Purpose – Although risks and client‐vendor relationships in IT outsourcing have been studied in prior research, there is a paucity of studies providing insights on the mitigation of client risks through the relationship. This research aims to focus on mitigation of the ex post risks of firms engaged in offshore software development (OSD). Client risks due to service provider behavior are identified first. Further, this work seeks to identify relationship variables that could reduce the impact of determinants of risk on a risk category. Design/methodology/approach – This research followed a multiple case study method aiming to build insights and directions that would facilitate further research. The paper's goal of sampling was to choose cases which were likely to extend the emergent theory pertaining to risks and their mitigation through relationships. Findings – Findings from this study show that shirking, loss of control over information assets, and service provider lock‐in are the three categories of ex post risks. A relationship management strategy ensuring reasonable profits to the vendor could mitigate shirking risk. Trustworthiness of vendors established through credibility and benevolence in prior engagements could mitigate the risk of loss of control over information assets. Further, dependence balancing through a multi‐vendor offshoring strategy and joint investments in relationship‐specific assets could mitigate the risk of service provider lock‐in. Practical implications – The findings from this research provide useful insights in vendor selection and management process. Originality/value – This paper adds to the growing body of literature in offshore IT outsourcing and makes two significant contributions: identification and categorization of risks due to vendor behavior and their determinants in OSD; and understanding the role of relationship dimension in mitigating such risks in OSD.
Strategic Outsourcing: An International Journal – Emerald Publishing
Published: Jun 28, 2011
Keywords: Offshore software development; Risk management; Mitigation; Relationship; Outsourcing; Vendor behavior