It takes two to tango: how relational investments improve IT outsourcing partnerships

• Authors: Nikhil Mehta;Anju Mehta
• Venue: Communications of the ACM
• Year: 2010

Introduction The IT outsourcing, industry landscape is dotted with broken contracts - results of unsuccessful client-vendor (C-V) partnerships. Approximately 78% C-V partnerships fail in the long term, inflicting high transition costs on clients. The recent economic downturn has strined C-V partnerships further. Despite the criticality of this issue, there is a relative lack of efforts to understand the issues leading to failed partnerships. We discuss these issues in light of the clients' onus towards improving the longevity of C-V partnerships. We adopt a two-pronged approach. First, we try to identify the client characteristics that influence their potential to forge a long-term C-V partnership. To that extent, we discuss a partnership maturity curve (PMC), which categorizes clients into three dynamic stages, and predicts their potential for developing mature partnerships based on their outsourcing objectives and their fit with vendors' capabilities (see Figure 1). Second, we try to understand vendors' perspective on the issue. We interviewed 21 executives in nine established IT-outsourcing vendors in India. It has been recommended that vendors' perspective is critical to understanding C-V partnerships. Vendors highlighted an interesting mix of their own as well as client-generated issues, which we discuss in light of the client dynamics identified by PMC, to propse guidelines for clients interested in developing successful C-V partnerships. The study confirms existing belief that improving the longevity of C-V partnerships requires relational investments from clients. We identify various areas for clients to make such investments.