Defining the most desirable outsourcing contract between customer and vendor

Abstract

Purpose The purpose of this work is to identify commonalities that exist within the contracts between customer and vendor companies, the nature of the problems commonly associated with these contracts, and to provide a theoretical model that exists between customer and vendor companies. Design/methodology/approach This research uses multiple sources of previous research to isolate the key elements and form a theoretical model for the ideal outsourcing contract. The common problems identified were also derived from previous research. Findings The paper finds that there is a common set of key contractual elements that exist between most outsourcing contracts. The nature of the particular industry the companies exist within and the specific needs within each customer‐vendor relationship can be accommodated within the contract by tailoring these key elements to fit each scenario. A set of common problems may arise when any of the key elements are not sufficiently addressed. These problems can greatly devalue the customer‐vendor relationship and supply chain as a whole. Research limitations/implications Future research should examine the theoretical model presented within the context of various industries. Each of the key elements presented and its implications for the customer‐vendor relationship should also be further examined. Practical implications This research may provide a better understanding of the importance of the outsourcing contract to the customer‐vendor relationship and/or the contract itself for management. Originality/value Previous research has not fully addressed the nature of the outsourcing contract and its associated problems. Where this research attempts to identify all key elements of the contract, previous research usually addresses a single contractual element at a time. There has also been little research that discusses the problems that commonly arise within the contractual relationship. The theoretical model within this research may be useful.

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