outsourcing contracts are often very complex, it is difficult to include all rules and agreements in the contract. interactions between the participants often go beyond rules and exceptions and depend on intangible factors ,such as trust and commitment

1. CMGB 6322
Strategic Information Systems
J O U R N A L A R T I C L E P R E S E N TAT I O N :
Effects of initial and ongoing trust in
IT outsourcing: A bilateral perspective
By Jae-Nam Lee , Byounggu Choi
Prepared by:
Alireza Khosroyar

2. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
PRESENTATION OUTLINE
•
Introduction
•
Theoretical Development
•
Methodology
•
Research Findings
•
Managerial Implications
CMGB 6322-Strategic Information Systems

3. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Introduction- Background
•
the global outsourcing market :
– US$340 billion in 2007,
– increase to US$509 billion by 2012,
– annual growth rate of 8.4%
•
However, there have been few reports about its successful ROI.
•
outsourcing contracts are often very complex, it is difficult to include all rules
and agreements in the contract.
•
interactions between the participants often go beyond rules and exceptions and
depend on intangible factors ,such as trust and commitment
•
More flexible relationship
more trust
CMGB 6322-Strategic Information Systems

4. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Introduction – the importance of this research
• Prior studies generally are cross-sectional but this research
studies the change of trust over time.
• Outsourcing from the perspectives of both participants.
– Service receiver
– Service provider
CMGB 6322-Strategic Information Systems

5. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Theoretical Development
• Initial trust vs. ongoing trust
– Trust is a dynamic process.
• Example: Team cohesion
– it is process-oriented rather than
outcome- or input-oriented concept.
• Initial Trust : is not based on any prior
experience but on an assumption.
tendency of a group to remain united
•
Ongoing Trust : result from observing
actual interaction .
– It is likely to be modified over time due to
experiences and interactions with partners.
CMGB 6322-Strategic Information Systems

6. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Theoretical Framework
CMGB 6322-Strategic Information Systems

7. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Research Methodology
Phase 1 :
Service
receivers :
2000 large
listed firms
535 firms
were
willing to
participate
Phone call
to 1750
455 service
receivers
responded
(85%)
415 After
Eliminating
missing
data
Phase1 , Service Provider
Service
Provider:
340
Phase1 , Service Receiver
232
responses
were
received
215 After
eliminating
missing
data
Phase 2:
Phase 2 , Service Provider
340
Questioners
Sent
205
Received
189
After
elimination
Phase2 , Service Receiver
169
received
148
After
elimination
CMGB 6322-Strategic Information Systems

8. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Findings




Service Receiver
Perspective







Service Provider
Perspective









CMGB 6322-Strategic Information Systems

9. EFFECTS OF INITIAL AND
ONGOING TRUST IN IT OUTSOURCING
Managerial Implications
 the role of ongoing trust and distrust is significant in understanding the
success of IT outsourcing initiatives.
increasing initial
trusting belief
minimizing
initial distrusting
belief
Forming
appropriate
favorable
expectations
Fostering an
environment
that encourages
ongoing positive
belief
Successful
Outsourcing
 knowledge sharing would draw both the provider and the receiver together
in a shared vision and provide a common goal.
CMGB 6322-Strategic Information Systems