE Company improve its internal management efficiency. The
direct benefits gained from those subsystems were reduced workload, shorter product
development cycle and customer delivery lead-time, more accurate product recording,
more reasonable production scheduling, lower level of inventory, and accelerated cash
flow (ISH_DE, 2004). DE’s employees and executives also benefited a lot from this
stage, and a professional and experienced IT team was formed which was invaluable to
the company’s further IS development (ISH_DE, 2004; ISP_DE, 2002).
However, the existing business process was not changed and this restricted the
effectiveness of information systems to localised enhancement rather than overall
organisational improvement (DRA_DE, 2004; ISH_DE, 2004). In addition, there was
no consolidated database to be shared by all subsystems, which led to inconsistency in
product records among different subsystems (ISH_DE, 2004).
87
4.2.5 Phase 3: outsourcing phase (2002-present)
The process of developing IS and implementing IS was a learning process for DE
Company aimed at leveraging IS to enhance its core competitive advantages. In the
third phase, senior executives of DE Company realised that there were other options to
manage the company’s IT resources, such as IT outsourcing (ISP_DE, 2002). With the
organisation’s rapid expansion, DE Company re-evaluated its core business and decided
to outsource IS development. Three main IT outsourcing projects (PDM, HR and CRM)
were implemented during this period.
External environment
Benefiting from China’s rapid economic progress, DE Company faced a booming
market. The real estate market grew very fast in big cities like Beijing and Shanghai,
which stimulated a new wave of demand for diesel engines used in construction
(ISH_DE, 2004). DE Company hoped to seize this opportunity to expand its market
share. Sales reached 100 thousand diesel engines in 2004, which was double the number
sold in 2002 (ANR, 2002; 2003; 2004; REN_DE, 2005).
The competition structure in the diesel engine industry continued to change after 2002
(REN_DE, 2005). Some overseas competitors in the diesel engine industry entered into
the Chinese market through joint ventures or collaboration with local manufacturers,
while domestic competitors also strived for market share (ISH_DE, 2004; REN_DE,
2005). Compared with the current market leader, DE Company lagged far behind and
the gap has further widened in recent years. However, its industry ranking returned to
the top tier (consisting of the top five or top ten), which indicates the success of DE
Company during this period (ANR, 2004; ISH_DE, 2004; REN_DE, 2005).
Internal environment
88
Although DE Company realised the importance of business process re-engineering
when adopting IS, senior executives still took a conservative approach to avoid
upsetting the existing management structure. Evolutionary instead of revolutionary
changes occurred to existing business processes (ISP_DE, 2002; 2003; 2004; ISS_DE,
2002). DE’s senior executives were becoming more capable of managing IT resources
and expected to reach world best practice in IS development (ISH_DE, 2004). The end-
users in DE Company became more confident and proficient in performing their work
in an IS environment. In line with its strategy to focus on the core business (RSD_DE,
2002; ISSP_DE, 2002), DE Company jointly invested in a new company, SQ Company,
along with its partner Machinery and Computers Company, and transferred half of its IT
staff to SQ Company (STO_SQ, 2005).
IS project(s)
Three IS projects were carried out during this period. These three projects are the three
cases for this research. The following briefly outlines the projects; a detailed description
of the cases is presented throughout Section 4.3 to Section 4.5.
The first project was initiated in 2002 when DE Company found inconsistencies in
product records among different subsystems. DE Company knew that the main task
every manufacturer has to face when adopting IS is to properly specify the source data
and to make it consistent for tracing throughout the whole product life cycle. Hence, DE
Company considered implementing a Product Data Management (PDM) system, which
aimed to integrate all the existing subsystems and to establish a product database used
by all the existing subsystems (ISH_DE, 2004; ISP_DE, 2002). DE Company decided
to outsource this project to PT Company, a world leader in the area of manufacturing
industry headquartered in the United States (STO_PT, 2005). The project started in
December 2002 and was concluded at the end of 2003 (ISH_DE, 2004; ISP_DE, 2004).
DE Company regarded the PDM project as the most challenging but influential IS
89
project in its IS development history, despite the fact that interviewees showed
dissatisfaction with the project outcome.
In late 2002 DE Company considered the development of a human resource (HR)
information system. The new HR system was expected to be capable of providing more
efficient personnel administration and more accessible information for management
(ISH_DE, 2004; ISP_DE, 2004). The project became a top priority when senior
management realised that the HR system would be able to deliver immediate value to
every employee in the organisation (ISH_DE, 2004). DE Company cooperated with a
local provider, SQ Company, and signed a contract to outsource its HR system
development. The contract specified that the project would start in January 2003 and
delivery of the HR system would be completed by September 2003 (ISH_DE, 2004;
ISP_DE, 2004).
In mid-2003 the marketing department of DE Company expressed a strong wish to
develop a customer relation management (CRM) system. The need to develop a CRM
system became urgent when DE Company found it had no specialised information
system to effectively deal with its expanding market (ISH_DE, 2004). In order to
capture the opportunity presented by high growing demand, DE Company hoped the
new CRM system could help improve its capability to manage its new customers as
well as retain its old customers. DE Company finally outsourced the project to a local
vendor, NG Company, who had successfully promoted CRM systems among a number
of organisations in China (STO_NG, 2005). This project started in early 2004 and had
not yet been concluded when interviews were conducted in August 2005.
Apart from these three outsourcing projects, DE Company also upgraded its inventory
control system and other related systems to adapt them to the new PDM system. A bar-
code system was also developed during this period.
90
Outcomes of the IS project(s)
The prominent characteristic of IS projects in this period was the integration and
collaboration at different subsystems. This indicated that DE’s IS development had got
to a new level compared with the first two phases which were characterised by isolated
subsystems unable to interconnect. Having carried out these IS projects, DE Company
started to consider a more systematic and wide-ranging IS project: an enterprise
resource planning (ERP) system (ERP_DE, 2003; 2004). It was widely acknowledged
that IS contributed to the improvement of DE’s internal management, although some
negative feedback did result from some projects within the company (ISH_DE, 2004;
ISP_DE, 2004). More detailed outcomes of each outsourcing project are discussed in
Section 4.3.
4.2.6 Summary of DE’s IS development
IS development in DE Company showed a typical IS adoption process in a state-owned
company in China (DRA_DE, 2004; 2005). After implementing the IS projects, DE
Company was becoming a modern organisation able to actively participate in the
information age (DRA_DE, 2004; 2005). Figure 4.3 summarises DE’s IS development
over time and identifies the business impact of the various IS projects.
4.3 Cas
This section
what the r
supporting
4.3.1 De
In 2002, th
different d
ISP_DE, 20
the diesel
manufactur
the updated
parameters
PDM
CRM HR
Complexity
of business
impact of
IS project
Phase 1 Phase 2 Phase 3
9
The last interview on DE’s side was
S
Figur
(Sour
Stage 1 of
e 1 – PDM ca
first describes th
esearcher found
quotes are also pro
scription of th
e senior executiv
epartments about
04). The problem
engine market
ing department w
data in time w
in response to th
5 96 97 98 99
e 4.3: DE’s IS De
ce: Developed for
tage 2 of
91
se: description and within-case analysis
e PDM project. Then the within-case analysis summarises
that sheds light on the three research questions. The
vided if necessary.
e PDM case
es of DE Company received a lot of complaints from
the inconsistency of product records (ISH_DE, 2004;
became a serious impendency when tough competition in
caused frequent changes in customer orders. The
hich uses product parameters routinely was unable to get
hen the engineering department modified some of the
e request of customers (ISH_DE, 2004). There was an
00 01 02 03 04 05 06 Year
Bar-code
Small projects to automate
velopment projects and their business impact
this research)
92
urgent need for DE Company to specify the source data in a uniform format and keep
the data consistent through each step of the product lifecycle. In September 2002, DE
Company decided to develop a Product Data Management (PDM) system. The PDM
system was expected to lay a solid foundation for future implementation of an enterprise
resource planning (ERP) system. DE Company chose to outsource the PDM project
rather than develop it, because the strategy of DE Company at that time was to focus on
its core business of manufacturing diesel engines (ISSP_DE, 2002; RSD_DE, 2002).
DE Company also hoped that outsourcing the PDM system could help them access
world-class manufacturing practices. Hence, DE Company set its sights on overseas
vendors. The Chief Information Officer (CIO) of DE Company explained to the
researcher why DE Company decided to outsource:
“The organisation should not focus on the development of software but on the
improvement of design technology of diesel engines and expansion of its
business. Meanwhile, domestic vendors are inexperienced and do not have
adequate capabilities in developing such a significant project like the PDM
system. We would like to tap into the world-leading technology by considering
outsourcing the project to a prestigious overseas provider…” (CIO of DE
Company)
After careful evaluation, two vendors were identified as final candidates – BM
Company and PT Company. It was believed that both vendors had the capability to
offer an advanced and extendable system with a complete solution for integration with a
future ERP system. DE Company was satisfied with the extensive experience both
companies had in working with various world-class organisations. DE Company
believed BM’s product represented an integrated solution with powerful functionality,
whereas PT’s product was perceived to be a good example of a product of an industry
specialist (DRA, 2004; ISH_DE, 2004). In the end, DE Company chose PT Company as
the vendor for its PDM system which showed its preference for an IT company with
specialised industry experience.
93
PT Company is a large vendor established in the United States. It specialises in IS
solutions for product lifecycle management. Nearly 60% of the customers of PT
Company operate outside of North America, with partners and customers all over the
world (STO_PT, 2005). In 2000 PT Company became aware of the need to offer their
IS development service with localised content and aligned with local business practices
(STO_PT, 2005). Hence, it published its company website in ten languages in 2002.
Their first localised web service in Asia went live in Japan at the beginning of 2002
(STO_PT, 2005). PT’s operations were very successful in North America and had a
good reputation among European countries. It set up its business in China in 2000. DE
Company was among PT’s first few customers in China (STO_PT, 2005).
In September 2002, DE Company signed the contract with PT Company, with the
project to commence in December 2002 and to conclude in December 2003. According
to DE’s plan (ISP, 2002), this project was only the first stage of its PDM system. The
main task at this stage was to standardise the product data with the aid of a product
record database on the enterprise intranet. This would facilitate the consolidation of the
document management system, engineering bill of materials (EBOM) system, and
production schedule system. Internal documentation outlined the plan for the second
stage of the PDM system which would take place from October 2004 to June 2005 (ISP,
2002). It aimed to integrate computer-aided design (CAD) system and computer aided-
process planning (CAPP), reserve interfaces to future ERP systems, and develop a
production bill of materials (PBOM) system (ERP_DE, 2003; 2004; ISH, 2004).
Early in 2003, the vendor (PT Company) assigned four system developers including one
project manager working on a full-time basis on the customer site. The project manager
took charge of the project until the system passed the system test in October 2003. One
sales representative from PT Company followed the whole process from pre-sales
support, project support and post-sales support.
At DE Company, a steering committee and a project team were formed to work closely
with their vendor during the project period. The steering committee was composed of
five senior managers including the vice president of the company. The project team was
made up of seven IT staff and ten business managers. The organisational structure for
the PDM project is described in Figure 4.4. The line between the solid line boxes means
the two groups of members directly interacted during the project.
PT Company DE Company
94
DE Company and the vendor, PT Company, collaborated with each other throughout
the project including the development and the implementation of the PDM system. The
newly developed PDM system went through testing in October 2003. The
implementation work in different departments of DE Company used a phase-in
approach. The progress of the PDM project is presented in Figure 4.5.
Figure 4.4: The organisational structure for the PDM project
(Source: Developed for this research)
Project team (4 system
developers)
1 Sales representative
Project team (7 IT staff and 10
business managers)
Steering Committee (5 senior executives)
95
The project was implemented in line with the project schedule. The contract was
The new system was not readily accepted by DE’s end-users. The PDM system
4.3.2 Within-case analysis of the PDM case
This section summarises what stood out in the PDM case about the three research
questions. It provides a preliminary answer to each research question. The findings will
be discussed in greater detail in the cross-case analysis section in Chapter 5.
fulfilled completely. DE Company had to honour all agreed payments to PT Company.
But a lot of problems were detected when the system was run in a real business
environment. Some departments (e.g., product design department) claimed that the new
system failed to support their daily work. Most of the interviewees (six out of seven)
showed their dissatisfaction towards PT Company; the seventh interviewee declined to
comment on PT Company.
currently runs well when used for one product line, the model 114 diesel engine. It was
not put into operation for other products. The second stage of PDM was shelved and
delayed indefinitely due to the problems DE Company met during the first stage.
Figure 4.5: The progress of the PDM project
(Source: Developed for this research)
2001 2002 2003 2004 2005
Considering the
introduction of
PDM system
Vendor
selection
and
negotiation
Proposed 2 stage
of PDM project
nd
System
migration and
implementationSystem
test
System
development
1 stage of
PDM project
st
Interviews for PDM project were conducted
Jan Jan Sep Dec Oct Dec Jun Oct
Project
started
Contract
signed
Project
ended
96
characteristics of a satisfactory
IT outsourcing relationship?
nd benefit
sharing when the contract was signed. But they formed only a transactional (impersonal,
the the interviewees agreed that the development of the
relationship was less than satisfactory. For example, one project team member of DE
Company said:
(PDM project team member of DE Company)
Co the
pro cing
rel the
PD tract
im
when they described the relationship. As the CIO of DE Company said:
e help...”
(CIO of DE Company)
Research question one: What are the distinguishing
In the PDM project, DE Company and its vendor had no prior collaboration experience.
DE Company expected a partnership style relationship including risk a
overly structured, and governed mostly through the formal contract) relationship when
project was concluded. All of
“We [DE Company and its vendor] had only a contractual relationship [in
Chinese culture, the contractual relationship here has a negative meaning].
They seemed polite when talking with us, but were really difficult to approach.
However, we expected a relationship like partnership or like friends in addition
to the contract…”
ntract implementation, trust building, and the value the vendor delivered to
ject were identified as the distinguishing characteristics of an IT outsour
ationship when the interviewees described and explained the relationship with
M vendor. Staff of DE Company perceived that the vendor only focused on con
plementation and did not make time to establish trust between the two project teams
“We [DE staff] expected to learn the best management practice of the top
mechanism company through cooperation with our vendor. However, they gave
limited help in the project… They adhered too much to the contract…The post-
sale support only took the responsibility to provide explanations to the system
and to offer training on how to use the new system… It was of littl
97
me
The interviewees in the PDM project perceived the PDM vendor as a good contract
ma
improve the possibility of implementing the contract successfully in the PDM project.
However, they also argued that the PDM vendor should not implement the contract
whi contract implementation but might lower satisfaction.
The statement of the CIO of DE Company could be an example:
f PDM system is
pretty limited…” (CIO of DE Company)
Co DM
pro for
dif ject
ob user
sat
“The delayed understanding really restricted us to address appropriate
t during
Research question two: How does relationship management influence the outco
of an IT outsourcing project
ker. They admitted that a comprehensive and well-prepared contract might help
literally regardless of newly addressed requirements by the customer organisation,
ch might lead to a successful
“Our vendor completely implemented the contract and cleared the accounts.
From the contract perspective, it is successful. The vendor achieved almost all
clauses specified in the contract. However, we are not satisfied with the project
outcome. It was quite normal for us to change some requirements when we
were not familiar with the PDM system, while the vendor appeared reluctant to
change if it was not included in the contract. The current use o
mmunication between DE Company and its vendor was not effective in the P
ject according to interview data. This was regarded as the main explanation
ferent understandings of system requirement and different expectations on the pro
jective, which was perceived to influence final system implementation and end-
isfaction. The PDM project manager of DE Company also commented:
requirements. This might lead to the disappointing project outcomes…” (PDM
project manager of DE Company)
The interviewees told the researcher that the two project teams were not familiar with
each other before the PDM project and did not have sufficient chances to interac
98
the wly
de ould
no gs, which restricted the vendor from realising its
true value. Then trust building and eventual project outcomes were also influenced. The
DE staff were not satisfied with the human resources PDM vendor allocated to the PDM
pro ree
ye ent
sk was
pe all made DE interviewees
doubt whether the PDM project was a successful investment:
were thinking about
and worrying about. It is a factor that led to unsatisfactory result…” (PDM
fect
Interviewees from
accustom reement. Once
project. The vendor was perceived to be incapable of explaining the ne
veloped system in the language of the end-users, and thus the two project teams c
t grasp each other’s correct meanin
quote below supports the above summaries:
“We were not familiar with each other. We found they were incapable of
explaining the system in the language of the end-users. We could not correctly
grasp the meaning of the new system and hence might not feel the true value of
our vendor…” (PDM project manager of DE Company)
ject. The project manager of PDM vendor, a PhD graduate who had less than th
ars’ working experience, was perceived to lack industry experience and managem
ills. The sales representative who took the key role in coordinating the project
rceived to be inappropriate and to lack authority. These
“…the system developers assigned for this project were technical experts who
did not have adequate industry experience by my observation. The project
manager from the vendor is a PhD graduate who has worked for less than
three years. He did not show his qualified capability in coordinating and
managing the project, let alone understanding what we
project team member of DE Company)
Research question three: To what extent do cross-cultural differences af
relationship management in IT outsourcing?
DE Company perceived that staff from the PDM vendor were
ed to developing trust by means of abiding by the contract or ag
99
orde peared to be sensitive and reluctant to
accept any work scope changes against the contract. However, employees in DE
” (PDM Project team member of DE
Company)
So ned
or y in
a f . In
co staff felt that communicating in a formal manner would dampen
enthusiasms in establishing close working relationships. For example, one project team
lking with us, but were difficult
to really approach... Gradually, we were reluctant to express our true feelings
a deadline was agreed in a contract, the vendor did their best to meet the deadline in
r to win the other party’s trust. The vendor ap
Company preferred to develop trust by exchanging favours. The interviewees thought
that a sound relationship would be formed when both parties are considerate, helpful,
and generous. DE interviewees also told the researcher that people from PDM vendor
tend to rely on the tangible agreement or contract to govern the business activity
explicitly, while they do not feel comfortable about this. A project team member of DE
Company described these differences:
“It is quite common for new requirements to be addressed when implementing
the contract… But they insisted that they should adhere to the contract first in
order to complete it in time… They [PDM vendor] preferred to self evaluate
their work against the contract…
me of the DE interviewees felt that staff from the PDM vendor liked to have plan
scheduled communications and communicated with project team of DE Compan
ormal, impersonal, or business-like manner in order to show their professionalism
ntrast, DE
member of DE Company told the researcher that:
“Their over-formal style of communication always reminded us that we [DE
employees and the PDM vendor’s employees] were only in a contractual
relationship [in Chinese culture, the contractual relationship here has a
negative meaning]. They seemed polite when ta
to them, as they never treated us as friends… (PDM project team member of
DE Company)
100
DE rests
wi two
sta the
PDM project they were likely to get the second stage of the PDM project easily.
However, the vendor’s work did not satisfy DE Company. For example, the vice
e would consider contracting the second stage of
PDM project to them [PDM vendor]… I thought that the vendor knew our
DE onal
bo ere
im two
parties could be established immediately despite the fact that the two parties had no
prior business relationships. Guanxi is defined as “friendship with continuous exchange
their belief that social/personal bonds could not substitute for a formal business
interviewees told the researcher that they tried hard to establish mutual inte
th the PDM vendor in the project. That is why they divided the PDM project into
ges, hoping to imply to the vendor that if they performed well in the first stage of
president of DE Company said:
“PDM project was of strategic significance to us [DE Company]. We took
great efforts to establish mutual goals with our vendor [PT Company]…We
[DE Company] implied that if we could get along well with each other in the
first stage of PDM project, w
mutual interests…But what a pity, we [DE Company and its PDM vendor] did
not establish a long-term partnership in the end…” (Vice president of DE
Company)
interviewees showed their special attention to the establishment of social/pers
nds. They believed that, to project team members, social/personal bonds w
portant when collaborating with partners. If Guanxi was felt, a trust between
of favours” (Pye, 1982). Tsui and Farh (1997) concluded that 'relationships based on
common ground' are the essence of Guanxi. In Chinese society, Guanxi means the
network of relationships among various people or parties that exchange favours, which
are expected to be done regularly and voluntarily. Guanxi (social/personal bonds) is
used to resolve some of the problems encountered between different parties in Chinese
society.
In contrast, although the PDM vendor might understand that the existence of
social/personal bonds help to promote business partnerships, their behaviour showed
101
or my Guanxi network…” (PDM Project team member of DE Company)
DE sted
int ke a
ke ject
ma
DE can
solve the problems with their technical talent in the organisation. The DE staff also
ever, the project was very important to us. Our most excellent
IT experts and diesel engineers were assigned to this project…” (PDM project
relationship in order to foster trust. A project team member of DE Company stated his
opinion:
“We [DE Company] don't know any of the project team members from the
vendor side before. We could collaborate with each other in a business manner,
but I never expect the mutual trust or understanding would happen through
merely business relationships. Sincerity or trust easily happens to my familiar
friend
interviewees also felt uncomfortable about the human resources its vendor inve
o the PDM project. For instance, the vendor assigned a sales representative to ta
y role in the project. Technical experts including system developers or even pro
nagers followed the instructions of the sales representative. However, in the mind of
staff, sales or marketing people are not as authoritative as technical experts who
doubted the qualifications of the project manager from the vendor, because the project
manager was a PhD graduate who had no more than three years’ industry experience.
The words of the PDM project manager of DE Company could partially support the
above perceptions:
“I could hardly believe that PT Company assigned a sales representative to
take the key role in the project. I always doubted whether he could understand
the requirements our technical experts addressed in the daily workplace…
Sometimes we [DE employees] felt the vendor was probably unconcerned with
our project. How
manager of DE Company)
102
4.
This section begins with a description of the second case – the HR project. Then the
the
three research questions. The supporting quotes are provided if necessary.
In 2002, DE Company investigated the development of a human resource information
reviewing DE’s IS development in 2001 (ISH, 2004; ISP, 2002). The proposal for an
orkplace during the past few years. We
needed a good project to establish our confidence in and to win the trust from
Th and
su personnel administration department. Traditionally, the HR
function was restricted to payroll administration, clerical duties for employee benefits,
4 Case 2 – HR case: description and within-case analysis
within-case analysis explores the HR case and summarises the findings regarding
4.4.1 Description of the HR case
system (HR system). The IT department first proposed the project during a presentation
HR project was approved readily when senior executives of DE Company realised that
an HR system would deliver direct benefits to every employee in the organisation and
thus would be able to help relieve the resistance to the introduction of the new PDM
system. The CIO of DE Company expressed the expectations of senior executives
regarding the HR project in the interview:
“We had endless resistance from our employees when we introduced new
information systems in the day-to-day w
our employees. After careful analysis of our current infrastructure and
architecture, we selected an HR information system. It was expected to impact
on every DE employee and to positively influence their acceptance of IT… ”
(CIO of DE Company)
e human resource (HR) department of DE Company was established in 2000
pplanted the company’s
and record keeping. The new HR system aimed to support new functions, such as
management advisory and policy recommendation. The managers of DE Company
expected to gain administration support from the new system while employees hoped to
103
ed relevant to its strategy
of focusing on the core business. According to the HR project manager,
There were plenty of dom
system s (widely used
internationally) to semi-structured systems (which could be customised to meet unique
Company was the first one we thought of because no one else could know our
access information on career development and position descriptions (ISP, 2002). In the
end, two functions (personnel administration and management information), became the
main system requirements for the HR system.
DE Company had the capability to develop a HR system by itself, but it decided to
outsource the project to an outsider vendor, which was deem
“Outsourcing could also lower system development cost compared with self-
development” (HR project manager of DE Company)
estic vendors who could offer a mature HR system. The HR
packages in the market ranged from standard system
requirements). Senior executives in DE Company knew that, as a traditional state-
owned company, DE Company had specific personnel administration practices with
particular Chinese business characteristics. Generic HR software packages might work
well in Western companies but would not fit the requirements of DE Company.
Industry expertise was another key concern when DE Company selected its vendor.
Therefore, DE Company decided to contract the HR system to its holding company, SQ
Company, whose employees mostly came from the IT department of DE Company and
participated in the first two phases of DE’s IS development. DE Company strongly felt
that nobody else could better understand their system requirements than their former
employees. The HR project manager explained why DE Company selected SQ
Company to be the outsourcing vendor for the HR project:
“We [DE Company] had a unique HR management process and I was afraid
that many mature HR systems on the market could not cater to our needs. SQ
business better than this company…” (HR project manager of DE Company)
104
S and
M as DE
Company (STO_SQ, 2005). Key staff in SQ Company came from the IT department of
imple because both sides knew each other well.
They spent some time negotiating the contract price, the project boundary and service
rmer IT manager in DE Company. In
the system test and improvement phase, the project team of the HR vendor transferred
Q Company was established in January 2002. It was owned by DE Company
achinery and Computers Company which operated in the same industry
DE Company. SQ’s specialty was developing ERP products specifically for machinery
industry companies (STO_SQ, 2005). An HR function was one of the core components
of its ERP product (STO_SQ, 2005).
DE Company signed a small contract to outsource the HR system development in
September 2002. The contract was s
scope, but they reached agreement on these issues quickly, because they trusted each
other and had confidence in future collaboration.
In January 2003, the HR vendor assigned 5 full-time system developers to the HR
project including a project manager who was the fo
to work on site. From DE Company, one project manager, four IT staff and two HR
managers comprised the project team. The team was responsible for addressing all HR
system requirements. The two project managers from two companies met on a weekly
basis to review the progress of the project. Other interaction took place by telephone,
through personal visits, and by emails. The organisational structure for the HR project is
shown in Figure 4.6. The line between the solid line boxes means the two groups of
members directly interacted during the project.
SQ Company DE Company
105
Each side worked closely with the other to overcome difficulties. The CIO of DE
Company described the close working relationship:
“The HR vendor is one of a few trustworthy partners we could rely on. We [SQ
staff and DE staff] could communicate with each other pretty well. They [SQ’s
project team members] knew our problems clearly because they also came out
of a traditional machinery company. They showed their generous and active
attitude towards our new requirements during the implementation stage of the
HR system…Sometimes I have to admit it is irrational in a business sense
(smile)…However, they [SQ’s project team members] impressed us greatly by
their friendliness and patience…” (CIO of DE Company)
The project ran for nine months. The HR system went through testing in August of 2003
and the contract was concluded in September of 2003. The new system went live at the
end of 2003 and had been used for more than one year when the interviews were
conducted. The progress of the HR project is summarised in Figure 4.7.
Figure 4.6: The organisational structure for the HR project
(Source: Developed for this research)
4 system developers
4 IT staff and 2 HR managers
1 project manager
1 project manager
106
The HR project turned out to be a successful project. The objectives of the project were
achieved, such as saving HR management cost and providing management advisory
functions (ISH_DE, 2004). The new HR system was welcomed by DE employees. In
the interviews, all interviewees showed their satisfaction with the project.
4.4.2 Within-case analysis of the HR case
This section summarises what stood out in the HR case about the three research
questions. It provides a preliminary answer to each research question. The findings will
be discussed in greater detail in the cross-case analysis section in Chapter 5.
Research question one: What are the distinguishing characteristics of a satisfactory
IT outsourcing relationship?
All the interviewees agreed that DE Company strengthened the partnership relationship
with its vendor, SQ Company, through the HR project. They said that they were
satisfied with this relationship. For example:
“We were happy about how the partnership was maintained and strengthened
through the HR project. I thought it should be regarded as long-term
Figure 4.7: The progress of the HR project
(Source: Developed for this research)
2002 2003 2004 2005
Evaluation
of
introducing
an HR
system
Vendor
selection
and
negotiation
Contract
signed
Project
ended
System
migration and
implementationSystem
tested
System
development
Interviews for HR project were conducted
Sep Mar Jan Jan Aug Sep
Project
started
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partnership. We trusted our friend [before the project]. As a result [after the
project], they did not disappoint us…” (HR project team member of DE
Company)
Sometimes the relationship appeared to be personal or informal in the HR project. The
interviewees explained that it was because the backbone of the HR vendor came from
the previous IT department of DE Company and DE Company is one of the key owners
of the HR vendor.
When the interviewees described the reasons why they perceived the relationship as
satisfactory, they mentioned the following themes: successful contract implementation,
established trust, the high value SQ Company brought to them, the open and flexible
attitude of HR vendor towards any requirement changes of the new developed HR
system, and the effective communication between the two project teams. As such, these
five themes were identified as the distinguishing characteristics of a satisfactory
relationship in an HR case.
Research question two: How does relationship management influence the outcome
of an IT outsourcing project
DE Company and the HR vendor had a brief and flexible contract. If any new system
requirements were addressed by DE Company, its vendor would actively respond to
them although it might increase the vendor’s cost to manage the HR project. The HR
vendor never asked for additional charges if what they went beyond the work scope
specified by the contract. This might be the main reason why all the DE interviewees
felt satisfied with the HR vendor’s work and the new developed system was
successfully adopted in practice soon after the project. The statement of the HR project
manager of DE Company is an example:
“The HR vendor is one of a few trustworthy partners we could rely on. When
we met with any problems with the system, they were able to come to our
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company in half an hour to help us solve the problem even when the contract
was over… They never asked for additional charges if what they did had gone
beyond the work scope specified by the contract…” (HR project manager of
DE Company)
Project members from the two companies were familiar with each other. They had
established close personal/social bonds before the project; hence they communicated
effectively in the project. This might have helped the vendor better understand the
system requirements and better deliver the vendor’s value to DE Company. This also
increased mutual trust and positively influenced the ultimate system adoption. DE staff
became more confident in IS development within DE Company after the HR project.
The quote below is from HR project team member of DE Company:
“…we could chat freely and be like friends. This kind of communication helped
us strengthen our personal bonds. So our project team members would like to
trust each other and share every idea with them…This benefited the ultimate
success of our project…” (HR project team member of DE Company)
DE interviewees also perceived that the special relationship (i.e. DE Company is the
parent company of the HR vendor) between these two companies led to common
interests in the HR project. This could explain why the HR vendor generously invested
its resources into the HR project. This was also perceived to strengthen their mutual
trust and increased the satisfaction of end-users in DE Company. The quote from the
vice president of DE Company could be taken as an example:
“If two parties had less conflicting interests, they were willing to invest more
resources to the project and they will not be too mean about money. That was
why we and our vendor dared to rely on each other and trusted each other…
Hence, the project was easy to run…” (Vice president of DE Company)
Research question three: To what extent do cross-cultural differences affect
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relationship management in IT outsourcing?
DE Company and the HR vendor regarded contract as a framework within which a
business could be operated. Their cooperation in the HR project was not restricted by
the contract. They focused on relationship development more than contract
implementation in the HR project. When new system requirements beyond the contract
specification were addressed by DE Company, the HR vendor was open and flexible to
help DE Company solve the problems. The HR project manager of DE Company talked
about this issue in the interview:
“We did not draft a comprehensive contract; instead, we took the contract as
the starting point of the cooperation for the two companies. The contract was a
framework within which we began to compose our own music freely…We did
not put everything on the paper, we would rather observe our vendor, and then
did the appropriate thing to show our response to their action. For example,
when we met with any problems with the system, they were able to come to our
company in half an hour to help us solve the problem even when the contract
was over. They never asked for additional charges if what they did had gone
beyond the work scope specified by the contract…” (HR project manager of
DE Company)
DE Company and the HR vendor had ad hoc meetings in the HR project. Their
communication appeared to be frequent and easy. If project members found problems,
they could call their vendor and gained immediate technical support. Additionally, the
two parties normally discussed project issues in an informal, personal manner. They
even played jokes when discussing certain sensitive issues of the HR project. The
statement of a HR project team member of DE Company could be taken as an example:
“We [DE employees and the vendor’s employees] normally communicated
with each other in an informal manner. Sometimes we liked to play jokes when
we were discussing certain sensitive issues in business. We both tried to avoid
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an over-formal tone when we had any conversations about the project…” (HR
project team member of DE Company)
The vendor specifically assigned system developers who had worked in the IT
department of DE Company before to the HR project. Hence, most of the project team
members in the two companies already had established close social/personal bonds
before the HR project. DE interviewees perceived this type of social/personal bonds as
important to maintain a good working relationship and establish mutual trust in the
project. The social/personal bonds were also regarded as helpful to improve the
efficiency of the communication. The following representative quote is from an HR
project team member of DE Company:
“The project manager of the vendor and I were former colleagues in the IT
department of DE Company and close friends as well. We graduated from the
same university... we had established tight social bonds… I could fully
understand why our vendor assigned him to the HR project and authorised him
to take charge of the whole project. We trusted him and the team he led
because we had a lot of common experience before through which we had
established tight social bonds…” (HR project team member of DE Company)
All the project team members from the HR vendor were IT specialists or experienced
industry experts. They gained great respect from DE staff. Their suggestions were easy
to be accepted and to be put into practice by the end-users of DE Company.
Some implications about cross-cultural differences might be generated if the above data,
together with the data collected from the CRM case that involves another Chinese
vendor, are compared with data from the PDM case that involves a Western vendor.
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4.5 Case 3 – CRM case: description and within-case analysis
This section describes the third case – the CRM project and then the within-case
analysis summarises the findings regarding the three research questions. The supporting
quotes are provided if necessary.
4.5.1 Description of the CRM case
In August 2003, the marketing department of DE Company took action to develop a
customer relationship management (CRM) system. They reported to senior executives
that the diesel engine market was developing rapidly, but DE Company was at a
disadvantage when competing for new customers and customer retainment. Competitors
who had a CRM system in place had taken away some of DE’s customers by offering a
more differentiated service. Senior executives immediately made a decision to initiate a
CRM project. The new CRM system was expected to automate the process of sales,
marketing, post-sales support and channel management as DE Company attempted to
improve communications, planning, campaign management and problem solving
(ISH_DE, 2004; ISP_DE, 2003). DE Company chose to outsource the CRM project.
The major reasons for outsourcing were articulated by a project member from the
marketing department:
“Time constraint was the main concern when we [DE Company] considered
about whether to outsource the CRM system development. The booming market
for diesel engines in mid-2003 brought us numerous orders but also put great
pressure on our marketing and sales operation. The manual input for all
branches’ orders was undertaken by two headquarter clerks who were not able
to keep up with the increasing sales volume. Frequent errors and delayed
feedback were the two biggest complaints from our customers. Our main
competitors were already equipped with powerful CRM systems and performed
better in the market than us. They had taken away some of our customers. We
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felt it very urgent to introduce a CRM system as soon as possible. If we chose
to self develop the system, it is too time consuming and inefficient. As a result,
we set out to outsource it…” (CRM project team member of DE Company)
The existing CRM systems in the Chinese market were still in their infancy in mid-
2003. Famous overseas vendors such as Siebel and SAP CRM did not have proven
records in the Chinese market. Their standard CRM system packages were very
expensive. Furthermore, DE’s CRM system hoped to incorporate broader functionality
(e.g., branches inventory management) than a normal CRM package offered on the
market. Therefore, DE Company gave up the idea of cross national collaboration. They
turned their attention to some prestigious local vendors. Through careful evaluation, DE
Company selected NG Company as their CRM system vendor. The CRM project
manager informed the researcher why they chose NG Company:
“NG Company was one of the most famous domestic vendors providing system
packages for general management in China. The design framework of NG’s
CRM system impressed us greatly because it exactly matched our requirement,
while others’ system did not. Then, through group evaluation, NG Company
gained the highest vote…” (CRM project manager of DE Company)
NG Company was established in the early 1990s and operated as a management system
developer and an e-commerce solution provider in China (STO_NG, 2004). It took
active part in promoting CRM in China, and had a successful record of CRM system
implementation in several industries (STO_NG, 2004). However, they had not had
customers in the machinery industry prior to the relationship with DE Company. NG’s
product series ranged from specific financial information systems to complete ERP
systems (STO_NG, 2004). The CRM system was one of the existing features of its ERP
product.
DE Company signed a contract with NG Company to outsource CRM system
development in September 2003. The contract specified that the project would
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commence in September 2003 and was to be completed by December 2003. The
contract also specified that five main functions should be provided by the vendor:
branches inventory management, post-sales, direct sales, customer management, and
customer e-training. When both parties negotiated the contract price, NG Company
made a great concession. They expressed their wish to develop a long-term partnership
with DE Company, which was their first large customer in the machinery industry. In
addition to the formal business contract, NG Company also signed with DE Company a
small agreement in which NG Company identified DE Company as a VIP customer and
offered DE Company favourable treatment during the project period and after project
completion. A CRM project team member of DE Company described the situation:
“We spent little time negotiating the project’s scope. When we signed the
contract with them, they appeared to be very anxious to establish a relationship
with us. They charged us a very low price for this CRM project. They frankly
told us that what they cared about at that stage was to retain us as a very
important customer. I guess our company could help them better understand
the machinery industry and develop more potential customers for them along
our value chain. The agreement we signed authorised the VIP customer some
favourable rights; for instance, express delivery and regular contact after the
project was completed…” (CRM project team member of DE Company)
DE Company happily accepted the agreement as well as the favorable CRM project
contract. The CIO of DE Company told the researcher:
“We [DE Company] were satisfied with the agreement, because we also hoped
to make good use of the rights the agreement gave us to continuously improve
the CRM system after the project. With the help of NG Company, our future
objective for the CRM system was to develop cross-functional integration,
supported by data warehousing to create a customised view of customers…”
(CIO of DE Company)
In September 2003, NG Company assigned one full-time technical manager and one
system analyst from its Shanghai office to work on DE’s site for three months. The head
of the Shanghai office of NG Company took on the responsibility of project manager.
The project team from Shanghai office collaborated with system developers in NG
Company’s headquarters (in a different city). At DE Company, two IT staff and two
marketing staff formed the project team and took charge of the CRM project. The
Shanghai office of NG Company created a bridge between the system users (on DE’s
side) and the system developers (on NG’s side). The organisational structure for the
CRM project is shown in Figure 4.8. The line between the solid line boxes means the
two groups of members directly interacted during the project.
NG Company DE Company
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The CRM project was divided into stages for developing different functionalities of the
CRM system. NG Company spent almost three months to conduct analysis for branch
inventory management. It seemed impossible to complete the whole project on time.
Therefore, the two parties signed a complementary contract in December 2003, creating
a new timetable for completion of the CRM project. The failure to keep up with the
original project schedule was explained by the CRM project member of DE Company:
6 system developers in
the headquarters (in a different
city)
1 IT staff and 2 marketing managers
Project manager (IT staff)
Project manager (Head of Shanghai office)
1 technical manager and 1 system analyst
Figure 4.8: The organisational structure for the CRM project
(Source: Developed for this research)
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“Although we [NG Company and DE Company] came to agree on the project
scope quickly when we signed the contract, there existed great
misunderstandings between the two parties at that time. We [DE Company]
had no prior experience in developing a CRM project. They [NG Company]
knew little about our industry. These two factors caused frequent dispute over
the understanding of the system requirements. Furthermore, NG Company was
a product vendor for system packages rather than a service provider. They
were not good at managing a project. What the Shanghai office employees
learned in our company could not transform into the understanding of the
system developers in the headquarters of NG Company… I felt that the system
developers were not willing to be instructed by Shanghai office employees…”
(CRM project member of DE Company)
At the end of November 2003, the functionality of branch inventory management was
delivered to DE Company for testing. Some bugs were found. NG Company promised
to fix the problems for DE’s CRM project prior to other projects. Due to the failure to
keep up with the original project schedule, NG Company assigned more developers to
the CRM project until the branch inventory management functionality was completed
and went live two weeks later. The first functionality was able to go live in a relatively
short time frame because the full inventory management functionality had been already
developed in NG’s ERP product. But other functionalities were less well-developed in
NG Company at that time.
NG Company started to develop the direct sales functionality and post-sales
functionality in early 2004 and delivered these for testing in May 2004. There appeared
to be many bugs in the system in the early days of testing. DE Company became
disappointed with the project and considered terminating the contract with NG
Company. When the board chairperson of NG Company found out, he immediately
called a special meeting with DE Company to investigate the event. He also organised
an emergency team to solve the problems for DE Company. In response to DE’s request,
the project team from Shanghai office were dismissed by NG Company so that system
developers in the headquarters of NG Company interacted with DE’s project team
directly. It took DE Company three months to test the two functionalities and another
three months for implementation. In December 2004, the direct and post-sales modules
went live. Development of the other two functionalities had not yet started when the
interviews for CRM project were conducted (August 2005). The deadline (December
2004) stated in the complementary contract was not achieved. The progress of the CRM
project is presented in Figure 4.9.
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The implementation of the CRM contract is not a complete success so far. Two
functionalities of the CRM system were still incomplete when the interviews for CRM
project were conducted. However, interviewees were not dissatisfied with the project.
Most expressed their understanding of the project progress and were positive about the
project outcomes.
Figure 4.9: The progress of the CRM project
(Source: Developed for this research)
2003 2004 2005Interviews for CRM project were conducted
AugAug Sep Nov Dec May AugDec
Considering
the
introduction
of CRM
system
System
selection
and
negotiation
Complementary
contract signed
IM
development
Requirement
analysis
Note:
IM: functionality of branches inventory management
P&S: functionality of post-sales and functionality of direct sales
CM: functionality of customer management
CT: functionality of customer e-training
IM went live
P&S
testing
P&S
implementation
P&S
development Proposed
CM and CT Contract
signed
Project
started
P&S went live
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4.5.2 Within-case analysis of the CRM case
This section summarises what stood out in the CRM case about the three research
questions. It provides a preliminary answer to each research question. The findings will
be discussed in greater detail in the cross-case analysis section in Chapter 5.
Research question one: What are the distinguishing characteristics of a satisfactory
IT outsourcing relationship?
DE Company considered the relationship with the CRM vendor to be on the right track
to partnership when the interview was conducted. It was the first time that the two
companies collaborated with each other on business. And the CRM project had less
strategic significance compared to the PDM project in DE Company. As such, DE
Company did not expect too much partnership building. The relationship experienced
ups and downs during the project. But finally, due to the efforts of both parties, their
relationship became closer and closer. They perceived the relationship with the CRM
vendor as moderately satisfactory and showed their confidence in establishing the
partnership in the near future.
Interviewees in the CRM project mentioned four main themes to describe the
moderately satisfactory relationship: the disappointing contract implementation, the
great price concession the CRM vendor gave in the outsourcing contract, the gradually
established trust, and the real benefits the new developed CRM system brought to DE
Company’s sales function. These themes were identified as the distinguishing
characteristics of the IT outsourcing relationship in the CRM case. The CRM project
manager of DE Company told us part of this story:
“We [DE Company and NG Company] were on the way to partnership if we
had not been the partners… Our vendor showed the sincereness of building
partnership by giving concessions on contract price... When lots of bugs were
found in the post-sale and direct sale functionalities… the end-users of these
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two functionalities on DE’s side even asked the senior management to
terminate the contract with the vendor and chose a new vendor... Quickly the
problems were solved and the functionalities were running pretty well two
months later… We are satisfied with the released functionalities of the CRM
system which greatly relieve the workload of our sales department up to now...
We [DE Company] hoped to continuously strengthen the relationship with our
vendor... We believed that we could become good partners in the future…”
(CRM project manager of DE Company)
Research question two: How does relationship management influence the outcome
of an IT outsourcing project?
DE interviewees told the researcher that the CRM vendor spent little time on contract
preparation and gave great price concessions to the CRM project. They seemed to be
more concerned with establishing a long-term partnership with DE Company. The CRM
vendor did not perform well on contract implementation. They did not accomplish the
task specified in the contract. This led to a trust crisis during the CRM project. However,
the vendor quickly called a special meeting and organised an emergency team to cope
with the crisis in order to maintain a good relationship with DE Company. The
continuous efforts paid by the CRM vendor finally won the trust of its customer
organisation, DE Company. At the end of the project, DE staff acknowledged the value
the vendor brought to their company and expressed their confidence in establishing
partnership in the near future. The statement of a CRM project team member of DE
Company could support the above arguments:
“In December 2003, the vendor came into the first trust crisis ever. They failed
to meet the deadline of delivering all functionalities. They delivered the first
functionality which contained lots of bugs. Their board chairperson quickly
created an express way for us to mend the system. We could see that they were
sincere in establishing partnerships with us. So we decided to give our vendor
more time. They prepared another complementary contract to eliminate our
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worries. After a short period of bug shooting, the first functionality successfully
went live…” (CRM project team member of DE Company)
The DE interviewees pointed out that the effective communication the vendor facilitated,
especially when the trust crisis occurred, and the continuously increasing resources the
CRM vendor invested into the CRM project helped establish the mutual trust between
the two companies and helped overcome the crisis in the project. This positively
influenced the project outcome in the end. The CRM project manager of DE Company
talked about this issue in the interview:
“The end-users of these two functionalities even asked the senior management
to terminate the contract with the vendor and chose a new vendor. The board
chairperson of our vendor chaired a special meeting with our senior
management… Quickly the problems were solved and the functionalities were
running pretty well two months later. This made us start to trust our vendor…”
(CRM project manager of DE Company)
The DE interviewees also perceived that an IT outsourcing project normally involved
conflicting interests between two parties. But in the CRM case, the two companies had
foreseen the opportunity to pursue mutual interests in the long run (i.e. DE Company
hoped to improve other management packages with the help of the CRM vendor in the
future, whereas the vendor expected to understand the business of the mechanism
industry and develop more potential customers in the related industry), and hence they
could overlook some short-term conflicts. That could explain why DE appeared to be
patient enough in the crisis and the trust was easy to establish in the CRM project. The
representative quote is from the CIO of DE Company:
“Normally, when two parties failed to run the project well, the most likely
reason was that the project involved conflicting interests of these two parties. If
the two parties were able to find mutual interests in a long run and aimed to
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establish close relationship (for instance, partnership), they could overlook
some short-term conflicts…” (CIO of DE Company)
Research question three: To what extent do cross-cultural differences affect
relationship management in IT outsourcing?
DE Company and the CRM vendor regarded the contract as a starting point for building
their business relationship. Contract was also perceived as a legal support for the
relationship development in the CRM project. The vendor prepared two different
contracts in different stages of the CRM project, but the two contracts both turned out to
be useless in the actual project management. The CRM vendor spent more time in
establishing and maintaining the relationship with DE Company in the CRM project.
For example, a CRM project team member of DE Company stated his opinion:
“In my opinion, a contract was a starting point for both parties to establish a
business relationship…If the relationship failed, the contract was a legal
support to appeal reasonable compensation. If relationship was expected to
start or amend, contract could also be used as a method to express one’s
faithfulness…” (CRM project team member of DE Company)
DE Company organised face-to-face communication with the system developers in the
headquarters of the CRM vendor in another city. The CRM vendor specifically assigned
an employee to coordinate the unexpected communication with DE Company in the
CRM project. The project team members from two companies discussed the project
issues in a formal and explicit manner in the early days of the project, but they gradually
became more relaxed later on. This could be supported by the statement of CRM project
team member of DE Company in the interview:
“In the early days, we talked with each other formally. If no business
communication was needed, we just kept silence. But at the later stages, when
the two companies got closer and closer, people from the two companies were
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not afraid to joke. In other words, we communicated in an informal manner,
just like friends, as we know that people from the other company would not
misunderstand…” (CRM project team member of DE Company)
DE interviewees perceived that it was not a smooth process for the two companies to
pursue mutual interests from the project. However, they regarded the establishment of
mutual interests as important to overcome short-term conflicts in the CRM project. The
CRM vendor gave great price concessions to DE Company because they aimed to
accumulate experience in the mechanism industry through the CRM project so that they
could develop more potential customers in the related industry in the future. The
statement of a CRM project member of DE Company is an example:
“I did not quite understand why our vendor gave such great concession on the
price until one project team member from our vendor whispered to me the
reason. We were the first customer in the machinery industry of our vendor...
When they finished the project with DE Company, they could develop a more
matured product especially for the mechanical industry. They might even be
able to earn profits from their second or third project after deducting the costs
in the first project with us in the machinery industry…” (CRM project member
of DE Company)
Both DE Company and the CRM vendor perceived the social/personal bonds as
important and helpful in developing the business relationship in the CRM project. The
DE interviewees also perceived that if the social/personal bonds had been established
between the top management of the two companies, the CRM project would have been
much easier to manage and the relationship easier to maintain or strengthen. The
statement of a CRM project manager of DE Company supports the above arguments:
“Well, actually during the later stages of the project, the two project team
members had become good friends. They sometimes gave good suggestions to
the other party on how to relieve the antagonism in their company. It proved to
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be helpful in promoting the relationship between the two companies…If the
senior management established some personal bonds or Guanxi network, the
partnership would be much easier to be achieved, I believe…” (CRM project
manager of DE Company)
The DE interviewees did not feel satisfied with the project members interacting with DE
Company at the early stage of the project, because they were not system developers of
the new CRM system. They specifically doubted the qualification of a business analyst
from the CRM vendor who had no technical background. However, in the later stage of
the project the DE staff became happier, as they were able to communicate directly with
the system developers in the headquarters of the CRM vendor. The following two
quotes support the above argument:
“We appreciated the vendor’s large input into our project. They opened an
express way to shoot the software bugs for us. They assigned personnel from
their Shanghai office to take care of our project locally…But actually we
preferred to communicate with the system developers in the headquarters. The
direct interaction with the software engineers helped us solve the system
problems effectively…” (CIO of DE Company)
“We knew that the vendor had assigned a strong system development team to
our project, but the system analysts in the phase of requirement analysis were
less than satisfactory. Only one technical manager knew our business and was
qualified in doing this job. The assistant of his had no technical background
and was of little help...” (CRM project member of DE Company)
Some implications about cross-cultural differences might be generated if the above data,
together with the data collected from the HR case that involves another Chinese vendor,
are compared with data from the PDM case that involves a Western vendor.
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4.6 A summary of the three IT outsourcing cases
This section summarises the three selected cases and concludes the initial impressions
of single cases. The descriptive information about the three cases is summarised in
Table 4.2.
Table 4.2: Summarised description of the three cases
PDM case HR case CRM case
Project duration Dec 2002 – Dec 2003 Jan 2003 – Sep 2003 Sep 2003 – Present
Cost of the contract ￥3 million (0.35 million US$)
￥0.4 million (0.05 million US$)
￥0.6 million (0.07 million US$)
Main functional departments involved
Design Dept., Manufacturing Dept., Product Engineering Dept., IT Dept.
HR Dept., IT Dept.
Sales branches, Marketing Dept., IT Dept.
Required functionality
Consolidation of the document management system, engineering bill of materials (EBOM) system, and production schedule system; Establishment of a shared product database for consistent data retrieval
Personnel administration, management advisory
Branches inventory management, post-sales, direct sales, customer management, customer e-training
Vendor name PT Company SQ Company NG Company
Cultural background of the vendor
Western (US) Chinese Chinese
Contract type Comprehensive Brief Brief
Relationship type Transactional only Partnership On the way to partnership
Outcome of contract implementation
Successful (Completed within the contract scope)
Successful (Completed beyond the contract scope)
Failed (Lost control of the contract schedule)
Level of user satisfaction
Dissatisfaction Satisfaction Moderate satisfaction
Extent of system adoption
Operational for one product
Operational Some functionalities operational
(Source: Developed for this research)
4.7 Chapter summary
The role of this chapter is to get familiar with the data collected from the three cases
before interpreting the meaning behind the data. The chapter began with the description
124
of the approach to presentation of the data analysis. The approach will be used
consistently in within-case analysis of this chapter as well as in cross-case analysis of
Chapter 5. This was followed by depicting the organisation background of DE
Company, including its business development history and its IS development history.
Then, the three selected cases – the PDM project, the HR project, and the CRM project
– were explored respectively. The exploration includes the project description and the
within-case analysis presenting the findings regarding three research questions. Lastly,
the three IT outsourcing cases were summarised in a table along several dimensions.
The next chapter will look beyond the initial impressions of single cases and resolve the
research problem by cross-case comparisons centring on three research questions. Also,
attempts will be made to generate theory through interpreting the data.
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5. Findings from cross-case comparison
Chapter 4 described the case organisation and summarised the three IT outsourcing
cases. This chapter explores the findings from a detailed cross-case analysis addressing
the three research questions.
The three research questions are investigated via a cross-case analysis comparison from
Sections 5.1 to 5.3 in this chapter. The structure of this chapter is illustrated in Figure
5.1.
What does a satisfactory IT outsourcing relationship mean? (Section 5.1 Cross-case analysis of research question one)
How does the relationship management influence the IT outsourcing outcome?
(Section 5.2 Cross-case analysis of research question two)
Do cultural differences really matter? (Section 5.3 Cross-case analysis of research question three)
Figure 5.1: Structure of Chapter 5
(Source: Developed for this research)
The first two research questions were addressed from the customer perspective where
cultural differences were not considered. The three IT outsourcing cases were treated
equally in the process of the cross-case analysis. Data collected from the customer side
for the three IT outsourcing projects could be complemented with each other to provide
a comprehensive picture perceived by the customer organisation on the first two
research issues. So the vendor’s perception was not investigated.
126
127
The third research question brings in the issue of cross-cultural differences. The three IT
outsourcing cases were divided into two groups for purposes of comparison and contrast.
One group consists of the PDM case which involved the cross-cultural collaboration
between a Western vendor and a Chinese customer. The other group consists of the HR
case and the CRM case which involved the collaboration between partners from the
same Chinese cultural background. The cross-case analysis on the third research issue
will compare within the groups and contrast across the groups. Data were mainly
collected from the customer side to examine the perceived cultural differences. Some
information was also obtained from the vendor side to validate the perceptions of the
customer organisation.
5.1 Cross-case analysis of research question one
Research question one looks at “what are the distinguishing characteristics of a
satisfactory IT outsourcing relationship”. The question is interested in the perception of
the interviewees on the main research concept – the IT outsourcing relationship –
irrespective of the success of their IT outsourcing projects.
The findings of this question are presented in three steps. The first step is to identify the
relationship category of each case including the identification of the initial expectation
on the relationship, the relationship status at the beginning of the project, at the end of
the project, and sometime after the project (i.e. when the interview was conducted).
The second step is to summarise the common descriptions across the three cases
detailing why the interviewees identified their relationship in this way. Some recurring
themes extracted from the common descriptions provide the characteristics of a
relationship.
The third step is to investigate how much each characteristic contributed to a
satisfactory IT outsourcing relationship. The findings were obtained through comparing
how the project performed on each characteristic (which was identified in the second
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step) and whether the interviewees felt satisfied with the relationship category (which
was identified in the first step) in the three cases.
The three steps for presenting findings constitute the following subsections: relationship
category (section 5.1.1), characteristics of an IT outsourcing relationship (section 5.1.2)
and contribution of each characteristic towards establishing a satisfactory IT
outsourcing relationship (section 5.1.3).
5.1.1 The dynamics of the relationship
Previous literature categorised the different classifications of the IT outsourcing
relationship according to different theories reviewed in Chapter 2. Classifying the
relationship into categories of transactional (stranger/buyer-supplier/contractual),
partnership (friends/strategic partner) or alliance, based on the transaction cost theory, is
the most popular and influential in the discipline of IS (e.g., Fitzgerald and Willcocks,
1994; Hendson, 1990). Hence, this classification was applied in this research.
Interviewees were asked to identify the relationship category based on transaction cost
theory. For specific interview questions concerning the relationship category, please
refer to Appendix A.
As IT outsourcing projects develop, the relationships between the case organisation and
its vendors are constantly evolving. In an attempt to capture the dynamic nature of a
relationship, the development of a relationship was reflected through the following four
themes: the initial expectation on the relationship, the relationship status at the
beginning of the project, the relationship status at the end of the project, and the
relationship status after the project. These four themes were extracted via open coding.
Table 5.1 shows how the interviewees in the customer organisation identify the
relationship category for each of the three IT outsourcing cases. Quotes extracted from
the interview transcripts are used to support the identification.
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PDM case HR case CRM case
Initial expectation on the relationship
Partnership Partnership Transaction only
Relationship status at the beginning of the project
Transaction only Partnership Transaction only
Relationship status at the end of project
Transaction only Strengthened partnership On the way to partnership
Relationship status after the project
No relationship Trustworthy partnership Having confidence in establishing partnership
PDM project had borne heavy responsibility to upgrade our company’s IS… We also hoped to establish a long-term partnership with our vendor, who is a world leading PDM system supplier... (CIO of DE Company)
We had merely a buyer-supplier relationship. What they did was restricted to the contract scope… Now we almost have no touch with them… (PDM project manager of DE Company)
Our vendor is one of a few trustworthy partners we could rely on… (HR project manager of DE Company)
We were happy about how the partnership was maintained and strengthened through the HR project. I thought it should be regarded as long-term partnership. We trusted our friend [before the project]. As a result [after the project], they did not disappoint us… (HR project team member of DE Company)
In my opinion, we [DE Company and its vendor] are now (when the interview was conducted) almost partners…We [DE staff] did not expect partnership at the beginning… (CIO of DE Company)
We were on the way to partnership if we had not been the partners… (CRM project manager of DE Company)
We considered the relationship with our vendor to be on the right track to partnership…Now [when the interview was conducted] we have the confidence in establishing the partnership in the near future... (CRM project team member of DE Company)
Table 5.1: The dynamics of the relationship for three IT outsourcing cases
(Source: Developed for this research.)
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In the PDM case, the case organisation DE Company had a strong inclination to develop
a partnership-based relationship with its vendor, even though the two companies had no
prior experience in collaborating with each other. The relationship was transactional
when the contract was signed and did not develop into a partnership as DE staff
expected. After the project, the interviewees still regarded the relationship as a
transactional one.
As for the HR case, DE Company is one of the key owners of its vendor. The vendor
company was established for the purpose of providing specialised IT services to DE
Company and other companies having similar business processes. The two companies
already had a partnership type relationship before the HR project started. Through the
HR project, the interviewees perceived that their partnership was further strengthened.
As for the CRM case, DE staff did not have much expectation on the relationship
establishment at the beginning of the project. They treated the CRM project as an
ordinary commercial deal and regarded the IT outsourcing relationship as merely a
transactional type initially. However, after going through the ups and downs of the
project with its vendor, DE staff very much appreciated the efforts the vendor made on
the CRM project. As such, the description “on the way to partnership” was used by the
interviewees to describe the relationship status at the end of the project.
5.1.2 Characteristics of an IT outsourcing relationship
The characteristics of the IT outsourcing relationship were not identified by a direct
inquiry like “what are the characteristics of an IT outsourcing relationship?”. The
academic parlance of “characteristics of relationship” was deemed inappropriate in the
interview questions. The overly theoretical and formal tone might confuse the
interviewees and then interrupt their narrative logic. Therefore, the question “why do
you identify the relationship with your vendor in this way?” was instead applied to
examine the characteristics that the interviewees perceived. As a result, there was a
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commonality of the descriptions across the three different cases with high consistency.
The primary recurring themes extracted via open coding of the interview transcripts are:
• Contract implementation
• Trust
• Value proposition.
Contract implementation was highlighted by almost all the interviewees when they were
asked to describe the relationships with their vendors. This theme emerged in areas such
as the descriptions on whether the contract was fulfilled successfully.
Trust was cited by most interviewees as a necessary characteristic to explain a
relationship. Trust in this study not only means the perception of the vendor’s ability
and expertise, or the expectation of technically competent role performance, but also the
perceptions of the vendor’s intention to perform DE Company’s objectives, which is
associated with integrity and responsibility.
Value proposition means the concrete results a customer gets from using the products or
services of its vendor or a vendor gets from doing business with its customer. In the
interviews with DE staff, value proposition concerned the acknowledgement of the
economic and management benefits the vendors delivered to DE Company through the
IT outsourcing engagement. This theme was seen as significant across the three cases.
Table 5.2 illustrates how these three themes evolved from the interview transcripts and
compares the three cases along the three themes. The representative quotes were
selected to support the identification of each theme.
Table 5.2: A comparison of the relationship characteristics for three IT outsourcing cases
PDM case HR case CRM case
Contract implementation
Successful (Completed within the contract scope)
Successful (Completed beyond the contract scope)
Failed (Did not complete what the contract specified)
We had merely a buyer-supplier relationship. What they did was restricted to the contract scope… (PDM project manager of DE Company)
…any further requests for system customisation were politely declined by the vendor, because the vendor insisted that the whole project was completed and delivered to the customer as the contract specified… (CIO of DE Company)
They showed their generous and active attitude towards our new system requirements which the contract did not specify…Sometimes I had to admit it was irrational in a business sense (smile)… (CIO of DE Company)
They never asked for extra charge even though they performed beyond the contract scope… (HR project manager of DE Company)
… we were unsatisfied with their contract implementation... (CIO of DE Company)
…the vendor appeared to lack control of the whole project schedule… (CRM project team member of DE Company)
Trust Trust was not fully established in the project.
Trust was established in the project. Trust was established in the project.
Gradually, we became reluctant to express our true feelings to them as they never treated us as friends… (PDM project team member of DE Company)
Our vendor is one of a few trustworthy partners we could rely on even in the future… (HR project manager of DE Company)
We trusted our friend… (HR project team member of DE Company)
With the help of our vendor, we had the confidence that our long-term objectives of the CRM system… could be achieved…(CIO of DE Company)
Quickly the problems were solved and the functionalities were running pretty well two months later. This made us start to trust our vendor. (CRM project manager of DE Company)
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Value proposition
DE staff acknowledged limited value that the vendor brought through the project
DE staff acknowledged high value that the vendor brought through the project
DE staff acknowledged high value that the vendor brought through the project
We [DE staff] expected to learn the best management practice of the top mechanism company through cooperation with our vendor. However, they gave limited help in the project… They adhered too much to the contract…The post-sale support only took the responsibility to provide explanations to the system and to offer some training on how to use the new system… It was of little help... (CIO of DE Company)
Our vendor was a specialised IT team familiar with DE Company and our industry, which was of high value to us… (Vice president of DE Company)
When we met with any problems with the system, they were able to come to our company in half an hour to help us solve the problem even when the contract was over… They never asked for new charges if what they did had gone beyond the work scope specified by the contract… (HR project manager of DE Company)
We hoped to continuously tighten the relationship with our vendor, as they were experts who could help us improve our management systems… (CRM project manager of DE Company)
We experienced ups and downs in our relationship throughout the project… The vendor’s board chairperson timely fixed the discrepancies… (CRM project team member of DE Company)
(Source: Developed for this research.)
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The interviewees concluded that, in the PDM case and the HR case, the contracts were
implemented successfully, while the vendor of the CRM project lost control of the
contract implementation. It is assumed that the DE staff perceived the contract
implementation as a significant characteristic of a relationship, which explains why this
theme frequently emerged when interviewees described the relationships with their
vendors.
Interviewees in DE Company perceived that trust had been established in the HR
project and the CRM project but not in the PDM project. The PDM vendor’s inclination
to adhere to the specified contract annoyed DE staff and led to mistrust by DE staff.
Trust was also perceived as a necessary characteristic to build an IT outsourcing
relationship by interviewees from DE Company.
DE staff acknowledged that the vendors in the HR project and the CRM project brought
high value. However, the value delivered by the vendor of the PDM project was
perceived to be limited. The interviewees mentioned that the PDM system had to be
abandoned subsequently as it had only operated successfully in one of the production
lines. This was much less than what DE staff had expected at the beginning of the PDM
project. This theme emerged surprisingly from the descriptions about a relationship
across the three different IT outsourcing cases. Hence, the value proposition was also
perceived to be an influential characteristic in a relationship.
The above three themes were prominently mentioned in the interview transcripts when
interviewees were asked to describe the relationships with their vendors. They were
addressed in all three cases, independent of the case context per se. Such independence
from the case context might improve the applicability of the identified characteristics in
an IT outsourcing relationship regardless of the success of the relationship or of the case
story. Other themes such as good communication, concession on price, and open and
flexible attitude emerged sporadically, and merely appeared in one case. Their
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emergence relied on the project heterogeneity. Therefore, these themes were excluded
from the representative characteristics of an IT outsourcing relationship.
5.1.3 Contribution of each characteristic to establishing a satisfactory
IT outsourcing relationship
The first research question was “what are the distinguishing characteristics of a
satisfactory IT outsourcing relationship?”. Having identified the distinguishing
characteristics of an IT outsourcing relationship in Sub-section 5.1.2, the last step is to
examine how each characteristic contributed to a satisfactory IT outsourcing
relationship. The contributions were not gained directly from the interview questions.
Instead, they were obtained through comparing the ultimate impression of the
relationship in each case with how each characteristic performed in each case. The
performances of the three characteristics for each case have been summarised in Table
5.2 in Sub-section 5.1.2 and reproduced in Table 5.3 for comparison purposes. The
perception of the relationship with each vendor is summarised in Table 5.3 with the
supporting quotes.
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PDM case HR case CRM case
Contract implementation
Successful (Completed within the contract scope)
Successful (Completed beyond the contract scope)
Failed (Lost control of the contract schedule)
Trust Trust was not fully established in the project.
Trust was established in the project. Trust was established in the project.
Value proposition DE staff acknowledged that limited value was brought in by the vendor through the project.
DE staff acknowledged that high value was brought in by the vendor through the project.
DE staff acknowledged that high value was brought in by the vendor through the project.
Perception of the IT outsourcing relationship
Unsatisfactory Satisfactory Partly satisfactory
Quotes (supporting the perception of the IT outsourcing relationship)
We were unhappy with the relationship with the vendor. (CIO of DE Company)
They seemed polite when talking with us, but were really difficult to approach. However, we expected a relationship like partnership or like friends in addition to the contract…(PDM project team member of DE Company)
We were happy about the partnership which was maintained and strengthened through the HR project…We felt comfortable during the project period and our project was running smoothly …(HR project team member of DE Company)
We were happy to accept the objective of building a partnership relationship…Although we were unsatisfied with their contract implementation. (CIO of DE Company)
We believed that we could become good partners in the future… (CRM project manager of DE Company)
Table 5.3: A comparison of the performance of relationship characteristics with the perception of the IT outsourcing relationship
(Source: Developed for this research.)
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The contributions of the three distinguishing characteristics to a satisfactory IT
outsourcing relationship are now analysed.
Successful contract implementation was perceived to be a necessary component of a
satisfactory IT outsourcing relationship in DE Company. The HR case and the CRM
case illustrated that the more successful the contract implementation process was, the
more likely that the relationship was found to be satisfying. However, the importance of
contract implementation seemed to be modest in DE Company; DE staff perceived the
relationship quality as almost satisfactory in the CRM case although their vendor lost
control of the contract implementation. Comparing the PDM case with the HR case, it
appeared that when the vendor promised to accomplish more than the contract
specification, DE Company was happier with the relationship. However, this does not
mean the vendor would feel the same, given the fact that going beyond the scope of the
contract increased the vendor’s cost.
Trust was assumed to be highly related to the perception of a satisfactory IT outsourcing
relationship in this study. The PDM case, the HR case and the CRM case all indicated
that if trust was established between the customer organisation and the vendor, the
relationship would most likely be perceived as satisfactory. An established trust might
contribute significantly to a satisfactory IT outsourcing relationship in DE Company.
The perceived high value that the vendor brought was another important indicator to a
satisfactory IT outsourcing relationship in the cases investigated in this research. The
greater the benefits that DE staff perceived that their vendors were delivering through
the IT outsourcing projects, the more satisfactory they perceived their relationships to
be. In the CRM case, the perceived high value that the vendor brought helped remedy
the perception of the relationship, especially when the contract implementation
eventually failed.
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In short, it was perceived by DE staff that a successful contract implementation,
established trust, and a high perceived value of the other party were necessary to form a
satisfactory IT outsourcing relationship.
5.2 Cross-case analysis of research question two
Research question two asks “how does relationship management influence the outcome
of an IT outsourcing project?”. This question examines how relationship management
led the way to ultimate project outcomes. It is noted that this question is concerned with
the central concept of “project outcomes” that might vary with perceived norms. Hence,
to answer the second research question, it is necessary to first illustrate what the DE
staff perceives to be the project outcome of an IT outsourcing engagement. Then, the
analysis of how relationship management influenced IT outsourcing outcomes is
presented.
5.2.1 The perception of project outcomes of IT outsourcing
The perception on the outcome of an IT outsourcing project was investigated through
the interview question asking about the overall impression of the project outcome.
Please refer to Appendix A for the specific interview questions regarding this issue.
The interviewees of DE Company were asked to elaborate on the project outcomes of
each IT outsourcing case. When the interviewees were describing the project outcomes,
two distinguishing themes emerged. These were:
• User satisfaction
• System adoption.
User satisfaction was a common theme that the interviewees came up with when they
were asked to describe each project’s outcome. For all the three cases, interviewees
expressed their personal satisfaction or the company’s satisfaction towards the IT
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outsourcing project. It was perceived by DE staff as an important indicator to evaluate
the outcomes of an IT outsourcing project.
System adoption was noted in almost all the interviews regardless of the case discussed.
This might indicate that system adoption was perceived as the most important theme to
represent the project outcome by DE staff. It also implied the interviewees’ preference
to use system adoption to understand the outcome of an IT outsourcing project.
The three cases are compared along the two themes in Table 5.4. The representative
quotes were selected to support the identification of the two themes.
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PDM case HR case CRM case
User satisfaction
Dissatisfaction Satisfaction Moderate satisfaction
System adoption
Operational for one product Operational Some functionalities operational
PDM system is less than successful, and it did not go live in all lines of our products… (Vice president of DE Company)
The vendor achieved almost all clauses specified in the contract. However, we are not satisfied with the project outcome… The current use of PDM system is pretty limited...(CIO of DE Company)
We could hardly blame our vendor but it doesn’t mean we were satisfied with their job…Now the PRM system is operational for only one product... (PDM project manager of DE Company)
HR system is the most successful IS project. I am satisfied with the project outcome. (Vice president of DE Company)
The HR system was ranked on the first place according to an internal evaluation report. This means senior executives as well as ordinary employees were satisfied with this project…(CIO of DE Company)
I was satisfied with the project progress and the project result. The system had gone live quickly after the contract was concluded. (HR project manager of DE Company)
It really relieved the workload of HR department. It brought convenience for every employee to access his personal record, get advice on career development…(HR project team member of DE Company)
The functionalities that had gone live have brought great benefits to our marketing function. It was especially welcomed by our employees in 33 branches... (CIO of DE Company)
To me, I was relatively satisfied with the CRM project…The customer management and customer e-training functionalities were not of great use at this stage. We could develop it later with our joint efforts…(CRM project manager of DE Company)
On my point, I should say the CRM project is not a failure. The adopted functionalities had taken effect in increasing our sales…The 33 branches were able to better coordinate with the marketing unit of the headquarters, although the customer management functionality and customer e-training functionality were not realised... (CRM project team member of DE Company)
Table 5.4: A comparison of project outcomes for three IT outsourcing cases
(Source: Developed for this research.)
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As for user satisfaction, the HR project gained the highest appraisals by DE staff. All
the interviewees showed their satisfaction towards this project without any hesitation. In
comparison with the HR project, the PDM project seemed to be more problematic. Most
of the interviewees felt unsatisfied with the project or expressed their suspicion about
the project outcomes. The satisfaction level for the CRM project was in the middle
range. DE’s management deemed the project outcome as moderately satisfactory.
Although some of the project targets had not been achieved in the CRM project, those
system users from the DE branches expressed their satisfaction towards the released
functionality of the CRM system.
Only the HR system was completely operational when the interviews were being
conducted. The CRM project lagged behind the original schedule, so only some
functionalities of the CRM system had been applied to the daily workplace use. The
PDM project had completed the development phase. However, during the
implementation phase the new system was operational on one product line and failed to
operate on the other product lines.
Other themes that the interviewees used to describe the project outcome varied with the
case heterogeneity. For instance, in the PDM project, one interviewee addressed the
theme of “the return of the investment”, as the investment on the PDM project turned
out to be a large sum. In the HR project, one interviewee talked about the project’s
impact on user confidence in IS development within DE Company, given the fact that
the HR project was expected to alleviate the resistance to the introduction of the new IS
in DE Company. In the CRM project, two interviewees praised the vendor’s efforts
expended on the project because the project result would not have been achieved if their
vendor had not put great efforts into the project. Such dependence on the case context
might decrease the applicability of these themes. Therefore, these themes were excluded
from the representative perceptions of the outcome of an IT outsourcing project.
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5.2.2 The influence of relationship management on the project
outcomes
The second research question aimed to investigate the influence of relationship
management on the project outcomes. The interview questions were designed to
facilitate interviewees’ descriptions on how their relationship management led the way
to the eventual project outcomes in the projects they were in charge of. More
specifically, they were required to depict the explanations on how concrete
implementation structure of relationship management influenced relationship status, and
impacted the project outcomes based on their memory about the project. Almost every
interviewee had his or her own version of the story, but it was possible to synthesise
their opinions and identify the possible influence of the relationship management on
project outcomes based on the interview data. The three IT outsourcing cases jointly
constituted the integrated picture of how relationship management influences the project
outcomes at DE Company, despite the fact that the picture was not comprehensive and
complete due to the illustrative nature of the interviewees’ descriptions. From open
coding of the interview transcripts, the emerging themes concerning relationship
management are:
• Contract
• Communication
• Mutual interests
• Social/personal bonds
• Project resources.
Table 5.5 illustrates how these themes evolved from the interview transcripts and
compares the three cases along these themes. The representative quotes were selected to
support the identification of each theme and the arguments about this theme.
Table 5.5: A comparison of emerging themes and arguments regarding the influence of the relationship management in three IT
outsourcing cases
Emerging themes
PDM case HR case CRM case
Contract A comprehensive and well prepared contract might help improve the possibility of implementing the contract successfully. (Argument 1.1a)
If the vendor implemented the contract literally regardless of the newly addressed requirements by customer organisation, it might lead to a successful contract implementation but low user satisfaction. (Argument 1.1b)
If the vendor implemented the contract flexibly and actively responded to the new addressed requirements by the customer organisation, it might lead to higher user satisfaction and system adoption. (Argument 1.2)
Little time spent on the contract preparation might influence whether the contract could be implemented successfully. (Argument 1.3a)
If the vendor failed to implement the contract successful but established a good relationship, it might still turn out to be good project outcome. (Argument 1.3b)
Selected quotes Our vendor completely implemented the contract and cleared the accounts. From the contract perspective, it is successful. The vendor achieved almost all clauses specified in the contract. However, we are not satisfied with the project outcome. It was quite normal for us to change some requirements when we were not familiar with the PDM system, while the vendor appeared reluctant to accept changes if it was not included in the contract. The current use of PDM system is pretty limited…(CIO of DE Company)
The HR vendor is one of a few trustworthy partners we could rely on. When we met with any problems with the system, they were able to come to our company in half an hour to help us solve the problem even when the contract was over… They never asked for additional charges if what they did had gone beyond the work scope specified by the contract…(HR project manager of DE Company)
In December 2003, the vendor came into the first trust crisis ever. They failed to meet the deadline of delivering all functionalities. They delivered the first functionality which contained lots of bugs. Their board chairperson quickly created an express way for us to mend the system. We could see that they were sincere in establishing partnerships with us. So we decided to give our vendor more time. They prepared another complementary contract to eliminate our worries. After a short period of bug shooting, the first functionality successfully went live…(CRM project team member of DE Company)
Communications Ineffective communication might cause different requirement understandings and different expectations on the project outcome, and then might influence the eventual project outcome. (Argument 2.1)
Effective communication might help increase trust and trust might also facilitate communication. (Argument 2.2a)
Effective communication might help vendor understand the requirements, and then the vendor’s value could be better delivered. (Argument 2.2b)
Effective communication might help overcome the crisis during the project and win the other party’s trust. (Argument 2.3)
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In PDM project, we had expectations about the outcomes of the project different from those of the project team members from our vendor. This might be caused by ineffective communication. These different expectations were dangerous signals to the overall success of the project... It takes time to let them thoroughly know our pains… Finally, we found that their misunderstanding about our requirements was due to the fact that we held different expectations on the project. It is too dangerous, because the clear definition of the project boundaries and accurate transfer of project deliverables are the pivotal elements contributing to the project success…the sales representative showed his capability to know our concerns and he was a very experienced person in communicating with our team members. It is always through him that we could get some sound feedback and reflect our requirements accurately regarding the system customisation…(CIO of DE Company)
A good relationship always needs effective communication. This kind of effective communication contributed a great deal to clarifying our requirements. By discussion with our vendor we made it much clearer what we really needed… Our vendor could understand the problem we addressed accurately and we could also easily adapt the system to our daily work and addressed more meaningful requirements. This is a virtual circle, I think…(HR project manager of DE Company)
The end-users of these two functionalities even asked the senior management to terminate the contract with the vendor and chose a new vendor. The board chairperson of our vendor chaired a special meeting with our senior management… Quickly the problems were solved and the functionalities were running pretty well two months later. This made us start to trust our vendor…(CRM project manager of DE Company)
Mutual interests Not available. Mutual interests might influence the project resources. (Argument3.2)
Mutual interest might help overcome some conflicts (so that trust could be established) and then might influence the project outcome. (Argument 3.3)
Not available. If two parties had less conflicting interests, they were willing to invest more resources to the project and they will not be too mean about money…(Vice president of DE Company)
Normally, when two parties failed to run the project well, the most likely reason was that the project involved conflicting interests of these two parties. If the two parties were able to find mutual interests in a long run and aimed to establish close relationship (for instance, partnership), they could overlook some short-term conflicts…(CIO of DE Company)
Social/personal bonds
Social bonds might influence the effectiveness of the communication and the acknowledgement of the vendor’s value. (Argument 4.1a)
Social bonds might influence the trust, and then influence ultimate project outcomes. (Argument 4.1b)
Effective communication might strengthen the personal bonds, and then influence the trust as well as ultimate project outcomes. (Argument 4.2)
Not available.
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We were not familiar with each other. We found they were incapable of explaining the system in the language of the end-users. We could not correctly grasp the meaning of the new system and hence might not feel the true value of our vendor. (PDM project manager of DE Company)
Another thing, the vendor’s team and our team did not have the chance to interact with each other to build up the social bonds between the team members before the project. But I think it [interacting with each other before the project] was important, because early interaction often improves mutual trust and helps relieve discrepancies or misunderstanding… (PDM project team member of DE Company)
…we could chat freely and be like friends. This kind of communication helped us strengthen our personal bonds. So our project team members would like to trust each other and share every idea with them…This benefited the ultimate success of our project…(HR project team member of DE Company)
Not available.
Project resources
Insufficient project resources or investment in inappropriate resources might influence the trust, and then might influence the user satisfaction. (Argument 5.1)
Sufficient project resources might influence the trust, and then influence the project outcome. (Argument 5.2)
Increasing project resources might increase trust, and then influence the project outcome. (Argument 5.3)
…the system developers assigned for this project were technical experts who did not have adequate industry experience by my observation. The project manager from the vendor is a PhD graduate who has worked for less than three years. He did not show his qualified capability in coordinating and managing the project, let alone understanding what we were thinking about and worrying about. It is a factor that led to unsatisfactory result... (PDM project team member of DE Company)
If two parties had less conflicting interests, they were willing to invest more resources to the project and they will not be too mean about money. That was why we and our vendor dared to rely on each other and trusted each other… Hence, the project was easy to run…(Vice president of DE Company)
In the HR project, a good relationship helped establish trust and increase the commitment of both parties to the project, which enhances the possibility of overall success…(CIO of DE Company)
When lots of bugs were found in the post-sale and direct sale functionalities, some of our project team members were unable to accept this fact and blamed our vendor…The board chairperson of our vendor organised an emergency team to mend the system for us. Quickly the problems were solved and the functionalities were running pretty well two months later. This made us start to trust our vendor...(CRM project manager of DE Company)
(Source: Developed for this research.)
The management of the contract was frequently spoken of by the interviewees from all
the three cases. Through comparison of the emerging arguments in the three cases, two
possible explanations emerged to illustrate how contract management might influence
the project outcome in the IT outsourcing cases of DE Company. One explanation is
that contract preparation might influence the contract implementation (Refer to
Argument 1.1a and Argument 1.3a in Table 5.5). But there were no indications that
good contract preparation helped improve the quality of contract implementation. For
instance, in the HR case, contract preparation was insufficient and the contract was only
a brief framework. However, this did not influence the successful implementation of the
contract.
The second possible explanation is that contract implementation might influence the
project outcomes (i.e. user satisfaction and system adoption) (Refer to Argument 1.1b,
Argument 1.2 and Argument 1.3b in Table 5.5). It was perceived by DE staff that
complementing the contract by flexibly and actively responding to the new addressed
requirements might improve user satisfaction and system adoption. But complementing
the contract literally, regardless of the newly addressed requirements, might lower user
satisfaction and system adoption. Furthermore, the PDM case indicated that the impact
of contract implementation on the user satisfaction could be small as long as the vendor
had successfully delivered high value to the customer organisation.
Communication was seen as part of everyday work in relationship management in the
three IT outsourcing cases. Interviewees spent a great amount of time discussing this
issue. DE staff perceived that communication might influence trust (Refer to Argument
2.2a and Argument 2.3 in Table 5.5) and the value proposition (Refer to Argument 2.2b
in Table 5.5), and vice versa. DE staff also perceived that communication might have a
direct impact on project outcomes (i.e. user satisfaction and system adoption) (Refer to
Argument 2.1 in Table 5.5). Comparison of the three cases showed that effective
communication helped strengthen the relationship and improved project outcomes in
DE Company.
When the issue of relationship management influence was discussed during the
interview, the theme “recognition of the mutual interests” was mentioned in the two
cases (i.e. the HR case and the CRM case). It does not mean this theme did not exist in
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the case of PDM. The following excerpt indicated that DE staff intended to establish
mutual interests through the PDM project but did not express it explicitly.
“At that time, PDM was a new idea to us; we did not know clearly what kind of
requirements might not adapt to the potential changes… We signed the contract
with the vendor with the hope to learn from them…When both sides signed the
contract, we verbally mentioned to our vendor that a follow-up project [the
second stage of PDM system] would be expected if the first stage was successfully
completed. But no agreement was signed on this follow-up project.” (The project
manager of PDM)
“Not available” in the column of PDM case in Table 5.5 means that the interviewees
from the PDM case did not discuss how the management of mutual interests influenced
the project outcome. Therefore, only the HR and the CRM cases provided evidence
about the influence of management of mutual interests. Two possible explanations were
described by the interviewees. One is from the mutual interests to the project resources
(Refer to Argument 3.2 in Table 5.5). It was perceived by DE staff that the more mutual
interests were established, the more resources vendors would invest into the project.
The other explanation is that mutual interests might influence trust, and then influence
project outcomes (Refer to Argument 3.3 in Table 5.5). DE staff held the view that the
mutual interests existing between the two parties could help increase mutual trust and
resolve conflicts easily, which would also affect project outcomes.
The development of social/personal bonds was noted by interviewees for the PDM case
and the HR case where they described how relationship management influenced project
outcomes. “Not available” does not mean that the management of social/personal bonds
was not cited by the interviewees, but meant that the interviewees did not link it to this
topic. Two possible explanations were described in the interviews. One is the mutual
influence of social/personal bonds and communication (Refer to Argument 4.1a and
Argument 4.2 in Table 5.5). DE staff perceived that tight social/personal bonds might
help facilitate effective communication and effective communication might help
establish or strengthen social/personal bonds. The other explanation is how
social/personal bonds might influence the trust and acknowledgment of the vendor’s
value, and influence the project outcome (Refer to Argument 4.1a, Argument 4.1b and
Argument 4.2 in Table 5.5). It was assumed that good social/personal bonds could
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increase the trust between the two parties, while limited social/personal bonds might
restrict the vendor in delivering value to the customer organisation.
The management of project resources was a common issue mentioned by interviewees
from all three cases. The arguments generated from the three cases all mentioned the
same explanation; that is, project resources might influence trust and then project
outcomes (e.g., user satisfaction) (Refer to Argument 5.1, Argument 5.2 and Argument
5.3 in Table 5.5). DE interviewees said that sufficient project resources helped the two
project teams from the vendor and the customer to increase mutual trust. But
insufficient or inappropriate resources invested into the project might lead to a
misunderstanding and breach of the mutual trust, which was important to the ultimate
project outcomes.
Figure 5.2 synthesises all the explanations interviewees raised in the interview in order
to illustrate how relationship management influences project outcomes in DE Company.
The arrows indicate the direction of the influences. Note that the figure aimed to depict
the emerging arguments from the interviews and to facilitate good understanding of the
influences of the relationship management; it has no causal implication in a positivist
sense. More specifically, the arrows do not imply causal relationships; themes in the
small boxes were grouped in a big dashed box representing one big category but do not
mean a complete set of indicators to measure the category. For instance, cost efficiency
is another commonly regarded indicator in the existing literature to describe the project
outcomes but it was not mentioned by interviewees from DE in this study.
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Relationship management practice
Relationship Dynamics
Project outcomes
Contract
5.3 Cross-case analysis of research question three
Research question three asks “to what extent do cross-cultural differences affect
relationship management in IT outsourcing?”. This question was addressed in two steps.
Firstly, the researcher used interview questions to examine what the interviewees in DE
Company perceived about the relationship management practice and their vendor’s
response which would reflect the vendor’s perception to some extent. Secondly, a
comparison of the three cases was conducted to find out whether there was any
difference that might be caused by different cultural background of the vendor. The
PDM case was linked to a US vendor with a Western culture, whereas the HR case and
the CRM case had Chinese vendors characterised by a Chinese cultural background.
Through a comparison of the three cases, findings were generated to suggest the
possible influences made by the cultural differences. In order to provide additional data,
some information was also collected from the vendor to ascertain whether these
findings made sense from the vendor’s perspective.
Communication
Mutual interests
Social/Personal bonds
Project resources
Contract implementation
Trust
Value proposition
User satisfaction
System adoption
Figure 5.2: Possible influence of relationship management on project
outcomes in DE Company
(Source: Developed for this research)
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150
Cultural differences were investigated from five perspectives (please refer to Appendix
A regarding interview questions). These five perspectives were identified in section 5.2
by summarising the emerging themes about the relationship management from the
interview transcripts. If culture really mattered in the management of IT outsourcing
relationships, it would influence the perceptions of the relationship management
practice. Hence, the five perspectives investigated in this section are: the perceived
attitude towards the contract (Subsection 5.3.1), the perceived modes of communication
(Subsection 5.3.2), perceptions of mutual interests (Subsection 5.3.3), perceptions of
social/personal bonds (Subsection 5.3.4), and perceptions of project resources
(Subsection 5.3.5).
5.3.1 Perceived attitudes towards the contract
The first interview question regarding cultural differences addressed perceived attitude
towards the contract. Interviewees were asked to describe their perceived attitude and
their vendor’s response to the issue of the contract in the project. The emerging themes
are presented in Table 5.6 with their supporting quotes.
Table 5.6: A comparison of perceived attitudes towards the contract in three cases
Emerging themes PDM case HR case CRM case
Contract characteristics
Comprehensive and complete, not flexible Brief and flexible, looked merely like a framework
Brief and flexible, looked merely like a framework
The vendor’s employees were very good contract makers. They tried their best to detail their responsibilities in the contract and performed strictly according to the contract. However, even the best contract could not predict and cover the change of the environment; sometimes we felt they were not flexible enough… (CIO of DE Company)
The vendor was good at drafting the contract. The items of the contract were as complete and comprehensive as we could imagine. .. (PDM project manager of DE Company)
The contract was not as comprehensive and complete as what we made with the PDM vendor. But the contract itself was the spirit of the outsourcing relationship between the vendor and us... (CIO of DE Company)
We did not draft a comprehensive contract; instead, we took the contract as the starting point of the cooperation for the two companies. The contract was a framework within which we began to compose our own music freely… (HR project manager of DE Company)
We didn’t pay much attention on making the contract, for we had a very good relationship with our vendor before. The contract specified the main responsibilities of both parties but didn’t identify the details. As a matter of fact, we didn’t have to list everything on the contract as that would be not only difficult to realise but also time consuming… (HR project team member of DE Company)
Both our vendor and we knew that the contract was only a framework within which a new business relationship started to be built. We spent little time on negotiating the project’s boundary and service scope. When we signed the contract with them, they appeared to be very anxious to establish the relationship with us… (CRM project manager of DE Company)
I had to admit that our contract with the vendor appeared to be a useless sheet. (CRM project manager of DE Company)
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The perceived role of contract
Abiding by the contract was the first thing in implementing the project or developing trust.
Relationship development was more important than contract implementation in the project.
The contract was a starting point as well as a legal support for the relationship development in the project. The relationship governed the project activities more than the contract did.
In the PDM project, the vendor was keen on sticking to the contract signed earlier and they could not give us timely response when we needed it… (Vice president of DE Company)
They worked strictly following the contact later in the progress of the project, and refused to extend the scope of their responsibility… (PDM project manager of DE Company)
…they insisted that they adhere to the contract first in order to complete it in time. They preferred to self evaluate their work against the contract and mentioned the clauses in the contract frequently when we communicated with each other… (PDM project team member of DE Company)
Sometimes they would love to help in the areas outside the contract, such as solving the problems of other information systems. They knew that what they did would cost more, but it would help in our future cooperation… (CIO of DE Company)
We did not put everything on the paper; we would rather observe our vendor, and then did the appropriate thing to show our response to their action. For example, when we met with any problems with the system, they were able to come to our company in half an hour to help us solve the problem even when the contract was over. They never asked for additional charges if what they did had gone beyond the work scope specified by the contract... (HR project manager of DE Company)
The contract between the vendor and us was a brief frame, only specifying some basic requirements we could foresee. But it does not matter because we trust our friend. Indeed, they did not disappoint us. They did not charge us if the work had gone beyond the contract. Our project team appreciated their efforts very much… (HR project team member of DE Company)
In December 2003, the vendor came into the first trust crisis ever. They failed to meet the deadline of delivering all functionalities. They delivered the first functionality that contained lots of bugs. Their board chairperson quickly created an express way for us to mend the system. We could see that they were sincere in establishing partnerships with us. So we decided to give our vendor more time. They prepared another complementary contract to eliminate our worries… (CRM project team member of DE Company)
In my opinion, a contract was a starting point for both parties to establish a business relationship…If the relationship failed, the contract was a legal support to appeal reasonable compensation. If the relationship was expected to start or amend, contract could also be used as a method to express one’s faithfulness… (CRM project team member of DE Company)
Now that both contract and the complementary contract had expired, the vendor and us still worked together to promote the CRM project and are most likely to further develop the uncompleted functionalities of the CRM system. We [DE staff] would consider paying more money to the vendor if they continued the work with us…(CRM project manager of DE Company)
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Attitude towards the work outside the contract
The vendor appeared to be cautious, sensitive and reluctant to accept changes of work scope against the contract.
The vendor was open and flexible regarding any changes in project scope against the contract.
The vendor took it as common and normal that the work scope changed against the initial contract.
It was quite normal for us to change some requirements when we were not familiar with the PDM system, while the vendor appeared reluctant to make changes if it was not included in the contract… (CIO of DE Company)
However, our team agreed that the vendor could be cautious and mean when negotiating a contract, but after that, they should be flexible in responding to changes and new requirements. If the vendor could establish a good relationship with us through this project, our company would have been happy to continue a follow up project with them or return some reasonable financial benefits to them… (Vice president of DE Company)
It is quite common for new requirements to be addressed when implementing the contract. But they insisted that they should adhere to the contract first in order to complete it on time… They [the PDM vendor] preferred to self evaluate their work against the contract… (PDM project team member of DE Company)
Sometimes they would love to help in the areas outside the contract, such as solving the problems of other information systems… (CIO of DE Company)
We greatly appreciated the efforts our vendor made. They were quite generous when any changes of requirements were addressed by us… (CIO of DE Company)
Sometimes they did not charge us if the work had gone beyond the contract. Our project team appreciated their efforts very much… (HR project team member of DE Company)
It is quite normal for an IS contract to change due to the new events occurring. The requirement usually changed in the middle of project. The misunderstanding on the project scope or definition often popped up after two parties signed the contract... (CRM project manager of DE Company)
But it was hard for a contract to foresee uncertainties in the future implementation of the project. Changes during the contract were acceptable as long as both parties were sincere in collaborating…I drew a lesson from the CRM case that developing a long term relationship always requires a flexible attitude towards the schedule. If both parties had the long-term security, they were likely to discard the contract to run the project… (CRM project team member of DE Company)
When the functionality of branches inventory management had problems when passing tests, we [DE staff] showed dissatisfaction to the project. The vendor immediately created an express way to prompt the mending, which was not promised in the business contract. (CRM project manager of DE Company)
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(Source: Developed for this research.)
• Contract characteristics
Table 5.6a: A comparison of contract characteristics in three cases
Emerging themes PDM case HR case CRM case
Contract characteristics
Comprehensive and complete, not flexible
Brief and flexible, looked merely like a framework
Brief and flexible, looked merely like a framework
(Source: Selected from Table 5.6)
DE staff perceived that the PDM vendor was a good contract maker. The IT outsourcing
contract with the PDM vendor was described as comprehensive and complete, whereas
the contract with the HR vendor or the CRM vendor was agreed to be a framework
characterised as brief and flexible. These different characteristics of a contract between
the Western vendor and Chinese vendors might be associated with the role of contracts
perceived by different parties of different cultural background.
• The perceived role of contract
Table 5.6b: A comparison of the perceived role of contract in three cases
Emerging themes
PDM case HR case CRM case
The perceived role of contract
Abiding by the contract was the first thing in implementing the project or developing trust.
Relationship development was more important than contract implementation in the project.
The contract was a starting point as well as a legal support for the relationship development in the project. The relationship governed the project activities more than the contract did.
(Source: Selected from Table 5.6)
The staff from the Western vendor (PDM vendor) might be accustomed to nurture the
trust by means of abiding by the contract or agreement. Once the deadline had been
agreed in the contract, they would try their best to meet the deadline in order to win the
other party’s trust. However, employees in DE Company preferred to nurture the trust
by developing relationships in the three cases. DE staff perceived that a sound
relationship was formed when both parties were considerate, helpful and generous as in
the HR case and CRM case. This point was supported and confirmed during the
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researcher’s discussions with the two Chinese vendors and another Western vendor of
DE Company. The quotes from vendors are provided:
“It is apparent that relationship works better than contract or regulations in the
Chinese society... We could sign a contract anytime we need, as long as we have a
good relationship. In the HR case, it was the project members who made
everything possible. We perform beyond the contract in order to maintain the
relationship…” (The project member of HR vendor)
“If we regard a company like DE Company as a valuable customer, we would
endeavour to build a long-term relationship … In this case, it was forgivable to
miss the contract schedule since what the customer needed was to best benefit
from the project. It was more important to deliver real value to the customer. Our
company believed that we had better guaranteed the implementation of the newly
developed system, which might be beyond the customer’s specification. We made
sure that the system really works on the customer’s site and helped them improve
their daily operation with the new system…In this way, end-users would be happy
because the new system relieved their workload, the IT staff would be happy
because their proposal for further IT projects would be approved much more
easily in the future, and the senior executives would be happy because the project
outcome was immediate and encouraging which meant that they had made a wise
decision on the IT investment …Then, the rest of the project or more projects
would be easier to manage as trust has been established…” (The project manager
of CRM vendor)
“We knew that building a relationship is pretty important in the business
environment of China. Hence, when we had the first opportunity to cooperate with
a new customer like DE Company, we tried our best to keep our promise in the
first instance. Since our promise has been stated in the contract, we would achieve
it by all means…This is also what the supervisors in our company always tell us
to do…If we failed to keep our promise, how could our customer rely on us and
give us another opportunity?...” (The project manager of another Western vendor
of DE Company)
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The perceived role of contract led to the discussion about the attitude towards work
outside the contract scope.
• Attitude towards the work outside the contract
Table 5.6c: A comparison of the attitudes towards the work outside the contract in
three cases
Emerging themes PDM case HR case CRM case
Attitude towards the work outside the contract
The vendor appeared to be cautious, sensitive and reluctant to accept work scope changes against the contract.
The vendor was open and flexible regarding any changes in project scope against the contract.
The vendor took it as common and normal that the work scope changed against the initial contract.
(Source: Selected from Table 5.6)
The two Chinese vendors were flexible when it came to the work scope changes. The
remarks of the two Chinese vendors in the interview provided their view of this issue:
“We would very much like to show our generosity to our customer. By doing so,
we could probably obtain more contracts from other customers. We normally help
the IT staff in DE Company to accomplish the work beyond the scope of the
contract, and they would stand on our side to resolve any complaints from the DE
end-users…This cooperation was key in the implementation phase…” (The
project member of HR vendor)
“It was really hard for a state-owned company like DE Company to clearly define
the work scope when drafting the contract…Frequently they might only know
what they really need at the later stage of the project when they had worked on
the project for an extended period of time. The Chinese companies did not go
through the entire process of IS development as a Western company does in the
past decades. Most of them were directly pushed to the modern IS era in the late
1990s.” (The project manager of the CRM vendor)
In contrast, Western vendors like the PDM vendor seemed to be cautious and reluctant
to accept changes of the work scope detailed in the contract. They were concerned that
changing the work scope during the project would interfere with normal progress and
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that they might lose the control of the contract implementation. As explained by the
project manager of another Western vendor of DE Company:
“We hoped customers like DE Company could define a clear work scope before
the start of the project. We could understand the work scope changes, but we do
not like these changes. When these changes occurred too often in the project, the
project became messy and difficult to manage… ” (The project manager of
another Western vendor of DE Company)
Along with the information collected from the DE employees and compared in Table
5.6c，the Chinese vendors and DE Company stressed that it was quite normal for
changes to be made to the contract due to the fact that it was difficult to foresee
uncertainties in the project. These Chinese organisations thought that a good
relationship should be achieved through exchanging favours between two partners. In
other words, if the vendor were cooperative enough to complete extra work beyond the
contract, the customer company would be likely to return favours to the vendor in
response to their request for establishing a good relationship. The remarks of the vice
president of DE Company explained this when he talked about the PDM project:
“The vendor was keen on sticking to the contract signed earlier and they could
not give us timely response when we needed it. However, our team agreed that the
vendor could be cautious and mean when negotiating a contract, but after that,
they should be flexible in responding to changes and new requirements. If the
vendor could establish a good relationship with us through this project, our
company would have been happy to continue a follow up project with them or
return some reasonable financial benefits to them…” (The vice president of DE
Company)
In summary, Western vendors tended to rely on the tangible agreement or contract to
govern the business activity explicitly; however, DE Company or its Chinese vendors
did not feel comfortable about this. The Chinese organisations were inclined to rely on
intangible relationships to govern the business activity implicitly.
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5.3.2 Perceived modes of communication
The second question regarding cultural differences addressed perceived modes of
communication. Interviewees were asked to describe the modes of communication in
each project and to comment on them. The emerging themes are presented in Table 5.7
with their supporting quotes.
Emerging themes PDM case HR case CRM case
Where and when to communicate
Regular meetings; the vendor tried to communicate based on a planned schedule.
Irregular meetings; the vendor facilitated communication whenever required.
A special face to face visit; the vendor specifically assigned an employee to coordinate the unexpected communication between the two sides.
We had routine meeting every week; most of our communications happened in those meetings. We needed to make an appointment if we wanted to meet them out of the regular meetings…(CIO of DE Company)
We had meetings every week; the time was arranged at convenience of both parties. However, we might often need some urgent. Sometimes we were not able to reach the vendor in time, which adversely affected our progress... (PDM project manager of DE Company)
Our communication was much easier and frequent. We could meet our vendor anytime when we had new ideas or new requirements. No appointment was needed... (CIO of DE Company)
We had meetings with our vendor frequently. The communication channel was efficient. We could reach our vendor any time we needed. We also prepared to meet them anytime when they needed our help…(HR project manager of DE Company)
At first, our project team normally addressed problems to the project manager and the technical manager in Shanghai office. [The headquarters of the CRM vendor is located in another city]. But it did not work ... We finally decided to pay a visit to another city where the CRM vendor’s headquarters is located and talked with these system developers face to face. Later on, they specifically assigned an employee in R&D department to deal with the unexpected communication of our project directly with the system developers at our vendor side. It was much more efficient in terms of communication. (CIO of DE Company)
The manner of communication
In a formal, impersonal, or business-like manner In an informal, personal, or friend-like manner In a formal manner in early days, in a more relaxed manner later on; informal, personal and friend-like
Their over-formal style of communication always reminded us that we [DE employees and the PDM vendor’s employees] were only in a contractual relationship [in Chinese culture, the contractual relationship here has a negative meaning]. They seemed polite when talking with us, but were difficult to really approach... Gradually, we were reluctant to express our true feelings to them, as they never treated us as friends…(PDM project team member of DE Company)
We [DE employees and the vendor’s employees] normally communicated with each other in an informal manner. Sometimes we liked to play jokes when we were discussing certain sensitive issues in business. We both tried to avoid a formal tone when we had any conversations about the project… (HR project team member of DE Company)
In the early days, we talked with each other formally. If no business communication was needed, we just kept silence. But at the later stages, when the two companies got closer and closer, people from the two companies were not afraid to joke. In other words, we communicated in an informal manner, just like friends, as we know that people from the other company would not misunderstand…(CRM project team member of DE Company)
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Table 5.7: A comparison of perceived modes of communication in three cases
(Source: Developed for this research.)
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• Where and when to communicate
Table 5.7a: A comparison of where and when to communicate in three cases
Emerging themes PDM case HR case CRM case
Where and when to communicate
Regular meetings; the vendor tried to communicate based on a planned schedule.
Irregular meetings; the vendor facilitated communication whenever required.
A special face to face visit; the vendor specifically assigned an employee to coordinate the unexpected communication between the two sides.
(Source: Selected from Table 5.7)
As to where and when to communicate, the three cases had their particular business
settings and their different working styles. It appears that the Western vendor (PDM
vendor) hoped to make a plan or a schedule for any communications. They tried to
make the communication happen by organising or planning in advance. In contrast, the
two Chinese vendors did not stress the importance of planned or scheduled
communications. The CRM vendor assigned an employee to coordinate the irregular
communication in order to facilitate any unplanned communication required by the
customer organisation. The remarks of the project manager from another Western
vendor of DE Company explained:
“We normally have an outline listing all the important issues we would like to
discuss with our customer in every meeting. We hoped to agree on the
communication time and venue up front so as to make sure that the key personnel
are present and that problems were properly resolved by a suitable person… ”
(The project manager of another Western vendor of DE Company)
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• The manner of communication
Table 5.7b: A comparison of the manner of communication in three cases
Emerging themes PDM case HR case CRM case
The manner of communication
In a formal, impersonal, or business-like manner
In an informal, personal, or friend-like manner
In a formal manner in early days, in a more relaxed manner later on; informal, personal and friend-like
(Source: Selected from Table 5.7)
As for the manner of communication, cross-cultural differences between the Chinese
organisations and the Western vendors were apparent. Staff from the Western vendor
(PDM vendor) was more inclined to communicate with DE staff in a formal, impersonal,
or business-like manner. They probably did so in order to show their professionalism
and, perhaps also, to gain respect and trust from their business partner DE Company. In
contrast, Chinese employees from the HR vendor and the CRM vendor as well as from
DE Company itself preferred to communicate with their colleagues in an informal,
personal, or friendly manner even in a business setting. Some interviewees from DE
Company assumed that enthusiasm would be dampened by communicating in a formal
manner. The following quote from DE’s project manager in the CRM case clearly
showed the perception of Chinese people when it comes to communication style:
“If both project team members could communicate with each other in an informal,
personal, or friend-like manner, then it normally meant the relationship between
two companies was good. However, when dissatisfaction or mistrust occurred
between two companies, the atmosphere of communication will be tense. In order
to get rid of the negative feeling, we might use some strategies. For instance,
when problems occurred, the chairperson of the meeting would normally use
humorous opening remarks to help alleviate the tense atmosphere. Then the
problems would be easy to solve. That is why sometimes the communication could
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be effectively conducted on the lunch table in China…” (CRM project manager of
DE Company)
The vendor of the CRM case confirmed the above argument. As explained by the
project manager of another Western vendor of DE Company:
“The informal way of communication in a formal business environment is deemed
inappropriate in our mind. A formal and explicit way of communication made us
assume what the customers said did count. The informal way of communication
confused our understanding and increase inefficiency when resolving the
problems…” (The project manager of another Western vendor of DE Company)
In summary, Western vendors preferred well prepared and planned communication in a
formal and explicit manner in a business setting much more than their Chinese
counterparts. To all three Chinese companies, an informal, personal and a friend-like
style of communication would have a positive impact in establishing a good relationship.
5.3.3 Perceptions of mutual interests
The third question regarding cultural differences addressed perceptions of mutual
interests. Interviewees were asked to describe how they dealt with the establishment of
the mutual interests and their vendor’s response in each project. The emerging themes
are presented in Table 5.8 with their supporting quotes.
Table 5.8: A comparison of perceptions of mutual interests in three cases
Emerging themes PDM case HR case CRM case
The communication about mutual interests
DE staff tried to imply to their vendor the mutual interests; both sides understood the mutual interests.
No need to communicate, as the mutual interests existed obviously for two sides
DE staff did not understand the mutual interests in early days but gradually got to know later on.
The PDM project was of strategic significance to us. We took great efforts to establish mutual interests with our vendor. We implied that if we could get along well with each other in the first stage of PDM project, we would consider contracting the second stage of PDM project to them... I believed that the vendor knew our mutual interests in this project, because they even suggested adding some tangible objectives in the contract… (Vice president of DE Company)
We tried to create a common interest with them by dividing the project into two stages. In the first stage, they should have the incentive to work better and gain the second stage of our project, which was also our goal. We thought our vendor should have realised that we had the potential opportunity of cooperation in the future... (PDM project team member of DE Company)
We are the key customer to our vendor. Our company is also the parent company of the vendor. Most of our previous IT managers are now working for our vendor. Our interests are mutually intertwined with each other. Therefore, our mutual goals were clear to us both when we signed the project contract, although we did not speak out... (CIO of DE Company)
DE Company was the largest owner of our vendor. Essentially we had the same interest, so we had mutual objectives. DE Company would like to support the development of our vendor; while our vendor would like to enhance the management efficiency of DE Company by developing a better HR information system…(HR project team member of DE Company)
Mutual goals or objectives were only decided in the interests of the two parties. If mutual interests could be agreed on by both parties, a long-term relationship would be expected. But we did not recognise our mutual interests during the early days. We did not understand why our vendor showed such great enthusiasms at the beginning. Later on the board chairperson explained during a special meeting that sometimes the real objectives of the vendor could be gained by careful observation and analysis...(CIO of DE Company)
I did not quite understand why our vendor gave such great concession on the price until one project team member from our vendor whispered to me the reason. We were the first customer in the machinery industry of our vendor... When they finished the project with DE Company, they could develop a more matured product, especially for the mechanical industry. They might even be able to earn profits from their second or third project after deducting the costs in the first project with us in the machinery industry...(CRM project member of DE Company)
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The realisation of the mutual interests
Failed to realise. Succeeded in realising. Not smooth at first but succeeded in realising later on.
We supposed that both parties should have mutual interests in developing a partnership. But I did not understand why they did not go as we expected. Maybe we were not such an important customer to them, or they did not perform as they wished to…(CIO of DE Company)
We believed that we had the same objectives with our vendor. However, we did not think that their efforts achieved the goal. They finished the project but we were not satisfied with them. We thought that our project was not important enough to obtain their attentions… (PDM project manager of DE Company)
But it seemed that they were more eager in maximising their short-term interests... (PDM project team member of DE Company)
I think we had the same goal during the development of the project, which was to work better and to build up a long-term relationship. Our vendor worked hard in achieving the goal, since we would give them more contracts if they could finish the first project successfully. On the other hand, we decided to adopt more IS with the help of our vendor…(HR project manager of DE Company)
We established mutual goals after the crisis. At first, we did not anticipate the hospitable attitude when we showed our dissatisfaction towards the project… Specifically speaking, the DE Company hoped to improve its other management packages with the help of our vendor in the future, while our vendor expected to understand the business of machinery industry. Then they could develop more potential customers in the related industry… (CRM project manager of DE Company)
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(Source: Developed for this research.)
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• The communication about mutual interests
Table 5.8a: A comparison of the communication about mutual interests in three
cases
Emerging themes PDM case HR case CRM case
The communication about mutual interests
DE staff tried to imply to their vendor the mutual interests; both sides understood the mutual interests.
No need to communicate, as the mutual interests existed obviously for two sides
DE staff did not understand the mutual interests in early days but gradually got to know later on.
(Source: Selected from Table 5.8)
Generally speaking, the communication of mutual interests was effective in all three
cases. In the PDM case, DE Company took an active role in establishing mutual
interests by initially facilitating communication regarding this issue. In the HR case,
there was no need to communicate, because DE Company is the parent company of the
HR vendor and the interests of the two parties had been already intertwined. In the
CRM case, the vendor took an active role in establishing mutual interests and expressed
its true interests in the later stage of the project. However, it seemed that all the Chinese
companies in this study addressed mutual interests implicitly rather than mentioning it
explicitly to the other party. This might be done differently in the case of Western
vendors. Western vendors probably like to make mutual interests explicit when
cooperating with their partners.
The researcher specifically addressed this question in the interview with an employee
from another Western vendor of DE Company and asked for his opinion. This employee
said that
“We don’t have this feeling as you described. To make the mutual interests
explicit or implicit depends on the strategy of the company when they are meeting
different partners. Sometimes if we make our interests too clear but know little
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about the customer’s, we might lose a good position in the business
negotiation…” (Another Western vendor of DE Company)
Information collected from the other Chinese vendors also did not show any indication
of cultural differences. The two Chinese vendors perceived that the communication of
mutual interests might depend on the strategy of the company and the personalities of
the project managers.
Therefore, it is hard to draw any conclusions as to whether there are any cultural
differences in the communication of mutual interests based on the information collected
in this study.
• The realisation of the mutual interests
Table 5.8b: A comparison of the realisation of the mutual interests in three cases
Emerging themes PDM case HR case CRM case
The realisation of the mutual interests
Failed to realise.
Succeeded in realising.
Not smooth at first but succeeded in realising later on.
(Source: Selected from Table 5.8)
The realisation of mutual interests was another concern for most of the interviewees. In
the PDM case, the two parties failed to realise their mutual interests. The interviewees
presented two possible reasons: the PDM project was not attractive enough to the PDM
vendor or the PDM vendor failed to realise the objective although they agreed on
mutual interests. It was not possible to gain a full understanding, as the researcher could
not access the PDM vendor in this study and hence had to rely on perceptions for DE
Company only. In the HR case, the two parties realised their mutual interests. In the
CRM case, although mutual interests were not realised smoothly in the early days, the
interviewees perceived that they succeeded later on. What DE staff addressed in the HR
case and the CRM case was confirmed by their vendors.
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In summary, the researcher did not find any indications of cultural differences based on
the information collected in this study.
5.3.4 Perceptions of social/personal bonds
The fourth question regarding cultural differences addressed the investigation of
perceptions of social/personal bonds. Interviewees were asked to describe their
perceived attitude towards social/personal bonds in the relationship management and
their vendor’s response. The emerging themes are presented in Table 5.9 with their
supporting quotes.
Table 5.9: A comparison of perceptions of social/personal bonds in three cases
Emerging themes
PDM case HR case CRM case
The existing social/personal bonds
Very few and limited Some social/personal bonds had been established before the project.
No social/personal bonds existed in top management level; some social/personal bonds were established between the two project teams but were restricted by the working environment.
We had few social bonds with the PDM vendor’s employees. Our relationship was more like the relationship between two contract parties … (CIO of DE Company)
We don't know any of the project team members from the vendor side before... (PDM project team member of DE Company)
Some of our employees were friends of the vendor’s employees before this project… (HR project manager of DE Company)
The project manager of the vendor and I were former colleagues in the IT department of DE Company and close friends as well. We graduated from the same university... we had established tight social bonds… (HR project team member of DE Company)
I do not know whether personal bonds existed between the two project teams. At the top management level, the two companies only had a business relationship and there were no personal bonds or social bonds... (CIO of DE Company)
Well, when the project was nearly completed, the two project team members had become good friends … (CRM project manager of DE Company)
The attitude towards establishing social/personal bonds
The vendor did not care much about the social/personal bonds, but DE staff regarded them as important.
Both parties regarded the social/personal bonds as important and helpful in the project.
Both parties knew the importance of establishing social/personal bonds, especially between the two project teams who were working together for the project.
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They did not care much about social bonds in their work. We could hardly make friends personally with our vendor. To them, work is work. In some sense this is good, as we do not need to spend much time in entertaining them or to be entertained. But on the other hand, we felt a lack of opportunity to get to know each other and build up on our common language... (PDM project manager of DE Company)
Social bonds were playing a positive role in maintaining the relationship with our vendor. And the social bonds made the communication more effective and efficient... (CIO of DE Company)
Personal bonds were important in our case... The friendly atmosphere was very helpful in improving the efficiency of our communication. And we had greatly benefited from having such a friendly atmosphere in our cooperation… (HR project manager of DE Company)
We trusted him and the team he led because we had a lot of common experience before through which we had established tight social bonds… (HR project team member of DE Company)
I believed if social bonds existed among project members of the two teams, the communication would have been easier... (CIO of DE Company)
Well, actually during the later stages of the project, the two project team members had become good friends. They sometimes gave good suggestions to the other party on how to relieve the antagonism in their company. It proved to be helpful in promoting the relationship between the two companies… (CRM project manager of DE Company)
The social or personal bonds … benefited trust building and made the communication effective... (CRM project manager of DE Company)
(Source: Developed for this research.)
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• The existing social/personal bonds
Table 5.9a: A comparison of existing social/personal bonds in three cases
Emerging themes PDM case HR case CRM case
The existing social/personal bonds
Very few and limited
Some social/personal bonds had been established before the project.
No social/personal bonds existed in top management level; some social/personal bonds were established between the two project teams but were restricted by the working environment.
(Source: Selected from Table 5.9)
The closeness of existing social/personal bonds seemed to be different in all three cases.
According to the interviewees, the two project teams did not establish satisfactory
social/personal bonds in the PDM project, which disappointed DE’s staff. In the HR
project, most of the project team members assigned by the HR vendor had worked in
the IT department of DE Company before the project. Hence, there were some existing
close social/personal bonds between the two project teams. As for the CRM project,
there were limited social/personal bonds existing at the top management level, whereas
some personal bonds were successfully built up in the operating level (i.e. between the
two project teams). The comparison of this theme (i.e. the existing social/personal
bonds) facilitates the analysis of the following theme (i.e. the attitude towards
establishing social/personal bonds), where the cultural differences in perceptions of
social/personal bonds could be investigated.
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• The attitude towards establishing social/personal bonds
Table 5.9b: A comparison of attitudes towards establishing social/personal bonds
in three cases
Emerging themes PDM case HR case CRM case
The attitude towards establishing social/personal bonds
The vendor did not care much about the social/personal bonds, but DE staff regarded them as important.
Both parties regarded the social/personal bonds as important and helpful in the project.
Both parties knew the importance of establishing social/personal bonds, especially between the two project teams who were working together for the project.
(Source: Selected from Table 5.9)
A comparison across the cases showed that the three vendors did not hold the same
attitude towards the establishment of social/personal bonds. The two Chinese vendors as
well as DE Company (the Chinese customer company) perceived that social/personal
bonds were extremely important when collaborating with partners. The social/personal
bonds made communication easier and increased mutual trust in the project. They
claimed that their work benefited a lot from these personal bonds. The employees from
the Western vendor (PDM vendor) might understand that the existence of
social/personal bonds among the two parties helped to promote business partnerships;
however, their behaviour showed their belief that social/personal bonds could not
substitute for a formal business relationship in order to foster trust. The staff of PDM
vendor maintained a formal and impersonal relationship with their workmates from DE
Company. This might reflect cultural differences in the perceptions of social/personal
bonds to some extent. The project manager of another Western vendor of DE Company
agreed with this conclusion. He commented:
“To us, social/personal bonds had better be separated from work setting. Business
relationships are between two companies. Social/personal bonds are between
persons. They are different things. We knew that in some cases personal
relationships might help the business but in other cases it might harm the business.
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We are often required by the company to be rational instead of emotional in a
work setting…” (The project manager of another Western vendor of DE
Company)
Another important issue emerging from the interviews is the notion of “Guanxi” (the
definition of Guanxi is given on page 102, Chapter 4 Sub-section 4.3.2), mentioned in
relation to the PDM project and the CRM project. Chinese interviewees assumed that if
Guanxi was felt, trust between two parties could be strengthened. The quotes of two
interviewees explained:
“We [DE staff] don't know any of the project team members from the vendor side
[the PDM vendor] before. We could collaborate with each other in a business
manner, but I find it difficult to expect mutual trust or understanding to happen
with a merely business relationship. In contrast, sincerity or trust easily appears
with my familiar friend or my Guanxi network…Our vendor’s staff should be
aware of the personal bonds…” (PDM project team member of DE Company)
“But if the senior management established some personal bonds or Guanxi, the
partnership would have been much easier to achieve, I believe…” (CRM project
manager of DE Company)
In summary, the Chinese companies regarded social/personal bonds as more significant
in a working environment than their Western counterparts. As shown in some of the
cases, the Chinese interviewees perceived social/personal bonds as one of the key
factors to build a successful business relationship.
5.3.5 Perceptions of project resources
The last question regarding cultural differences addressed perceptions of project
resources. Interviewees were asked to comment on the resources their vendor invested
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in the project. The emerging themes are presented in Table 5.10 with their supporting
quotes.
Table 5.10: A comparison of perceptions of project resources in three cases
Emerging themes PDM case HR case CRM case
Overall impression of project resources (by DE staff)
Not sufficient and less than satisfactory
Satisfactory Overall sufficient, but in some phases (e.g., the phase of requirement analysis) less than satisfactory
The resources inputted by our vendor were limited. Only several of their employees were involved which was less than what we expected. What we felt was that our project had not been taken good care of… (CIO of DE Company)
They are not so generous to us in sense of time and labour. The progress of the work was not so satisfactory. In our opinion, more staff and time should be allocated to our project… (PDM project team member of DE Company)
We were satisfied with the efforts made by our vendor. Many of their staffs as well as other resources were involved in our project... (CIO of DE Company)
I should say that our vendor made considerable efforts on our project. They formed an experienced team and spent a lot of time on our project. We were satisfied with what they invested in our project… (HR project manager of DE Company)
We appreciated the vendor’s large input into our project. They opened an express way to shoot the software bugs for us. They assigned personnel from their Shanghai office to take care of our project locally… (CIO of DE Company)
We knew that the vendor had assigned a strong system development team to our project, but the system analysts in the phase of requirement analysis were less than satisfactory…The lack of personnel input might be one of the reasons why requirement analysis took too much time compared to the original plan... (CRM project member of DE Company)
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Perceptions of invested human resources (by DE staff)
Doubt the qualification of the sales representative who took the key role in this project
Respect the experienced IT specialist and software experts in this project
Prefer to collaborate directly with the system developers; doubt the qualification of the assistant of the technical manager who had no technical background
I could hardly believe that our vendor assigned a sales representative to take the key role in the project. Surprisingly, their project team including system developers sometimes followed the instructions of the sales representative. But I always doubted whether he could understand the requirements our technical experts addressed in the daily workplace. Sometimes we felt the vendor was probably unconcerned with our project. However, the project was very important to us. Our best IT experts and diesel mechanician were assigned to this project, which reflected the significance of this project... (PDM project manager of DE Company)
The project manager was the former IT manager of our company. He was also an experienced IT specialist as far as I know. Normally we respected such specialists and would like to believe them because they are authorities in the domain, not like those salespersons. We respected and trusted his team, which was said to comprise of top software experts in the machinery industry… (HR project team member of DE Company)
But actually we preferred to communicate with the system developers in the headquarters. The direct interaction with the software engineers helped us solve the system problems effectively… (CIO of DE Company)
Sometimes we felt the technical manager (the vendor assigned to the project) was not influential enough to help us pass the new requirements to the system developers. Some requirements were declined by the R&D department in the name of “unfeasibility”. On this occasion, we had to visit their headquarters directly to discuss our requirements with the system developers. We felt that the project manager from the Shanghai office of the CRM vendor was much more like the sales manager, although his title was the technical manager… (CRM project manager of DE Company)
We knew that the vendor had assigned a strong system development team to our project, but the system analysts in the phase of requirement analysis were less than satisfactory. Only one technical manager knew our business and was qualified in doing this job. The assistant of his had no technical background and was of little help... (CRM project member of DE Company)
(Source: Developed for this research.)
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• Overall impression of project resources (by DE staff)
Table 5.10a: A comparison of the overall impression of project resources in three
cases
Emerging themes PDM case HR case CRM case
Overall impression of project resources (by DE staff)
Not sufficient and less than satisfactory
Satisfactory Overall sufficient, but in some phases (e.g., the phase of requirement analysis) less than satisfactory
(Source: Selected from Table 5.10)
The interviewees from DE Company described their overall impressions of the
resources invested by their vendors. DE staff had a different impression of the three
cases: they were unsatisfied with the insufficient resources invested by the PDM vendor;
they expressed their appreciation of the generous efforts the HR vendor inputted into the
HR project; and they gave overall positive comments on the general project resources,
although they felt unhappy in some phases of the CRM project (e.g., in the requirement
analysis phase). These impressions were consistent with their overall perceptions of
project outcomes in each case which were summarised in Sub-section 5.3.1. The
information collected from the two Chinese vendors indicated that they were satisfied
overall with the resources invested by DE Company in the two projects. This theme
leads to more specific descriptions about the perceptions of the project resources.
• Perceptions of invested human resources (by DE staff)
Table 5.10b: A comparison of the perceptions of invested human resources in three
cases
Emerging themes
PDM case HR case CRM case
Perceptions of invested human resources (by DE staff)
Doubt the qualification of the sales representative who took the key role in this project
Respect the experienced IT specialist and software experts in this project
Prefer to collaborate directly with the system developers; doubt the qualification of the assistant of the technical manager who had no technical background
(Source: Selected from Table 5.10)
Generally speaking, project resources are normally made up of material resources and
human resources. However, in IS development projects, project resources from the
vendor side mainly consist of human resources. This could explain why almost all the
interviewees talked about human resources invested by their vendors. Comparison of
the cases showed that there were some cultural differences in the perceptions of the
Western vendors and the Chinese companies. It was stated by the DE staff that the PDM
vendor (a Western company) assigned a sales representative to oversee the relationship
management role during the project. Technical experts including system developers or
even project managers from the PDM vendor followed the instructions of the sales
representative. However, in the mind of Chinese staff, the authority of technical experts
who could solve the problems with their technical talent was higher compared to that of
sales or marketing people.
The perceived high authority of the technical experts in Chinese organisations could
explain the following three facts: first, the project manager from the Shanghai office of
the CRM vendor used the title of “technical manager” although one of the interviewees
suspected that he really was a sales representative in the CRM project. Second, DE
Company itself assigned technical experts in the design department or engineering
department to show their priority in the PDM project. Third, the HR vendor also
assigned a strong team made up of their best IT specialists to show their priority in the
HR project. These technical experts had gained respect from other supporting
departments such as sales, marketing, human resources or finance and behaved as team
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leaders in IT outsourcing projects. DE staff felt uncomfortable when the PDM vendor (a
Western company) assigned a sales representative to take a key role in the PDM project.
Interviewees from DE Company doubted the credentials of the sales representative in
the PDM project and also doubted the qualification of the technical manager’s assistant
in the requirement analysis phase in the CRM project simply because this assistant had
no technical background.
This finding was confirmed by the vendors. The project manager of the CRM vendor
did not confirm the suspicion from DE Company that they purposely used the title of
“technical manager” for someone who was, in fact, in a sales role. However, he
supported the arguments about the authority of technical experts in Chinese society:
“It was quite normal that customers liked to address their problems with the
technical experts in our company. Customers and even employees in our own
company would believe in the technical experts and would like to rely on them to
make the decision. This is why the system developers in the headquarters had
many privileges even though they might be not high up in the hierarchy
structure...” (The project manager of CRM vendor)
The project manager of another Western vendor of DE Company addressed a new
cultural difference concerning this issue according to his experiences in cooperating
with both Western customers and Chinese customers: Chinese companies were more
sensitive to hierarchical structure than Western companies. This was illustrated by the
project manager of this Western vendor:
“For instance, in our project with DE Company, the project members from them
would like to address their system requirements to the project leader even though
we had assigned an analyst who was in charge of the role of requirements
collection and analysis. As far as we could understand, the top guy in the
hierarchy structure may not necessarily be the appropriate person to solve your
problem. If we assign the same project team to our Western customers, they are
able to recognise the functional structure and find a right person to resolve their
problems. Furthermore, they did not show special enthusiasms to the company
leaders as Chinese companies usually do…” (The project manager of another
Western vendor of DE Company)
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In summary, technical experts and the top personnel in the hierarchy gained more
respect from Chinese companies than Western vendors. Chinese companies would feel
comfortable when technical experts or senior managers rather than sales people took a
key role in an IT outsourcing project.
5.3.6 Summary of the cultural differences in relationship
management
The third research question was addressed by investigating cultural differences from
five perspectives. These five perspectives were the primary themes related to
relationship management practice. Analysis of the case data showed that there were
cultural differences in perceived attitudes towards the contract, perceived modes of
communication, perceptions of social/personal bonds, and perceptions of project
resources between Chinese companies and the Western vendors. However, no cultural
differences were found regarding the perceptions of mutual interests in this study.
5.4 Chapter summary
The role of this chapter was to present cross-case analysis and findings for the three
research questions. Information regarding each research question was subdivided into
issues or themes. These issues or themes were presented in tables to facilitate
comparison across the three IT outsourcing cases.
The three research questions were explored in turn: first, information was summarised
to address the question “what are the distinguishing characteristics of an effective IT
outsourcing relationship?”; then the second research question “how does relationship
management influence the outcome of an IT outsourcing project?” was focused on;
finally, the information was categorised according to the five issues which jointly
addressed the third research question “to what extent do cross-cultural differences affect
relationship management in IT outsourcing?”
This chapter made no attempt to compare these findings with the extant literature as that
is the role of the next chapter.
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6. Conclusions
This chapter concludes the thesis. It starts with a summary of this study (Section 6.1).
Then it discusses the findings about the three research questions in the light of the
existing literature (Section 6.2), and these lead to the conclusions about the research
problem (Section 6.3). Next, the contribution of this research (Section 6.4) is described
from two perspectives: contribution to theory and implications for practice. Finally, the
limitations of this research are acknowledged (Section 6.5) and suggestions for future
research (Section 6.6) are recommended. Figure 6.1 shows the structure of Chapter 6.
Summary of the study (Section 6.1)
Discussion about findings(Section 6.2) Conclusions about research problem(Section 6.3))
)
Contribution of this research(Section 6.4) Limitations of this research(Section 6.5) Suggestions for future research (Section 6.6)Figure 6.1: Structure of Chapter 6
(Source: Developed for this research)
Contribution to theory (6.4.1
Implications for practice (6.4.2
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6.1 Summary of the study
IT outsourcing is an established research topic with various areas of focus. Recent
researchers focused on the managerial perspective, especially the management of the
on-going relationship with the vendor. A growing interest in global and partner-based
alliances requires IT outsourcing management to fit this new context. To address these
issues, the research problem identified for this research was:
How can an IT outsourcing relationship be managed to enhance the outcome of an
IT outsourcing project in a cross-cultural context?
In order to address this research problem, three research questions were developed,
investigating the characteristics of a satisfactory IT outsourcing relationship, the
influence of relationship management on the outcome of an IT outsourcing project, and
the impact of cross-cultural differences on the relationship management.
A review of the extant literature relevant to the research problem was conducted in
Chapter 2. The review of the literature on IT outsourcing shows inconsistent results in
the antecedents, characteristics, and mediators of IT outsourcing outcomes.
Inconsistencies might be explained by organisational idiosyncrasies which make
outsourcing activities in different organisations hard to compare with each other.
Relationship management in IT outsourcing is a central issue in the current literature.
However, there are not sufficient academic research focuses on it. Most of the existing
literature on managing IT outsourcing relationships tests hypotheses or theoretical
propositions rather than generating theory. The static treatment of relationship
management issues by positivist researchers forfeits the chance to capture the dynamic
nature of IT outsourcing. Global and partnership-based alliances represent the latest
trend in IT outsourcing practice, but few studies take cross-cultural factors into
consideration when examining outsourcing arrangements. Very few IS studies use
interpretive methods to examine cross-cultural interaction. Hence, the issue of the
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management of IT outsourcing relationships in a cross-cultural context is a relevant and
important topic for research.
Having identified the research focus through the literature review, the research
methodology to address the research problem was developed and then described in
Chapter 3. Embedded case studies were adopted as an appropriate research strategy for
this research. More specifically, it is an interpretive case study. Three IT outsourcing
cases were studied in a Chinese customer organisation. One Western vendor and two
Chinese vendors provided the IT outsourcing services for these three projects. Data
were collected mainly through archival documents and interviews with the project
participants in the customer organisation. Some additional information from the vendors
was also collected through three brief interviews focusing on the perceived cultural
differences in relationship management.
Analysis of the collected data was presented in Chapter 4 and 5. After describing the
case organisation (Chinese customer organisation) and the three IT outsourcing projects,
cross-case comparison was conducted to address the research questions. Three
distinguishing characteristics of a satisfactory IT outsourcing relationship were
identified from the interviews: a successful contract implementation, established trust,
and the acknowledgement of vendor’s high value. In managing relationships the
outsourcing company emphasised contract implementation, communication with
vendors, recognition of mutual interests, establishment of social/personal bonds, and
appropriate allocation of project resources. These relationship management practices
influenced the dynamics of a relationship as well as project outcomes which was
perceived by staff in the case organisation to be investigated via user satisfaction and
system adoption. Cross-cultural differences were examined through cross-case
comparison of the project with a Western vendor and the projects with Chinese vendors.
The data collected from the customer organisation were cross-checked with those from
the vendors. Cross-cultural differences were found in the perceptions of contract,
communication, social/personal bonds, and project resources between the Western
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partners and the Chinese partners. In contrast, no cultural differences were detected in
the perceptions of mutual interests. These findings are discussed in the context of the
existing literature in the following sections.
6.2 Discussion of findings
This section discusses findings, comparing the findings of this research with the existing
literature. The discussion consolidates a substantial volume of prior theory with the
research findings and integrates theoretical constructs with their application in this
research while preserving the research context.
6.2.1 The nature of a satisfactory IT outsourcing relationship
Investigation of the nature of a satisfactory IT outsourcing relationship is a prerequisite
to understanding cross-cultural relationship management in this study. Based on the
analysis of the relationship category for each IT outsourcing case, this study identified
the distinguishing characteristics of an IT outsourcing relationship and assessed how
each characteristic contributed to a satisfactory IT outsourcing relationship.
The dynamics of the relationship
This study found that IT outsourcing relationships are not static; they are changing and
evolving over time. Three IT outsourcing cases in this research had different
relationship development stories (refer to Chapter 4 from Section 4.3 to 4.5). This study
captured the dynamic nature of a relationship and extracted four aspects of a
relationship to describe the development of an IT outsourcing relationship in each
project. These four aspects are "initial expectation on the relationship”, “the relationship
status at the beginning of the project”, “the relationship status at the end of the project”,
and “the relationship status after the project” (refer to Chapter 5 Section 5.1 and Table
5.2). The identification of these four aspects in this study is similar to the conclusion of
Nam et al. (1996) and Kishore et al. (2003), who emphasised that interorganisational
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relationships should not simply identify the specific relationship category for each pair
of companies, but consider the prior relationship the customer organisation had with its
vendor and trace the movement of customer-vendor relationship over time.
The four aspects of a relationship not only capture the different phases of the
relationship development for three IT outsourcing cases, but also influence each other in
all the three cases. The findings of this study showed that the initial expectation of a
relationship and the relationship status at the beginning of the project could explain
whether the project participants of one party took an active or passive role in the
relationship management for this project. For instance, in the CRM case, DE Company
took a relatively passive role in relationship establishment and development, because
the initial expectation of a relationship and the relationship status at the beginning of the
project were the same as DE Company. Then, in all three cases the joint-efforts the two
parties made since the project started would influence the relationship status at the end
of the project and after the project. The gap between the initial expectation of a
relationship and the relationship status at the end of the project or after the project
would greatly influence the perception of one party on whether relationship
development was satisfactory or not.
This is consistent with prior research on evolution of interorganisational relationships in
other contexts (e.g., Doz, 1996; Ring and van de Ven, 1994; Sabherwal, 1999; 2003). In
this study the way in which inter-organisational relationships evolved was shaped by the
initial conditions and adjustment activities, which confirms the conclusions of Doz
(1996) and Sabherwal (2003). The customer-vendor relationship of the HR case moved
in a virtuous circle as defined by Sabherwal (1999) and resulted in a strengthened
partnership. Sabherwal (1999) found that positive trust and appropriate structuring are
essential for a good outcome of a project, which in turn improves trust and facilitates
more appropriate structuring. The successful outcome of the HR project can be
attributed to a large extent to the initial condition of a solid partnership relationship
between the two sides prior to embarking on IT outsourcing. The PDM case and the
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CRM case started with the same relationship condition (i.e. the customer and vendor
had no prior collaborations), thereby relying on adjustment activities to promote their
relationships. However, the relationships emerged differently. In the PDM case the
relationship underwent a process described by Doz (1996) as stubborn with little
learning and readjustment; whereas the CRM case underwent “the cycles of learning,
re-evaluation and readjustment” (Sabherwal, 2003, p. 159).
However, the findings in this study are inconsistent with those of Sabherwal (2003) who
argues that the vendor, who is usually more experienced in outsourcing, prefers to go
into projects with greater preparation (as reflected in their greater emphasis on more
formal and impersonal mechanisms); in contrast, the customer, who usually has less
experience with such projects, seeks increased informal mutual adjustment. The HR
vendor and the CRM vendor in this study did not resist informal mutual adjustment and
did not pull the relationship towards the formal mechanisms characterised by standards,
plans, and formal mutual adjustment. In the manufacturing industry, business processes
are complicated and unique; for this reason vendors seldom try to persuade customers to
follow their IT outsourcing processes. In order to achieve success in the IT outsourcing
projects, the HR vendor and the CRM vendor actively made informal adjustments in
response to the customer’s requests.
Distinguishing characteristics of an IT outsourcing relationship
The findings of this research showed that contract implementation, trust, and value
proposition are three distinguishing characteristics of an IT outsourcing relationship.
Contract implementation refers to whether the contract was fulfilled successfully. Trust
in this study not only means the perception on the vendor’s ability and expertise, or the
expectation of technically competent role performance, but also the perceptions of the
vendor’s intention to perform according to customer’s objectives, which is associated
with integrity and responsibility. Value proposition in this study refers to the
acknowledgement of economic and management benefits the vendors delivered to DE
Company through the IT outsourcing projects. These three characteristics were
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prominently mentioned across cases when interviewees described the relationships with
their vendors, independent of the case context per se. Hence, they were identified in this
study as the distinguishing characteristics of an IT outsourcing relationship.
Contract implementation and trust are two common components identified, in existing
literature on IT outsourcing, as describing a relationship (e.g., Barthelemy, 2003;
Sabherwal, 1999; Willcocks and Kern, 1997). Barthelemy (2003) labels contract
implementation as the hard side of a relationship while trust as the soft side of a
relationship. This study suggests that contract implementation has a huge impact on
relationship quality because it allows two parties to set expectations and to commit
themselves to short- and medium-term goals (which is in line with the work of
Barthelemy (2003) and Gulati (1995)). This study also suggests that trust makes the
relationship more durable in the face of conflict and encourages interactions between
parties involving promotion of each other’s interests (which is line with the work of
Johanson and Mattsson (1987) and Sabherwal (1999)).
In addition, this study complements the existing literature by identifying a third
characteristic of a relationship: value proposition. The term “value proposition” was
borrowed from the work of Levina and Ross (2003) and refers to the concrete benefits a
customer gets from using the products or services of its vendor or the benefits a vendor
obtains from doing business with its customer. The study of Levina and Ross (2003)
explains how vendors deliver value to customers and manage the relationship cost
effectively. They addressed the importance of the value proposition in IT outsourcing
relationship management, but did not link this concept to the perceived relationship
characteristics in IT outsourcing. The findings of this study suggest that value
proposition is an additional perspective shaping the project participants’ perception on
an IT outsourcing relationship, besides contract implementation and trust. For instance,
in the CRM case the vendor lost control in contract implementation and did not
establish trust at the beginning of the project. However, when the customer organisation
(DE Company) became aware of the benefits the vendor delivered to its sales function
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through the CRM project, the interviewees from DE Company started to perceive the
relationship as moderately satisfactory. Trust was also gradually established when the
customer organisation obtained increasing benefits from its vendor.
Contribution of each characteristic towards establishing a satisfactory IT
outsourcing relationship
A successful contract implementation, established trust, and a high perceived value of
the other party were identified as the distinguishing characteristics of a satisfactory IT
outsourcing relationship in this research. However, successful contract implementation
was found to be less important compared with trust and perceived high value that the
vendor brought, which are significant to the perception of a satisfactory relationship.
This phenomenon might be explained through referring to the work of Willcocks and
Kern (1997). They argue that a relationship aiming to tap into the technical leadership
capabilities of a vendor to achieve IT efficiency may generate higher value if it is run as
a partnership, whereas one that aims to achieve cost efficiency by tapping into a
vendor's widely available resource pool may be better managed as a technical supply,
pay-per-service relationship governed mainly through contract. The case organisation in
this research transferred most of the IT function to its subsidiary company (the HR
vendor) to improve its management focus. The reason for IT outsourcing in all three
cases was pursuing strategic goals rather than cost cutting. Hence, the case organisation
focused on the establishment of trust and on value delivered by the vendor rather than
just contract implementation.
In addition, the great contribution of trust revealed in this study’s cases confirms the
work of Calderon et al. (2002), Fukuyama (1995), and Knack and Keefer (1997). These
authors consistently argued that trust plays a more important role in developing
countries with lower law enforcement or lower creditor protection (like China) than in
developed countries. This may be attributable to the less well-developed financial
sectors, insecure property rights, and unreliable contract enforcement of these
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developing countries (Knack and Keefer, 1997). When a society has little regard for law
enforcement, trust appears to be a key complement in business collaborations.
6.2.2 The impact of relationship management
Having clarified the nature of a satisfactory IT outsourcing relationship, this research
then focused on the way in which relationship management contributes to the outcome
of an IT outsourcing project. The perceptions of relationship management practice,
project outcomes and how relationship management influences project outcomes will be
discussed in turn.
Relationship management practice
IT outsourcing relationships are expected to be established, developed and strengthened
through management practice. In this research, five perspectives were summarised to
understand the perceptions of DE interviewees on relationship management practices.
These five main perspectives are the management of contract, communication, mutual
interest, social/personal bonds, and project resources. The management of a contract
includes contract facilitation (i.e. contract negotiation, execution, and conflict resolution)
and contract monitoring. Paying attention to communication and exchange of
information assisted both parties in IT outsourcing projects, enabling more accurate
assessments of the other party’s behaviour. The recognition of mutual interest refers to
the two parties of IT outsourcing taking efforts to understand each other and their
specific interests. The development of social/personal bonds involves a variety of
strategies for interpersonal relations and working with other people in the workplace.
The management of project resources means the management of asset-specific
investment made by both parties to show their level of commitment to the relationship,
including knowledge and time. The contents of these five perspectives of relationship
management practice have been discussed in the literature review chapter (Chapter 2)
with the references listed in Table 2.4. The data collected from the field showed that
these contents are still valid in this research context.
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In existing IS literature, there are several studies investigating relationship management
practice (e.g., Bensaou and Venkatraman, 1996; Henderson, 1990; Kern, 1997; Lee and
Kim, 1999; Willcocks and Kern, 1998). The perceptions of relationship management
practice identified from this study are most similar to those of Willcocks and Kern
(1998). They include power dependency and social/cultural adaptations in addition to
the five perspectives identified in this research. But the findings of this research showed
a different understanding of power dependency and social/cultural adaptations. In this
study social/cultural differences were found to influence the perceptions of relationship
management practice, so social/cultural adaptation is a process of understanding the
other party’s perception of management practice and making adjustment to improve the
practice effectiveness. Power dependency is also perceived to influence the way of
managing IT outsourcing relationship in this research rather than the relationship
management content.
Project outcomes
The findings of this research indicated that interviewees from DE Company perceived
“user satisfaction” and “system adoption” as two main measures of project outcomes.
User satisfaction is a subjective indicator concerning overall impressions of users on an
IT outsourcing project. It can be viewed as the level of fitness between the user’s
expectations (on economic benefits and strategic benefits) and the project consequences.
System adoption is an objective indicator regarding the level of acceptance and usage of
the new system in the everyday workplace of the customer organisation. It can be
viewed as the technical benefits the IT outsourcing projects eventually bring.
A lot of studies in existing IS literature have discussed the perceived measures of
project outcomes of IT outsourcing (e.g., Grover et al., 1996; Lacity and Willcocks,
1998, 2000; Lee and Kim, 1999; Saunders et al., 1997; Venkatraman and Ramanujam,
1987). Some of these studies include other indicators in addition to “user satisfaction”
and “system adoption” identified in this research. For example, Lacity and Willcocks
(1998; 2000) use “expected cost savings achieved” as one of the indicators of project
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outcomes. The findings of this research showed that this indicator is not appropriate in
today’s IT outsourcing arrangements motivated by strategic intent rather than cost
considerations. Lee and Kim (1999) use “realisation of the business benefits (business
perspective)” in addition to “user satisfaction (user perspective)” as their indicators of
project outcomes. But the themes extracted from this study only reflect the perceptions
of the DE interviewees on project outcomes and do not represent a complete set of
measurements of the concept “project outcomes”.
The impact of relationship management
As for the impact of relationship management, this research found that five perspectives
of relationship management practice would affect the performances of relationship
characteristics. Then the changes of relationship status would in turn affect the
relationship management practices and influence the outcome of an IT outsourcing
project. Some management practices might directly affect the eventual project outcomes.
This research also synthesises all the possible paths to illustrate the relationship
management impact (refer to Figure 5.2). For example, in the HR project the prior
relationship (i.e. DE Company is the parent company of the HR vendor) between these
two companies led to mutual recognition of common interests in the HR project. This
helped to explain why the HR vendor generously invested its resources into the HR
project. This was also perceived to strengthen their mutual trust and increased the
satisfaction of end-users in DE Company. Another example comes from the PDM case.
The ineffective communication between DE Company and PDM vendor was regarded
as the main explanation for different understandings of system requirement and
different expectation on the project objective, which was perceived to negatively
influence final system implementation and end-user’s satisfaction.
These findings about relationship management impact are in line with the work of
Willcocks and Kern (1998) and that of Lee and Kim (1999). However, the explanation
of these possible influences followed the interpretive approach in this study as
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Willcocks and Kern (1998) did, and has no causal implications in a positivist sense like
that of Lee and Kim (1999).
6.2.3 Cross-cultural differences in relationship management
The research also reveals a complex set of cross-cultural implications to relationship
management in an IT outsourcing arrangement. The cross-cultural differences were
investigated from five perspectives of relationship management practice to explore their
impact on relationship management.
Cross-cultural differences in perceived attitudes towards the contract
Both Chinese and Western vendors in the cases aimed at establishing a long-term
relationship. The problem is that they hold different perceptions on how to foster this
long-term relationship. This research showed that the Western vendor tended to rely on
the tangible agreement or contract to govern business activities explicitly and to the
letter. They worked with a comprehensive and complete contract. The vendor appeared
to be cautious and reluctant to accept changes of scope or other conditions specified in
the contract. Abiding by the contract and assuring on-time delivery, they believed, was
the most important contributor to establishing trust in an IT outsourcing project. In
contrast, contracts between the Chinese customer (DE Company) and two Chinese
vendors were usually brief and flexible. They regarded the contract as a starting point or
a legal support for the relationship development in the project. They were clear that it
was the relationship that governed the business activities in the project. Hence, they
were open and flexible regarding any changes in project scope.
These findings support Schwartz’s (1994) model, which categorised Chinese society
into the relationship culture and Western society into contractual cultures. The different
attitudes towards the contract found in this study are consistent with existing cross-
cultural literature (e.g., Chen and Partington, 2004; Lee, 1996; Tse et al., 1988; Wong
and Chan, 1999). Although it may be a great generalisation, Tse et al. (1988) claim that
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Western culture is based on principles of explicit norms in rules and fair contractual
relationships while Chinese culture emphasises an intricate system of long-term moral
obligations, of repayment, without explicit rules for termination of the obligations. This
may explain the Western vendor’s tendency to stick to the contract with DE Company
and regard the relationship subordinate to the project task; in contrast, Chinese
managers put more emphasis on a long-term relationship with the DE Company and
perceived that project tasks would only be accomplished if close relationships within
the project team were achieved (Chen and Partington, 2004; Lee, 1996; Wong and Chan,
1999).
Cross-cultural differences regarding the nature of communication
The Western vendors stressed the importance of planned or scheduled communications
in a formal and explicit manner, which is believed to demonstrate professionalism. In
contrast, the Chinese vendors and DE Company preferred an informal, personal and a
friend-like style of communication, which was perceived to have positive impacts on
establishing a good relationship.
The preference of Western companies for planned or scheduled communication, found
in this research, has not been specifically addressed in existing literature. But the
different modes of communication are mentioned in the cross-cultural literature (e.g.,
Chen and Partington, 2004; Elashmawi and Harris, 1993; Foster, 1992; Moore, 1967).
Face saving (in Chinese, “Face” refers to the respect, pride, and dignity of an individual
as a consequence of his or her position in society) is regarded as important in
communication to foster harmony in Chinese society (Moore, 1967). Face saving is
achieved when direct and blunt discussions about project problems are avoided, since
this might embarrass some team members or compromise their status (Elashmawi and
Harris, 1993). In Chinese culture, a good relationship with the project team means the
team should work as a close family and communicate in an affectionate way to show
their cooperativeness and support (Chen and Partington, 2004). In contrast, Americans
like to get to the point more quickly and directly (Foster, 1992), and keep
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communication more impersonal in a contract distance (Chen and Partington, 2004).
These different interaction styles and preferred modes of communication were reflected
in this study between the Western vendor and the Chinese companies.
Cross-cultural differences in perceptions of mutual interests
This study does not uncover any indications of cross-cultural differences in either the
communication of mutual interests or realisation of mutual interests. The findings of
this study do not mean that there are definitely no such cross-cultural differences
between Western vendors and their Chinese counterparts; rather, the researcher is not
able to draw conclusions about differences regarding mutual interests based on the
information collected for this research.
Cross-cultural differences in perceptions of social/personal bonds
This research showed that the Chinese vendors and the Chinese customer regarded
social/personal bonds as more important in a business setting when collaborating with
each other than the Western vendor did. Guanxi in Chinese is the networks of
relationships among various people or parties that exchange favours, which are expected
to be done regularly and voluntarily. When Guanxi is felt, trust between two parties
could be easily established or strengthened. While for the interviewee from another
Western vendor, social/personal bonds among two parties were perceived to be helpful
in developing business partnership, they could not replace a formal business
relationship to establish or strengthen trust.
These findings reinforce the argument made by Pheng and Leong (2000) that
social/personal bonds are very important in Asian cultures where there is a tendency to
first develop social/personal bonds with business partners before getting down to the
specifics of negotiation. This study also confirms the findings of Chen and Partington
(2004) that Chinese project managers pay greater attention to building and maintaining
social/personal bonds within the project team, compared to working on the project task.
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As indicated in existing literature, social/personal bonds are less valued in the US when
doing business (Pheng and Leong, 2000).
A note regarding the notion of Guanxi is required here. In existing Western literature,
the Chinese term Guanxi often refers to special interpersonal connections with the
characteristic of continuously exchanging favours (Pye, 1982). Business Guanxi can be
further divided into two types according to the type of parties involved (Fan, 2002). If
both parties in the relationship are business persons, it is B2B Guanxi; if one party is a
business person and the other a government official, it is B2G Guanxi (Fan, 2002). The
majority of existing literature discusses Guanxi in the sense of B2G Guanxi, which is
regarded as one of the most important key success factors or source of competitive
advantage in doing business in China (e.g., Ambramson and Ai, 1999; Fork and Woo,
1998; Yeung and Tung, 1996). In this research context, Guanxi involved B2B Guanxi
with no implication of corruption or questionable ethics. B2B Guanxi manifests the
preference of Chinese people to work with people they know or with those introduced
by other people they trust. It also implies a tendency of Chinese people to rely on long-
term social networks in business settings. In contrast, Western companies encourage a
cost-benefit approach to decision making (Tse et al., 1988). Developing or maintaining
long-term relationships will cost time, energy and money (Fan, 2002), which Western
companies view as social costs and constraints. These findings provide a possible
explanation on Hofstede’s (1991) generic argument that China is distinct from Western
countries with its long-term orientation (i.e. long-term reward could be expected as a
result of today’s great investment) whereas Western countries are short-term oriented
(i.e. striving for immediate recognition).
Cross-cultural differences in perceptions of project resources and professional
expertise
This research concerns IS development projects where project resources mainly
consisted of human resources. Findings of this study showed that the Western vendor
assigned a sales representative in a relationship management role during the project.
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Technical experts, including system developers, and project managers, tended to follow
the instructions of this sales representative. In contrast, in the mind of Chinese vendors
and the Chinese customer (DE Company), the authority of technical experts is higher
compared to sales or marketing people. IT and other technical experts who can solve the
problem with their technical talent or the top personnel in the hierarchy had more
respect in Chinese companies. They felt comfortable when technical experts or senior
managers rather than sales people took a key role in an IT outsourcing project.
There are some studies in the existing literature which argue that the structures of
Chinese companies are usually deeper and more hierarchical compared to Western
companies that tend to have a much flatter hierarchy (e.g., Hofstede, 1980, 1991; Chen
and Partington, 2002). While Western organisational structures like the matrix structure
utilise the functional and divisional chains of command simultaneously in a project, in
Chinese culture the more consensus-based structure is preferred (Rowlinson, 2001).
These studies help explain the findings of this study as to why top personnel in the
hierarchy could gain more respect from Chinese companies. The PDM case where the
Western vendor assigned a sales representative in a relationship management role
together with the system developers during the project provided an example of how the
matrix structure took effect in a Western culture based team. As a result, the managers
from DE Company felt degraded when they had to deal with a sales representative in
such an important project.
However, the finding that less respect was shown in a Chinese company to a sales
representative as a project team leader than to a technical expert as a project team leader
is not found in the existing literature.
6.3 Conclusions about research problem
The overarching research problem this research sought to investigate is: how can an IT
outsourcing relationship be managed to enhance the outcome of an IT outsourcing
project in a cross-cultural context?
In order to address the research problem, three research questions were developed as
instruments to collect empirical data. In-depth analysis of the three IT outsourcing cases
has provided a deep understanding of how IT outsourcing relationships were managed
especially in a cross-cultural context in the case organisation (DE Company). The
research findings (obtained from empirical data analysis) together with the synthesis of
ideas from existing literature in the form of constructs and conceptualisations of these
constructs enable some theory building: a relationship management framework based on
the case studies in the Chinese company (DE Company). The proposed relationship
management framework is shown in Figure 6.2a.
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This framework suggests that relationship management practices in IT outsourcing
affect and are affected by the dynamics of the relationship (i.e. the relationship might be
gradually established, strengthened, held back or remain the same). The changes in
relationship status would in turn give signals to practitioners, so that practitioners would
adjust relationship management practices and direct the relationship development
towards their initial relationship expectation. In this process, practitioners with different
cultural background might hold different perceptions of relationship management
practice and different understandings of the dynamics of the relationships. Hence, cross-
cultural differences influence both of them. The changes of relationship status in the
project are eventually reflected in the project outcome. In addition, some relationship
Dynamics of the relationship
Project outcome
reflected in
Figure 6.2a: Relationship management framework (high level diagram)
(Source: Developed for this research)
Relationship management practice
affects
affects
influences Cross-cultural differences
management practices directly affect the project outcome rather than affect it through
the dynamics of the relationship.
This research also specifically explores the perspectives of relationship management
practices, the distinguishing characteristics of a relationship, and the perceived measures
of project outcomes. Figure 6.2b presents the extended relationship management
framework with these details included.
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This extended framework identifies five perspectives of the relationship management
practices in IT outsourcing: managing the IT outsourcing contract, managing
communication between two companies, seeking mutual interests, establishing
social/personal bonds, and managing project resources. The management of these
perspectives could impact the performance of three distinguishing relationship
characteristics: contract implementation, trust and the value proposition (i.e. the
concrete benefits a customer gets from using the products or services of its vendor or a
Relationship management practice
Contract
Communication
Mutual interests
Social/Personal bonds
Project resources
Dynamics of the relationship
Contract implementation
Trust
Value proposition
affects
affects
Project outcome
reflected User satisfaction in
System adoption
Figure 6.2b: Relationship management framework (detailed diagram)
(Source: Developed for this research)
Cross-cultural differences
influence
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vendor gets from doing business with its customer). Then the dynamics of the
relationship are reflected in the project’s outcome, evaluated by a subjective indicator,
user satisfaction, and an objective indicator, system adoption. The dynamics of the
relationship also influence the relationship management practices. In addition, some
perspectives of relationship management practice (e.g., communication) would also
influence other perspectives of relationship management practice and directly influence
the indicators of project outcomes. Examples of these influences were provided in
Figure 5.2.
If an IT outsourcing project involves partners of different cultural background, special
attention should be paid to cross-cultural differences which might influence the
relationship management practices and influence the dynamics of a relationship. The
parties involved in this study are from a Chinese cultural background (the outsourcing
company and two vendors) and a Western cultural background (one vendor). Insights
into cross-cultural differences in relationship management among Chinese companies
(two Chinese vendors and a Chinese customer) and among the Chinese company and
the Western vendor are summarised in Table 6.1.
Table 6.1: Cross-cultural implications to relationship management
Management perspectives
Chinese company focus in business relationships
Western company focus in business relationships
Contract • Working with a brief and flexible contract
• Relying on the intangible relationship to govern the business activities implicitly
• Working with a comprehensive and complete contract
• Relying on the tangible agreement or contract to govern the business activities explicitly
Communication • Communicating in an informal, personal and a friend-like manner to show closeness
• Emphasis on the planned or scheduled communications
• Communicating in a formal and explicit manner to show professionalism
Social/personal bonds
• Developing social/personal bonds were perceived as important in a business relationship.
• When Guanxi was felt, a trust could be easily established and strengthened
• Developing social/personal bonds was not a priority in the business relationships
• Formal business relationship was developed regardless of social/personal bonds.
Project resources
• The sales representative was not authoritative in the IT outsourcing project.
• Technical experts or the top personnel in the hierarchy gained more respect and were considered appropriate to take the leading role in IT outsourcing projects.
• A sales representative was assigned a key role in relationship management in IT outsourcing projects.
(Source: Developed for this research.)
The theoretical framework is summarised in two figures and a table (Figure 6.2a, Figure
6.2b and Table 6.1). Resulting from in-depth analysis of three IT outsourcing cases, this
framework is not empirically generalisable beyond the given cases and can only be
subject to theoretical generalisation.
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6.4 Contribution of this research
This research provides a contribution to knowledge about IT outsourcing relationships
in a cross-cultural context and also has some practical implications for practitioners.
The contributions to theory and implications for practice are discussed in two
subsections below.
6.4.1 Contributions to theory
Although IT outsourcing is an established topic, the inconsistent results reported in
existing literature and some unclarified areas about IT outsourcing in existing literature
continue to make this topic a relevant and important research area. This research
explores relationship management and cross-cultural management in the Chinese
context, which are of interest to many researchers worldwide.
Despite the acknowledged importance of relationship management for IT outsourcing in
existing literature, very few studies have examined the concrete processes of
relationship management in IT outsourcing and the influences of management practice
on the project outcome. Even less literature investigates this issue in the cross-cultural
context. This research addresses these research gaps to some extent and is one of few
studies which look into IT outsourcing relationship management in a cross-cultural
context.
The interpretive approach adopted in this research helps address the deficiency of uni-
dimensional inquiry (positivist approach) in terms of relationship management for IT
outsourcing. The interpretive approach adopted in this study facilitates capturing the
dynamic nature of IT outsourcing relationships and exploring detailed work patterns in
IT outsourcing projects. The interpretive approach also enables the researcher to
generate theory on IT outsourcing relationship management without sacrificing the
idiosyncrasies of each IT outsourcing project.
The theory development work of this study is reflected through relationship
management frameworks on IT outsourcing (refer to Figure 6.2a and Figure 6.2b) and a
cross-cultural comparison table (refer to Table 6.1). These relationship management
frameworks and the cross-cultural comparison table were generated from case studies of
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three IT outsourcing projects. This process is described by Lee and Baskerville (2003)
as generalising from empirical statements to theoretical statements. From another
perspective, the framework development in this research synthesises ideas from existing
literature and integrates concepts from economic, marketing, organisational behaviour,
international business, and cross-culture disciplines, which generalise from concepts to
theory (Lee and Baskerville, 2003). In addition, the research findings were discussed in
the light of existing literature in the above sections. Prior theoretical propositions highly
relevant to this research topic were explained and assessed in the context of the
empirical findings of this research. This facilitates the third type of generalisability,
which is generalising from theory to empirical description (Lee and Baskerville, 2003).
The last type of generalisability identified by Lee and Baskerville (2003) concerns
generalising from data to descriptive statements. This study provided a description
about the background information of the case organisation and three IT outsourcing
cases. In order to make it possible for readers to assess the validity of these empirical
descriptions, archival document references and illustrative quotes from the interviews
were provided with these empirical descriptions (refer to Chapter 4). The interpretive
research highly values these four types of generalisability because these guidelines
illuminate how research using interpretive approaches could substantially contribute to
theory in a proper way.
The simple linkage of national cultural values to work-related actions or attitudes is
criticised by contemporary academics as forfeiting the rich content of culture and the
dynamic nature of culture (e.g., Myers and Tan, 2002; Spencer-Oatey, 2000; Walsham,
2002). This research used in-depth case studies to investigate detailed work patterns in
the cross-cultural context and to explore the project participants’ perceptions on these
work patterns. This kind of research has advantages in gaining rich insights on how
national cultural differences influence business behaviour, but is in short supply in
existing literature.
In summary, this study explores relationship management for IT outsourcing and the
relevance of studying IT outsourcing in a cross-cultural context. As such, the current
research contributes to both these areas of the literature.
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6.4.2 Implications for practice
IT outsourcing relationship management in a cross-cultural context appears to be an
issue of increasing interest to practitioners. The theory generated from this research
could not generalise to a new setting until the theory is actually tested and confirmed in
this new setting. However, this does not impede this study providing implications for
practice, especially when facing a similar setting.
Practitioners involved in IT outsourcing projects might benefit from the insights this
research provides into how an IT outsourcing relationship would be managed to
enhance project outcomes. Customer and vendor executives managing IT outsourcing
projects would find it useful to consider the concrete characteristics of the IT
outsourcing relationship. They could also identify the relationship status by evaluating
the performance of each characteristic. The fulfilment of promises was crucial to the
contract implementation in this research because it had been an important aspect of a
contractual relationship. But it seemed that there existed significant potential for
customers and vendors to achieve a more partner-based relationship through
establishing trust and improving the value brought to the other party. These insights
might be helpful for practitioners who are working in a similar setting.
This research could also provide insights into how an IT outsourcing relationship is
managed. The extended relationship management frameworks summarising this
research (Figure 6.2a and Figure 6.2b) suggest the perspectives of relationship
management practice and how these perspectives influence the dynamics of the
relationship and then project outcomes. Such insight is of value to practitioners who are
involved in IT outsourcing projects.
The relationship management in IT outsourcing is not universal but culture-sensitive.
This research provides practical guidelines for identifying and managing those cross-
cultural relationships. Furthermore, the lessons learnt in this research might be helpful
for Western entrepreneurs embarking on business projects with Chinese companies and
vice versa. Analysis of cross-cultural differences between Chinese companies and
Western companies in this study helps practitioners to understand more accurately the
customs and perceptions of their partners of different cultural background.
Consequently, a fuller understanding might support practitioners to anticipate partners’
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responses in business transactions so as to make adjustments to mitigate undesirable
consequences. Failure to understand cultural differences may lead to misinformation,
misunderstanding and eventually mistrust between two parties, thus jeopardising the IT
outsourcing relationships. In brief, the cross-cultural implications concluded from this
research might improve practitioners’ ability to deal with colleagues of different
nationalities in an IT outsourcing project or in other cross-cultural collaborations.
Practitioners should be aware that in the context of globalisation, with increasing
contact between different countries, it is difficult for any group to remain isolated and
uninfluenced by other cultures (Walsham, 2002). However, introducing change into any
country requires sensitivity to that culture’s tradition and background. As demonstrated
in this research, paying attention to the cultural differences in the relationship
management would increase the chances of IT outsourcing success.
6.5 Limitations of this research
This section discusses the specific methodological and theoretical limitations
encountered during the research process. The limitations of this research are presented
in two categories: limitations associated with research design (i.e. methodological
limitation) and theoretical limitations associated with the generalisability of the findings
(i.e. theoretical limitation).
6.5.1 Limitations associated with the research design
Every research design has limitations (Yin, 1994). The limitations inherent in this
research design are acknowledged as follows:
Firstly, this research mainly focuses on the customer perspective and interprets the
customer’s perceptions of relationship management of IT outsourcing projects. The
selected cases are embedded in one customer organisation (the reasons why this study
adopted this kind of research design were provided in Sub-section 3.3.2 of Chapter 3.).
Most of the interviews were conducted with employees from the customer organisation.
Due to lack of access to the vendors and the time constraints of the masters degree
thesis, limited information was collected from the vendors to examine further the
perceived cultural differences. This is not enough information, because the
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improvement of project outcomes through relationship management of IT outsourcing is
also determined to a significant extent by the vendor. Focus on one of the partners and
complementing with some information from the other partner was deemed appropriate
for the purpose of this thesis. But if time and resources permitted, full investigation of
vendors’ perceptions would enhance a study of this kind.
Secondly, this study could not access the vendor of the PDM project and could not
interview project participants from the PDM vendor. But the PDM project is worthy of
further investigation from the vendor’s perspective due to its limited project outcomes
and the significant impact of perceived cultural differences.
Finally, the empirical research took place in China. The interviews were conducted in
China. The working language in the interviews is Chinese. The archival document is
recorded in Chinese. As there is no perfect translation in the world, the accuracy of the
translation from Chinese into English (which belongs to the different language family
from Chinese) could always be challenged. This meant that the empirical data in this
study had to be cautiously translated into English. Findings had to be carefully
interpreted due to the language differences.
6.5.2 Limitations associated with the generalisability of the findings
Although the findings of this research are considered relevant and contribute to theory
of managing IT outsourcing relationships in a cross-cultural context, this study is based
on limited cases of IT outsourcing projects in one customer organisation from a single
industry. The cross-cultural context in this study refers to the collaboration between
organisations with Chinese cultural background and US cultural background. These
findings can not be generalised to other IT outsourcing projects, other industries and
other cultural contexts.
This research focuses specifically on IT outsourcing cases with applications
development services (the reasons this research focuses on the applications development
were provided in Sub-section 2.1.1 of Chapter 2.). The findings may not directly
translate into relationship management of other types of IT outsourcing projects, for
example outsourcing IT infrastructure, outsourcing the maintenance work of legacy
applications, or outsourcing the whole IT function.
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The case organisation selected for this research is from the manufacturing industry (the
reasons the case organisation was selected from the manufacturing industry were
provided in Sub-section 3.3.2 of Chapter 3). The findings should not be considered to be
of automatic relevance to other industries, for example the financial service industry, the
retailing industry, or the education institute. It is not that the findings generated from the
manufacturing industry are specific and irrelevant to other organisations, but rather that
the research was not designed to investigate across industries.
The IT outsourcing cases in this research were between Chinese partners and Western
partners. Both of the Western vendors involved in this study are US companies.
Although US culture is identified as a typical Western culture by many culture
researchers (e.g., Hofstede, 1991; Schwartz, 1994; Trompenaars, 1993), the findings are
not automatically valid when generalising to other Western companies, for example
Australian companies or European companies. Furthermore, generalising the findings of
this research to other cross-cultural contexts (e.g., collaboration between other countries)
would be inappropriate.
6.6 Suggestions for future research
This section suggests directions for future research. The direction of future research
flows from the findings of this research.
This study generated relationship management frameworks describing how the
relationship management practice influenced the dynamics of an IT outsourcing
relationship, and then influenced project outcomes. The emerging concepts (or
constructs) and the emerging relationships among these concepts (or constructs) could
be further enriched and tested in future studies. The following strategies could be
adopted to enrich or test these frameworks:
• The vendor’s perspective could be included to investigate the vendor’s
perception of a satisfactory relationship in IT outsourcing and of relationship
management influences on project outcomes. An interpretive investigation from
the vendor’s perspective could facilitate better understanding of the relationship
management practice in the IT outsourcing projects and enrich the relationship
management framework established in this study.
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• More cases within the case organisation, cases in different organisations and
cases in different industries could be added to provide valuable insights on
relationship management in IT outsourcing and to enhance generalisability of
the relationship management frameworks established in this study to other
observed cases.
• Hypotheses supporting these emerging concepts and their relationships could be
developed and be tested in a positivist study using quantitative research methods.
Multiple research approaches facilitate triangulation and add richness to the
research framework established in this study.
This research also raised several questions about cross-cultural differences for future
research. For instance, further study could examine whether there are no cross-cultural
differences existing in the perceptions of mutual interests in the real world; whether
there are any other cross-cultural differences in the perceived attitudes towards the
contract, perceived modes of communication, perceptions of social/personal bonds, or
perceptions of project resources; and whether there are any cross-cultural differences
related to other facets of the relationship management practice. These questions could
be addressed through the following strategies:
• Interviews from the vendor’s side, especially Western vendors of the selected
cases, could be added to examine the impact of cross-cultural differences on
relationship management.
• More cross-cultural collaboration cases in the case organisation, more cross-
cultural collaboration cases in other organisations in the same industry, and
more cross-cultural collaboration cases in different organisations from different
industries could be included to examine the impact of cross-cultural differences
on the relationship management.
• More IT outsourcing cases could be selected from Western countries rather than
China, especially when Western companies are increasingly outsourcing IT
projects to developing countries like India, Poland, and China.
• Further study of Chinese philosophy and society compared to Western
civilisation may enable the researchers to better understand the roots of the two
different cultures and to better interpret the cross-cultural differences in a
business setting.
206
6.7 Chapter summary
This chapter concludes the thesis. It started with the summary of the research project
and then compared the findings of this research with existing literature. Synthesising
ideas from existing literature, this research developed relationship management
frameworks on IT outsourcing and a cultural comparison table to address the research
problem. Then, the chapter discussed the contribution of this research from the two
perspectives: contribution to theory on IT outsourcing and implications to practitioners
who face a similar setting in IT outsourcing. Next, the limitations associated with the
research design and limitations associated with the generalisability of the research
findings were acknowledged. Last, this chapter suggested the direction of the future
research which flows from the findings of these three IT outsourcing cases.
207
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Appendix A - Copies of interview guides used for data
collection
Appendix A 1.1 Chinese version of interview guides used for
interview with Senior Executives from DE Company
Appendix A 1.2 Chinese version of interview guides used for
interview with Project Participants from DE Company
Appendix A 1.3 Chinese version of interview guides used for
interview with vendors
Appendix A 2.1 English translation of interview guides used for
interview with Senior Executives from DE Company
Appendix A 2.2 English translation of interview guides used for
interview with Project Participants from DE Company
Appendix A 2.3 English translation of interview guides used for
interview with vendors
230
Appendix A 1.1 Chinese version of interview guides used for
interview with Senior Executives from DE Company
澳大利亚新南威尔士大学（悉尼） 管理经济学院
信息系统，信息技术和信息管理系
信息技术外包中的关系管理研究课题
访谈提纲 – 高层经理 （DE 公司）
引言
1) 感谢受访者接受访谈
2) 简要的自我介绍 (学位，专业)
3) 描述项目 (强调此研究的商业价值以及本访谈对于研究的贡献)
4) 恪守学术伦理: 本访谈的所有资料严格保密。受访者姓名，任何出现的公司名
在研究报告中均用假名，同时隐去任何可以识别受访者身份和公司概况的信
息 受访者可以在任何时候终止本访谈。
5) 如果可能，请求受访者允许接受访谈录音
受访者信息
1) 您在公司担任什么职位？
2) 您在本公司工作了多少年？
3) 您在公司里先前曾担任过什么职位？您以前的工作经历是怎样的？
公司背景信息
4) 能否介绍一下贵公司？
5) 公司何时建立？隶属哪个行业？年收入多少？
231
能否介绍一下贵公司的业务发展史？― 针对管理业务的公司高层
能否介绍一下贵公司信息系统开发的历史？－针对管理信息系统的公司高层
有关信息系统外包项目的描述
6) 能否介绍一下贵公司有哪些信息系统外包项目?
7) 能否介绍一下这些信息系统外包项目的背景? 为什么要发起这个项目? 公司当
时是如何决定外包的，又是如何外包的?
8) 供应商是谁，供应商的背景，尤其是文化背景?
9) 合约在项目实施中有没有变化？项目何时启动？历时多久？涉及大约多大金
额？多少人参与此项目，多少人涉及了此项目？ 项目团队的组织架构是怎样
的？供应商派出的项目团队组织架构是怎样的？项目中外包了系统的哪些功
能模块？这些功能模块对企业战略的意义？能否描述一下整个项目进程？
10) 对项目的总体映像是什么？
总结补充
11) 对于以上所谈内容是否有什么需要补充的?
12) 请求能否提供与刚才的访谈相关的企业资料？
13) 能否为我引见合适的公司员工，帮助我更具体地了解这几个信息系统外包项
目，并方便接受我的访谈?
14) 如果我需要对今天的访谈内容作进一步的了解，我是否能够再一次与您联系?
结束语
非常感谢您今天接受本访谈。您的今天的意见对我的研究来说非常宝贵，我也希
望我的研究结果能帮助您和贵公司更好地管理信息系统外包项目。
您可以在任何方便的时候联系我，询问有关本研究的任何细节。我的电子邮件地
232
Appendix A 1.2 Chinese version of interview guides used for
interview with Project Participants from DE Company
澳大利亚新南威尔士大学（悉尼） 管理经济学院
信息系统，信息技术和信息管理系
信息技术中的关系管理研究项目
访谈提纲 – 项目参与者（DE 公司）
引言
1) 感谢受访者接受访谈
2) 简要的自我介绍 (学位，专业)
3) 描述项目 (强调此研究的商业价值以及本访谈对于研究的贡献)
4) 恪守学术伦理: 本访谈的所有资料严格保密。受访者姓名，任何出现的公司名
在研究报告中均用假名，同时隐去任何可以识别受访者身份和公司概况的信
息 首访者可以在任何时候终止本访谈。
5) 如果可能，请求受访者允许接受访谈录音
受访者信息
1) 您参与了哪一个信息系统外包项目？您在此项目中担任什么角色？
2) 您在公司担任什么职位？
3) 您在本公司工作了多少年？
4) 您在公司里先前曾担任过什么职位？您以前的工作经历是怎样的？
有关信息系统外包项目的描述
5) 能否介绍一下您所参与的信息系统外包项目?
6) 能否介绍一下这些信息系统外包项目的背景? 为什么要发起这个项目? 公司当
233
时是如何决定外包的，又是如何外包的?
7) 供应商是谁，供应商的背景是什么，尤其是文化背景?
8) 合约在项目实施中有没有变化？项目何时启动？历时多久？涉及大约多大金
额？多少人参与此项目，多少人涉及了此项目？ 项目团队的组织架构是怎样
的？供应商派出的项目团队组织架构是怎样的？项目中外包了系统的哪些功
能模块？这些功能模块对企业战略的意义？能否描述一下整个项目进程？
9) 对项目的总体映像是什么？
研究问题 1: 信息系统外包关系的特征
10) 您会如何描述贵公司在这个项目中和供应商的关系（纯粹交易关系，或战略
合作伙伴关系，或联盟合作）? 这样的关系在项目进程中是如何变化的？
11) 为什么您会这样定义你们的关系?（要求受访者作进一步解释）
12) 您对贵公司和供应商通过项目建立起来的关系是否感到满意？
研究问题 2: 信息系统外包关系的影响
13) 您能否评论一下这个外包项目的成果？（这个项目成功吗? 在多大程度上这个
项目是成功/失败的？）为什么您认为是成功/失败的？（如何衡量这个项目成
果？根据什么来判断这个成果？）
14) 你们是如何来管理和供应商的关系的？（研究者要尤其关注受访者谈到的关
系管理措施，并尽量记录下来；因为这些实践会在下面的文化差异问题中作
为主要议题被涉及。）
15) 这些关系管理的措施是通过何种途径来影响信息系统外包项目的结果的？能
否列举一些您所经历的场景（或例子）来说明外包关系措施如何影响项目结
果？
研究问题 3: 文化差异
16) 您认为贵公司的团队与供应商之间的合作是否愉快？工作关系是否融洽？
17) 贵公司的团队是如何看待 XXXX 的？(XXXX 指代受访者在第 14 个问题中提
234
到的关系管理措施。) 供应商方面又是如何回应你们采取的这些措施的？能否
列举一些您所经历的场景（或例子）来说明问题？
--- 这个问题将反复使用，直到受访者在第 14 个问题中提出的所有关系管理措
施都被涉及到。
总结补充
18) 对于以上所谈内容是否有什么需要补充的?
19) 请求能否提供与刚才的访谈相关的企业资料？
20) 如果我需要对今天的访谈内容作进一步的了解，我是否能够再一次与您联系?
结束语
非常感谢您今天接受本访谈。您的今天的意见对我的研究来说非常宝贵，我也希
望我的研究结果能帮助您和贵公司更好地管理信息系统外包项目。
您可以在任何方便的时候联系我，询问有关本研究的任何细节。我的电子邮件地
235
Appendix A 1.3 Chinese version of interview guides used for
interview with vendors
澳大利亚新南威尔士大学（悉尼） 管理经济学院
信息系统，信息技术和信息管理系
信息技术外包中的关系管理研究课题
访谈提纲 – 项目参与者（供应商）
引言
1) 感谢受访者接受访谈
2) 简要的自我介绍 (学位，专业)
3) 描述项目 (强调此研究的商业价值以及本访谈对于研究的贡献)
4) 恪守学术伦理: 本访谈的所有资料严格保密。受访者姓名，任何出现的公司名
在研究报告中均用假名，同时隐去任何可以识别受访者身份和公司概况的信
息 首访者可以在任何时候终止本访谈。
5) 如果可能，请求受访者允许接受访谈录音
受访者信息
1) 您参与了哪一个项目？您在此项目中担任什么角色？
2) 您在公司担任什么职位？
3) 您在本公司工作了多少年？
4) 您在公司里先前曾担任过什么职位？您以前的工作经历是怎样的？
有关公司以及项目的描述
5) 能否简要介绍一下贵公司
6) 能否介绍一下您所参与的项目?
236
7) 什么时候竞标并承接到这个项目的？公司当时竞标这个项目时出于什么考
虑？项目何时启动？历时多久？公司派了多少人参与此项目？项目团队的组
织架构是怎样的？
8) 对项目的总体映像是什么？
研究问题: 文化差异
9) 您认为贵公司的团队与供应商之间的合作是否愉快？工作关系是否融洽？
10) 贵公司的团队是如何看待项目合约的？又是如何看待项目中与客户公司的关
系？这两者在项目中的是否有侧重点，各自起什么作用？如果在项目中客户
提出超越合约范围的工作要求，你们怎么看待？
11) 贵公司的团队是如何看待沟通的？一般你们喜欢在什么时候，什么地方，采
用什么方式与客户沟通？
12) 贵公司的团队是如何处理你们和客户公司之间的相互利益？你们是否喜欢明
晰地与客户公司沟通这个问题？这些相关利益是否通过项目顺利实现？
13) 贵公司的团队是如何看待与供应商团队成员建立私交? 在项目开始之前，贵公
司的团队是否与客户公司的团队有私交？
14) 贵公司的团队如何评价在此项目中双方的投入，尤其是人员投入?
15) 能否列举一些您所经历的场景（或例子）来说明以上谈到的五个问题？
总结补充
16) 对于以上所谈内容是否有什么需要补充的?
17) 如果我需要对今天的访谈内容作进一步的了解，我是否能够再一次与您联系?
结束语
非常感谢您今天接受本访谈。您的今天的意见对我的研究来说非常宝贵。
您可以在任何方便的时候联系我，询问有关本研究的任何细节。我的电子邮件地
237
Appendix A 2.1 English translation of interview guides used for
interview with Senior Executives from DE Company
School of Information Systems, Technology, and Management Faculty of Commerce and Economics,
University of New South Wales, Sydney
Relationship Management in IT outsourcing Research Project
INTERVIEW GUIDES – Senior Executives (DE Company)
Opening section
1) Delivering thanks to the informant who is willing to be interviewed by the
researcher
2) Briefly introducing oneself by the researcher (Program, Major)
3) Describing the project (emphasize the business value of this study and the
contribution this interview may bring to the study)
4) Ethical concerns: All data collected in this interview will be kept confidential and
anonymous. Your name and any company’s name will be disguised, along with
any other identifying details, in the final research report. You could terminate the
interview at any time that you wish.
5) Asking for the permit of tape recording if possible
Interviewee details
1) What is your current role in this organisation?
2) How long have you been here?
3) Previous role and previous working experience if possible?
238
Organisation information
4) May I know something about your company?
5) When was it established? Which industry it operates in? What is its annual
turnover? History of organisation business growth? --- for General Manager
History of information system development? --- for IS Manager
Description of the case story (IT outsourcing project)
6) May I know something about your several IT outsourcing arrangements?
7) What was the history background of IT outsourcing project? Motivation? How do
you decide what to outsource and how to outsource?
8) Who is the vendor and some background information of the vendor especially the
cultural background?
9) Has the contract changed much? Start of deal? Length of deal? Size of deal?
Number of people assigned and involved? What was the structure of your project
team and the vendor’s project team? What functionalities were outsourced? How
important do you think this functionality is to the company strategy? What is the
progress of this IT outsourcing project?
10) What is your overall impression of the outsourcing project?
Closing section
11) Is there anything you would like to complement or you think I should know?
12) Could you provide any archival document in relation to what we talked about?
13) Could you introduce the relevant employees who could provide me with more
details of these IT outsourcing projects and could be interviewed by me these days?
14) May I contact you again if I later need to clarify any points that you have made?
239
Ending words
Many thanks for your involvement today. It is very much appreciated and I look
forward to a research output that will assist you and your company to better acquire
management skills to attain IT outsourcing success.
You may contact me on [email protected] about any aspect of this research at
any time.
240
Appendix A 2.2 English translation of interview guides used for
interview with Project Participants from DE Company
School of Information Systems, Technology, and Management Faculty of Commerce and Economics,
University of New South Wales, Sydney
Relationship Management in IT outsourcing Research Project
INTERVIEW GUIDE – Project participants (DE Company)
Opening section
1) Delivering thanks to the informant who is willing to be interviewed by the
researcher
2) Briefly introducing oneself by the researcher (Program, Major)
3) Describing the project (emphasize the business value of this study and the
contribution this interview may bring to the study)
4) Ethical concerns: All data collected in this interview will be kept confidential and
anonymous. Your name and any company’s name will be disguised, along with
any other identifying details, in the final research report. You could terminate the
interview at any time that you wish.
5) Asking for the permit of tape recording if possible
Interviewee details
1) Which IT outsourcing project did you participate? What was your role in the
participated case?
2) What is your current role in this organisation?
3) How long have you been here?
4) Previous role and previous working experience if possible?
241
Description of the case story (IT outsourcing project)
5) May I know something about the IT outsourcing arrangement you took in charge
of?
6) What was the history background of IT outsourcing project? Motivation? How do
you decide what to outsource and how to outsource?
7) Who is the vendor and some background information of the vendor especially the
cultural background?
8) Has the contract changed much? Start of deal? Length of deal? Size of deal?
Number of people assigned and involved? What was the structure of your project
team and the vendor’s project team? What functionalities were outsourced? How
important do you think this functionality is to the company strategy? What is the
progress of this IT outsourcing project?
9) What is your overall impression of the outsourcing project?
RQ 1: Characteristics of relationship
10) How would you describe your relationship with your vendor in this project?
(Transactional/ Partnership/ Alliance?) Had the relationship changed in the project?
11) Why do you identify the relationship with your vendor in this way? (Ask the
interviewee to explain the relationship with its vendor)
12) Are you satisfied with the relationship established with your vendor?
RQ 2: Impact of relationship management
13) Could you please comment on the outcome of this outsourcing project? (Was it
successful or failed? To what extent do you think of it as successful/ failed?) Why
do you think it was successful/failed? (How did you assess the outcome of this
project? According to what? )
14) How did you manage the relationship with your vendor? (The researcher should
242
pay special attention to the management practices interviewees mentioned and try
to record these practices on the notebook, because they will be used as key terms
of the questions about cross-cultural differences.)
15) In which way did these relationship management practices impact the outcome of
the IT outsourcing project? Would you please give me some episodes (or
examples) of how relationship management practice impact project outcomes?
RQ 3: Cross-cultural difference
16) Did you think your team and your vendor cooperate very well or not? Did the
working relationship go smoothly?
17) How did your team perceive XXXX? (XXXX refers to the relationship
management practice this interviewee mentioned in question 14.) What was your
vendor’s response to XXXX? Would you please give me some episodes (or
examples)?
--- This question is used iteratively until all the relationship management practices this
interviewee addressed in question 14 have been covered.
Closing section
18) Is there anything you would like to complement or you think I should know?
19) Could you provide any archival document in relation to what we talked about just
now?
20) May I please contact you again if I later need to clarify any points that you have
made?
Ending words
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Many thanks for your involvement today. It is very much appreciated and I look
forward to a research output that will assist you and your company to better acquire
management skills to attain IT outsourcing success.
You may contact me on [email protected] about any aspect of this research at
any time.
244
Appendix A 2.3 English translation of interview guides used for
interview with vendors
School of Information Systems, Technology, and Management Faculty of Commerce and Economics,
University of New South Wales, Sydney
Relationship Management in IT outsourcing Research Project
INTERVIEW GUIDE – Project participants (vendors)
Opening section
1) Delivering thanks to the informant who is willing to be interviewed by the
researcher
2) Briefly introducing oneself by the researcher (Program, Major)
3) Describing the project (emphasize the business value of this study and the
contribution this interview may bring to the study)
4) Ethical concerns: All data collected in this interview will be kept confidential and
anonymous. Your name and any company’s name will be disguised, along with
any other identifying details, in the final research report. You could terminate the
interview at any time that you wish.
5) Asking for the permit of tape recording if possible
Interviewee details
1) Which project did you participate? What was your role in the participated project?
2) What is your current role in this organisation?
3) How long have you been here?
4) Previous role and previous working experience if possible?
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Description of the company and the project
5) May I know something about your company?
6) May I know something about the IT outsourcing arrangement you took in charge
of?
7) When did your company bid for this project? When did you know your company
had got the project? What was your company’s motivation when you decided to
bid for this project? When did this project start? How long did this project take?
How many people were assigned? What was the structure of your project team?
8) What is your overall impression of the outsourcing project?
Research issue: Cross-cultural difference
9) Did you think your team and your vendor cooperate very well or not? Did the
working relationship go smoothly?
10) How did your project team perceive contract? How did your project team perceive
relationship with your customer organisation? What was your project team’s
perceived role of contract/relationship in the project? What was the attitude of
your project team towards the work outside the contract requested by your
customer organisation?
11) How did your project team perceive the modes of communication? When and
where did your project team communicate with your customer organisation? What
was the manner of the communication?
12) How did your project team manage the mutual interests with your customer
organisation? Would your project team like to make mutual interests explicit when
cooperating with your customer organisation? Had these mutual interests been
realised through this project?
13) How did your project team perceive establishing social/personal bonds with your
customer? Were there any existing social/personal bonds with your customer prior
to this project?
246
14) How did your project team perceive the project resources invested by both parties,
especially the human resources investment?
15) Would you please give me some episodes (or examples) of the five above issues?
Closing section
16) Is there anything you would like to complement or you think I should know?
17) May I please contact you again if I later need to clarify any points that you have
made?
Ending words
Many thanks for your involvement today. It is very much appreciated.
You may contact me on [email protected] about any aspect of this research at
any time.
247
Appendix B - Interviewees selected for this research
Interviewee name1
Company2 Role in the participated
case
Current role in current company
Previous role in current company
Working years in current
company
VP DE Company Senior executive
Vice president N/A (assigned by government)
8 years
CIO3 DE Company Senior executive & CRM project manager
Chief Information Officer
Director of IT Department
12 years
COO DE Company PDM Project manager
Chief Operation Officer
Director of Product Department
18 years
PM3 DE Company HR & CRM project manager
Director of IT Department
IT manager in IT Department
6 years
PMBA DE Company PDM project team member
Associate director of IT Department
IT manager in IT Department
5 years
PMBB DE Company HR project team member
HR manager in HR Department
HR staff in HR Department
7 years
PMBC DE Company CRM project team member
Marketing executive
Marketing assistant
5 years
V1 SQ Company (HR vendor)
HR project team member
Technical manager
System developer
6 years
V2 NG Company (CRM vendor)
CRM project manager
Head of Shanghai office
System consultant
9 years
V3 Consulting Company M (another western vendor)
Project manager of another strategy consulting project
Manager in the service line of manufacturing industry
N/A (transferred from another company)
5 years
(Source: Developed for this research.)
1 The names of interviewees are all disguised names due to the request for confidentiality from the interviewees. 2 The names of companies are all disguised names due to the request for confidentiality from the case organisation. 3 It means this interviewee have been interviewed twice at different time for this study.
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Appendix C - Interviews conducted for this research
Time Interviewee Venue Interview method
Primary information offered
January, 2005
VP (Vice president of DE Company)
Meeting room of DE Company
Face to face
Organisational background; PDM case; HR case; CRM case
January, 2005
CIO4 (Chief information officer of DE Company)
Meeting room of DE Company
Face to face
IS development history; PDM case; HR case; CRM case
January, 2005
COO (Chief operation officer of DE Company and PDM project manager of DE Company)
Meeting room of DE Company
Face to face
PDM case
January, 2005
PMBA (PDM project team member of DE Company)
Office of IT Dept. of DE Company
Face to face
PDM case
January, 2005
PM4 (HR project manager of DE Company)
Office of IT Dept. of DE Company
Face to face
HR case
January, 2005
PMBB (HR project team member of DE Company)
Office of HR Dept. of DE Company
Face to face
HR case
August, 2005
CIO4 (Chief information officer of DE Company and CRM project manager of DE Company)
N/A Telephone interview
CRM case
August, 2005
PM4 (CRM project team member of DE Company)
N/A Telephone interview
CRM case
August, 2005
PMBC (CRM project team member of DE Company)
N/A Telephone interview
CRM case
February, 2006
V1 (HR project team member from the vendor side)
Office of IT Dept. of the HR project vendor
Face to face
HR case
February, 2006
V2 (CRM project manager from the vendor side)
At the lunch table Face to face
CRM case
February, 2006
V3 (Another western vendor’s project manager for the strategy consulting project with DE Company)
At the lunch table Face to face
Opinions on cultural differences
(Source: Developed for this research.)
4 It means this interviewee have been interviewed twice at different time for this study.
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Appendix D - Archival documents for this research
Document Name Context information type
Author Source Drafting date
1 IS Planning (2002)
IS development history
DE Company
Provided by IT department of DE Company
30/10/2002
2 IS Planning (2003)
IS development history
DE Company
Provided by IT department of DE Company
03/11/2003
3 IS Planning (2004-2006)
IS development history
DE Company
Provided by IT department of DE Company
10/2004
4 IS strategy planning (2002)
IS strategy development
DE Company
Provided by IT department of DE Company
20/03/2002
5 Key business processes analysis
Key business processes
DE Company
Provided by IT department of DE Company
03/11/2003
6 The past, present and future of DE’s IS development
IS development history
DE Company
Provided by IT department of DE Company
02/06/2004
7 Operating environment for future ERP
Existing IS environment
DE Company
Provided by IT department of DE Company
03/11/2003
8 ERP feasibility analysis
Existing IS environment
DE Company
Provided by IT department of DE Company
10/2004
9 IS development history
IS development history
DE Company
Provided by IT department of DE Company
17/11/2004
10 Consulting report on DE’s strategy development
Strategy development history; Industry competition structure
Consulting Company M
Provided by IT department of DE Company
12/12/2002
11 Diagnosis report and some advice on DE’s IS development
IS development history; Existing IS environment
Fudan University
Provided by MIS department of Fudan University
18/12/2004
12 Diagnosis report and some advice on DE’s IS development (Executive edition)
Existing IS environment
Fudan University
Provided by MIS department of Fudan University
13/01/2005
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13 Story about DE Company
Business background DE Company
Downloaded from DE Company’s homepage
24/3/2005
14 Recent news about DE Company
Industry competition structure
DE Company
Downloaded from DE Company’s homepage
24/3/2005
15 Story about PT Company
Business background of the vendor (PT Company)
PT Company
Downloaded from PT Company’s homepage
24/3/2005
16 Story about SQ Company
Business background of the vendor (SQ Company)
SQ Company
Downloaded from SQ Company’s homepage
24/3/2005
17 Story about NG Company
Business background of the vendor (NG Company)
NG Company
Downloaded from NG Company’s homepage
20/8/2005
18 DE Annual Report (1993)
Business growth,; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1993
19 DE Annual Report (1994)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1994
20 DE Annual Report (1995)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1995
21 DE Annual Report (1996)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1996
22 DE Annual Report (1997)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1997
23 DE Annual Report (1998)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1998
24 DE Annual Report (1999)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/1999
25 DE Annual Report (2000)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/2000
26 DE Annual Report (2001)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/2001
27 DE Annual Report (2002)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/2002
28 DE Annual Report (2003)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/2003
29 DE Annual Report (2004)
Business growth; ownership structure
DE Company
Downloaded from DE Company’s homepage
31/12/2004
(Source: Developed for this research.)
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Appendix E - Emerging categories, sub-categories and
codes/themes after coding
Category Sub-category Code/Theme Description
Interviewee information All the relevant information about the interviewee
Interviewee name The name of the interviewee (in this thesis the real name has been suppressed.)
Role in the participated case The role the interviewee took in the participated case
Current role in current company The current role the interviewee takes in the current company
Previous role in current company The previous role the interviewee took in the current company
Working years in current company The length of time the interviewee has worked for in the current company
Case organisational description All the relevant information about the case organisation.
Organisational background The background information about the case organisation.
Company name The company name of the case organisation (in this thesis the real name has been suppressed.)
Foundation day The day when the case organisation was founded (in this thesis the approximate time was used instead so that the case organisation can not be identified.)
Headquarters location The city where the organisational headquarters locates
Cultural background The national cultural background of the case organisation
Listed time The day when the case organisation was listed in the stock market (in this thesis the approximate time was used instead so that the case organisation can not be identified.)
Ownership structure The ownership structure of the organisation
Number of employees The current number of the employees in the case organisation (in this thesis the approximate number was used instead so that the case organisation can not be identified.)
252
Category Sub-category Code/Theme Description
Turnover The current turnover per year of the case organisation (in this thesis the approximate number was used instead so that the case organisation can not be identified.)
Core business The core business the case organisation focuses on
Competition position The ranking position of the case organisation when competing with its competitors in the market (in this thesis the approximate position was used instead so that the case organisation can not be identified.)
Business strategy The current business strategy the case organisation adopts
Advantage The competitive advantages of the case organisation compared with its competitors
Disadvantage The competitive disadvantages of the case organisation compared with its competitors
Business development The brief description of business development in the case organisation
IS development (3 phases) The description of every phase of IS development in the case organisation (three phases have been identified.)
External Environment The external environment the case organisation faced in each phase
Internal Environment The internal environment the organisation faced in each phase
IS project(s) The brief description of the IS project(s) the case organisation developed in each phase
Outcomes of the IS project(s) The brief description of the IS project(s) outcomes in each phase
Case description The background information about the IT outsourcing project
Project description All the relevant information about the project
Project Name The name of the IT outsourcing project
253
Category Sub-category Code/Theme Description
Project duration The time when the IT outsourcing project started and ended
Project motivation The reasons why the case organisation initiated this project
Outsourcing motivation The reasons why the case organisation chose outsourcing this project
Selection of vendor The reasons why the case organisation selected this vendor
Required functionality All the functionalities the new system required to develop in the IT outsourcing project
Main functional departments involved
The main functional departments of the case organisation involved in this project
Vendor description All the relevant information about the vendor
Vendor name The company name of the vendor (in this thesis the real name has been suppressed.)
Headquarters location The city where the headquarters of the vendor locates
Cultural background The national cultural background of the vendor
Other characteristics of the vendor The description of other prominent characteristics the vendor had (e.g., the distinguishing competitive advantages/disadvantages the vendor had; the image of the vendor in the market).
Contract description The description of the contract
Cost of the contract The sum of the contract price (in this thesis the approximate price was used in response to the request for confidentiality by the case organisation.)
Contract negotiation The description of the negotiation process before the contract was signed
Other contract characteristics Other distinguishing characteristics of the contract (e.g., whether the contract is brief/comprehensive; whether there is a great price concession given by either party)
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Category Sub-category Code/Theme Description
Project team structure The description of the organisational structure of the project teams from both parties (using diagram)
Project progress The brief description of the project progress (using diagram)
Overall impression of the project The comments on overall impression of the IT outsourcing project
Relationship description The description of a dynamic relationship
The dynamics of the relationship The identification of relationships development with its vendor (transactional/partnership/alliance)
Initial expectation on the relationship The relationship type the case organisation expected to have with its vendor before the project (transactional/partnership/alliance)
Relationship status at the beginning of the project
The relationship type the case organisation had with its vendor at the beginning of the project (transactional/partnership/alliance)
Relationship status at the end of the project
The relationship type the case organisation had with its vendor at the end of the project (transactional/partnership/alliance)
Relationship status after the project The relationship type the case organisation had with its vendor after the project (transactional/partnership/alliance)
Relationship characteristics The distinguishing characteristics of a relationship
Contract implementation The description on whether the contract was fulfilled successfully
Trust The description on whether the trust had been established and developed
Value proposition The acknowledgement of the economic and management benefits the vendor delivered to the case organisation through the IT outsourcing project
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Category Sub-category Code/Theme Description
Relationship management impact The impact of relationship management on project outcomes
Project outcomes The project outcomes the interviewees perceived in the IT outsourcing projects
User satisfaction The description on whether the system users felt satisfied with the new developed system
System adoption The description on whether the new developed system had been adopted successfully in the case organisation
Relationship management practice The actions the IT outsourcing project participants took to manage the relationship in the IT outsourcing project
The management of contract The description on how the contract was managed in the IT outsourcing project
The management of communication The description on how the communication was managed in the IT outsourcing project
The management of mutual interests The description on how the mutual interests were established and understood
The management of social/personal bonds
The description on how the social/personal bonds were established and developed
The management of project resources
The description on how the project resources were managed
Cultural differences The cultural differences which might influence the relationship management
Perceived attitudes towards the contract Cross cultural differences in perceived attitudes towards the contract
Contract characteristics The description of contract characteristics in an IT outsourcing project
Perceived role of contract The perceived role the contract should take in an IT outsourcing project
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Category Sub-category Code/Theme Description
Attitude towards the work outside the contract
The perceived attitude towards the work outside the contract
Perceived modes of communication Cross-cultural differences in perceived modes of communication
Where and when to communicate The perception of where and when the communication should happen in an IT outsourcing project
Manner of communication The perceived manner of communication in an IT outsourcing project
Perceptions of mutual interests Cross-cultural differences in perceptions of mutual interests
Communication about mutual interests
Description on how to communicate about the mutual interests in the project
Realisation of mutual interests Description on whether the mutual interests had been realised through the IT outsourcing project
Perceptions of social/personal bonds Cross-cultural differences in perceptions of social/personal bonds
Existing social/personal bonds The description on the existing social/personal bonds before the project
Attitude towards establishing social/personal bonds
The perceived attitude towards the establishment or development of social/personal bonds
Perceptions of project resources Cross cultural differences in perceptions of project resources
Overall impression of project resources
The overall impression of the project resources the other party invested in an IT outsourcing project
Perceptions of human resources The perceptions on how human resources of the other party should be invested in an IT outsourcing project
(Source: Developed for this research.)
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