Abstract

As companies' budgets devoted to information technology (IT) outsourcing continue to expand, effective IT provider management becomes one of the most critical administrative skills of the 21st century (Heckman, 1999). Yet to this day, there is no agreement among researchers and practitioners with regard to the main research question of this thesis: How IT buyer-supplier relationships should be managed in order to ensure the relationship success? Adopting an integrative approach to IT outsourcing governance based on both Transaction Cost and Relational Exchange perspectives, a novel IT outsourcing relationship management model is proposed in this thesis with a goal to investigate and explain how formal/contractual and informal/relational governance mechanisms employed by the parties of the IT outsourcing dyads may complement each other in their effect on the overall relationship success. The conceptual model is tested and further developed when applied to five cases of IT outsourcing deals in Canadian insurance and airline industries. The findings not only show support for the integrative approach to IT outsourcing, but also reveal how informal and formal governance mechanisms may complement each other by playing different roles within interorganizational financial, service, and informational exchanges. It appears that in the successful IT outsourcing deals the parties actively practice formal/contractual management of the financial exchanges between them, while resorting to informal/relational governance of interorganizational service exchanges. Well developed both formal and informal information exchanges between organizations seem to be essential to the IT outsourcing relationship success.