Effect of trust and risk on it outsourcing relationship quality and outsourcing success

Abstract

Successful post-contract relationships determine whether an IT outsourcing project is fully successful, partially successful or a failure. The purpose of this study is to further the understanding of IT outsourcing relationships in the post-contract phase. This study adopts a social exchange theory perspective and examines the impact of trust in IT outsourcing vendor, various modes of trust and trustworthiness factors, perceptions of risk, perceptions of strategic salience and service quality on relationship quality and outsourcing success. Perceptions of trustworthiness of the vendor, and the various bases of IT outsourcing decision making such as institution-based trust, transference-based trust, calculative-based trust and the past experiences with the vendor and their impact on the trust in vendor are examined in an IT outsourcing context. This research used a cross-sectional, correlational design. The data were collected using an online survey. The sample consisted of 163 professionals working in the area of IT outsourcing. The study results indicated that managing client-vendor relationships is a very important factor in the implementation phase of the IT outsourcing contracts. Relationship quality was significantly related to IT outsourcing success. The factors influencing relationship quality, tested in this study were: trust in vendor, interdependence, service quality, perceptions of risk and perceptions of strategic salience. Perceptions of risk was not related to relationship quality. Interdependence was moderately significant. Trust, service quality, and perceptions of strategic salience were significantly related to relationship quality. The study posited trust as a moderator because high or low levels of trust can have a profound effect in ongoing relationships. Though the original hypotheses of moderation were not supported, the study found in the post-hoc analyses that trust indeed moderated the relationship between the perceptions of strategic salience and relationship quality. The study posited that institutional-based trust, calculative-based trust, transference-based trust and knowledge-based trust were positively related to trust in vendor. Surprisingly, institutional based trust was not significant. The other modes of trust were significantly related to trust in vendor. The study's important contribution to theory is examining the role of trust as a moderator. The results about the interdependence of client and the vendor could offer some ideas on resolving the conflicting findings about interdependence in the context of IT outsourcing client-vendor relationships. In the context of IT outsourcing projects which are very service intensive, and time and cost sensitive, this study concludes that though good client-vendor relationships are not the only ingredient of a project success, the importance of relationships built on mutual trust between the parties, interdependence and service quality in ensuring project success cannot be understated.

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