IT outsourcing lifecycle
The literature review revealed that ITO could be seen as a lifecycle consisting of six major phases, which are: 1. Investigate and prepare, 2. select provider, 3. negotiate contract, 4. conduct transition, 5. manage IT service provision, 6. evaluate options), and cancel or renew contract. At the end of the ITO lifecycle there are four potential options for ITO clients how to proceed at the end of the contract. These four options are: (1) switch the ITO provider, (2) source the IT back in-house, (3) launch new IT organisation or IT company, and (4) continue with the incumbent provider. The first three phases can be considered as a pre-delivery building block, the next two can be considered as a
57
delivery building block, and the last activity can be considered as a re-evaluation building block. If the ITO client has decided to switch ITO providers, then a transition needs to be conducted. Transition is a highly complex, resource intense, and risky phase with the objective that IT services are successfully implemented and delivered by the new ITO provider and the ITO client, as contractually agreed. At the end of the transition, the new provider is enabled to provide IT services as contractually agreed. Then the incumbent provider is no longer required for providing IT services. Based on the initial analysis of the literature the provisional conceptual framework, depicted in Figure 3-1, was developed.
Figure 3-1 Provisional conceptual framework (developed for this thesis)
The provisional factors, which contribute to a successful switching of ITO providers during transition, are described as follows:
Manage project
Complex projects such as switching ITO providers need to be managed professionally so that the project can be implemented within budget, quality, and time. ITO provider switching projects are characterised by a high degree of complexity not only due to the dependencies between the client, the incumbent, and the new provider. But also due to particularly demanding activities such as managing the knowledge transfer from the incumbent provider to the new provider or the transfer of identified key experts. A
4. Transition IT outsourcing lifecycle A ct iv it ie s O u ts o u rc in g p h as e Re-evaluate Pre-delivery Delivery M an ag e p ro je ct Enable trust
Manage key experts transfer Manage knowledge transfer Ensure sufficient resources Ensure top management support M an ag e es ca la tio n s 1.Investigate and prepare 2. Select provider 3. Negotiate contract 4. Conduct transition 5. Manage IT service provision 6. Evaluate options (switch, backsource, launch new IT organisation, stay), and cancel or renew contract
58
professional project management ensures that the defined transition objectives are achieved and that the new provider can deliver IT services as contractually agreed.
Manage knowledge transfer
An effective knowledge transfer from the incumbent provider to new provider is a prerequisite for a successful transition. Without successfully transferring knowledge the new provider will not be able to provide complex IT services, within a reasonable timeframe, for the new ITO client. Knowledge transfer in ITO provider switching projects can be considerably more difficult than typical knowledge transfer projects. There are various reasons for this, such as missing trust and low motivation of incumbent provider employees to share their knowledge with a competitor.
Manage key experts transfer
Transferring key experts from the incumbent to the new provider appears to be a highly effective knowledge transfer strategy. For successfully transferring key experts, they need to be identified and transferred at the right time. There is the risk that the incumbent provider transfers key resources to other accounts, before they can be identified and necessary steps are taken to initiate the transfer, either by the client or by the new provider. Another risk is that the incumbent provider blocks the transfer by so- called no-hire clauses. These risks need to be adequately addressed and managed.
Adapt ITO client governance
The governance structure of the ITO client needs be adapted, so that the new provider can be managed according to the new contract. However, for the transitional period, both providers need to be managed with this governance structure. This brings additional challenges for the retained client organisation in terms of staff utilisation and the inherent complexity of managing two providers at the same time. Contract management, commercial management, and service level management are essential parts of the governance.
Ensure sufficient resources
It can be anticipated that the retained IT client organisation is optimised to manage one ITO provider. The transition to another IT outsourcing provider brings several challenges, which requires sufficient staff resources. Examples are the management of the transition project, the management of two providers for a transitional period, and
59
the management of escalations between all three parties. Therefore, the ITO client needs to ensure that sufficient resources in terms of manpower and experience are available.
Ensure top management support
Top management support is needed for large and complex ITO switching projects, since ITO switching projects are highly complex, resource intensive, costly, have a long duration, and have the potential of serious business disruption if the transition is either partly successful or not successful at all. Top management needs to be regularly informed and involved by the transition project management. Top management needs regular updates transition progress and transition risks. There will be situations where top management’s decisions will be required by the transition project.
Enable trust
Trust appears to be a central key factor for a successful ITO provider switching transition. For example, trust appears to be important for critical activities such as knowledge transfer and transfer of key experts. However, the incumbent provider can judge the contract termination with the incumbent provider and the contracting of a new provider, who is also a competitor, as a breach of trust. If trust between the incumbent provider and the ITO client is permanently lost, then the likelihood that the incumbent provider is either unsupportive or even hostile will increase. A trustful relationship between the new provider and the incumbent provider would ease many activities between the two providers. Therefore, the challenge for the ITO client and the incumbent provider is to create a culture where it is possible that a trustful relationship can develop between all three parties.
Manage escalations
When ITO providers are switched, then there is potential for various reasons for escalations, such as:
The incumbent and/or the new provider does/do not deliver IT services as contractually agreed and requirement
Knowledge will not be transferred as required
The incumbent provider conducts an unsupportive or hostile strategy
60
Escalations need to be managed by the ITO client, so that necessary decisions are made and actions are taken, so that the transition can be successfully completed.
3.3 Conclusion
Based on the initial analysis of the literature a provisional conceptual framework for switching ITO providers was developed. This provisional framework was used for the following four purposes. 1. Initial factors contributing to ITO switching success were identified and discussed. This partly addresses RQ1. 2. The provisional conceptual framework was the foundation for the development of the initial research sub-questions (see section 4.5.4). 3. It provided an initial classification of factors contributing to ITO switching success. This partly addresses RQ2. 4. The provisional conceptual framework enhanced this researcher’s theoretical sensitivity for the research. The factors contributing to ITO switching success have been classified into: Manage project, manage knowledge transfer, manage key experts transfer, adapt ITO client governance, ensure sufficient resources, ensure top management support, enable trust, and manage escalations.
61
4 RESEARCH METHODOLOGY
4.1 Introduction
This chapter presents the research design, specifically the research paradigm and the research methodology. The chosen research methodology, addresses the research questions and the research objectives, which have been discussed in chapter 1. In this chapter, alternative research philosophies and methodologies are also summarised and justifications are given for the chosen research philosophy and methodology.
4.2 Research design
Figure 4-1 provides an overview of the research design choices for this research. In this figure, the text in red represents the choices for this research. As an example, action research and case study are briefly described and it has reasons are given for not using them for this thesis.
Figure 4-1 Research design choices, adapted from Saunders, Lewis, and Thornhill (2009, p. 138)
The overall research design for this research is depicted in Figure 4-2. Solid lines demonstrates direct/strong influence between the research elements. Whereas dotted lines demonstrate indirect/week influence between the research elements.
Sampling Secondary data Observation Interviews Questionnaire Data Collection Methods Experiment Cross sectional Longitudinal
Time Horizons Research
Methods Survey Case Study Ethnography Action Research Inductive Deductive Positivism Constructivism Quantitative Qualitative Modified Grounded Theory Realism Critical Theory Research Approaches Mixed Methods Research Philosophy
62 Figure 4-2 Research design (developed for this thesis)
4.3 Research paradigm
A fundamental decision is the research paradigm choice for the research (Maxwell, 2005, p. 36). The term paradigm was introduced by Thomas Kuhn’s significant book "The Structure of Scientific Revolutions" (Kuhn, 1962) to describe a basic set of scientific assumptions which researchers share. Guba and Lincoln (1994) defined paradigm as "a set of basic beliefs (or metaphysics) that deals with ultimates or first principles" (p.107). Others choose the term worldview (Creswell, 2009, p. 6), or research philosophy instead of research paradigm (Saunders et al., 2009, p. 107). Paradigms can be based on the tripartite linkage of ontological, epistemological and methodical questions (Morgan, 2007) which are shown in Table 4-1.
Research objectives
RO1: To establish the main factors that contribute to successful switching of IT outsourcing providers.
RO2: To analyse and classify the factors contributing to a successful transition when ITO providers are switched – to provide operational guidance for the ITO client. RO3: To develop a conceptual and operational framework for switching ITO providers with the specific focus on transition. The conceptual framework will be developed for the ITO client perspective.
Literature review and provisional conceptual framework - Initial literature review - Development of a provisional
conceptual framework - Final literature review - Development of conceptual
framework Main research questions
RQ1: When IT outsourcing (ITO) providers are switched – what factors contribute to a successful
transition?
RQ2: How can these factors be best classified and prioritised to provide operational guidance to
practitioners?
RQ3: What conceptual model or framework can be developed for the switching of ITO providers?
Methodologies and methods - Modified grounded theory - Semi structured interviews
- Memo writing - Coding
- Concept & category development - Theoretical sampling - Constant comparison
Verification strategies - Ensure methodical coherence
- Sample appropriately - Collecting and analysing data
concurrently - Thinking theoretically
Validation procedures - Use member checking - Use rich, thick description
- Clarify bias - Spend prolonged time in the field
Research paradigm - Constructivism
63 Table 4-1 Ontological, epistemological, and methodical questions
Ontological question Epistemological question Methodical question
"What is the form and nature of reality and, therefore, what is there that can be known about it"
"What is the nature of the
relationship between the knower or would-be knower and what can be known"
"How can the inquirer (would-be knower) go about finding out whatever he or she believes can be known"
Adapted from Guba and Lincoln (1994, p. 108)
Various researchers have defined different paradigms. For example Creswell (2009, p. 6) discussed postpositivism, constructivism, advocacy/participatory, and pragmatism as different worldviews. Perry, Riege and Brown (1999) also defined 4 research paradigms which are: Positivism, realism, critical theory, and constructivism. Table 4-2 shows the main distinguishing elements of the four paradigms by Perry et al. (1999).
Table 4-2 Basic belief systems of alternative inquiry paradigms
Paradigm
Item Positivism Realism Critical theory Constructivism
Ontology Naïve realism: Reality is real and apprehensible
Critical realism:
Reality is "real" but only imperfectly and probabilistically apprehensible and so triangulation from many sources is required to try to know it Historical realism: ‘Virtual’ reality shaped by social, economic, ethnic, political, cultural, and gender values, crystallised over time Critical relativism: Multiple local and specific ‘constructed’ realities Epistemology Objectivist: Findings true Modified objectivist: Findings probably true Subjectivist: Value mediated findings Subjectivist: Created findings Methodology Experiments/ surveys: Verification of hypothesis: Chiefly quantitative methods Case studies/convergent interviewing: Triangulation, interpretation of research issues by qualitative and quantitative methods such as structural equation modelling Dialogic/ dialectical: Researcher is a transformative intellectual’ who changes the social world within which participants live Hermeneutical/ dialectical: Researcher is a ‘passionate participant’ within the world being investigated
64
4.3.1 Constructivism
This research was performed within the constructivism paradigm. Creswell (2012) defined the characteristics of the social constructivist paradigm as follows:
In this interpretative framework, qualitative researchers seek understanding of the world in which they live and work. They develop subjective meaning of their experiences – meanings directed toward certain objects and things. These meanings are varied and multiple, leading the researcher to look for complexity of views rather than narrow the meaning into a few categories or ideas. The goal of this research, then, is to rely as much as possible on the participants’ views of the situation (p. 301).
Within the constructivism paradigm it is assumed that it is not possible to observe the real world (Guba & Lincoln, 1994, p. 110) but "our understanding of this world is inevitably our construction, rather than a purely objective perception of reality, and no such construction can claim the absolute truth" (Maxwell, 2012). Constructivists are open to new views of the world (Guba & Lincoln, 1994, p. 113) and this is reflected in their comprehensive open-ended questions (Creswell, 2009, p. 8). This is in line with the approach of this research, which used semi structured questions. According to Creswell (2009, p. 8) constructivists assume that people want to understand the world they are part of. This researcher wanted to understand how the interview partners view the world regarding ITO provider switching success factors. It was part of the research design for this thesis to get involved with the world and to make sense of it, therefore a constructivist paradigm was well suited (Crotty, 1998, p. 7). This research did not start with a theory (Creswell, 2009, p. 8) instead findings were created during the research endeavour (Guba & Lincoln, 1994, p. 111). This approach is well aligned with a constructivist stance to research. This contextualised research was conducted within a constructivist paradigm as it was assumed that a pluralistic and interpretative "perspective toward reality" (Creswell & Miller, 2000, pp. 125-126) will benefit the research topic most.
However, not all researchers agreed that constructivism is an adequate paradigm for business research. For example Hunt (1991) warned that the constructivist approach is rarely suitable for business research as it excludes the technological and economic
65
aspects of businesses. Time has moved on and the views how research paradigms can successfully applied have shifted since Hunt’s warning in 1991. This is demonstrated by the paper "strategic management and the philosophy of science: the case for a constructivist methodology" which appeared in the Strategic Management Journal". The authors suggested "…that constructivism has the potential to inform research in strategic management" (Mir & Watson, 2000, p. 941). Researchers have successfully applied the constructivist paradigm in information technology (Ellis, 2006) and in IT outsourcing (Stafford, Gillenson, & Richardson, 2007).
4.3.2 Alternative research paradigms
In the subsequent paragraphs, three alternative research paradigms are briefly discussed and reasons are provided for not using these paradigms for this research.
4.3.2.1 Positivism
Researchers who conduct inquiry within the positivistic paradigm assume that there is an objective reality which is ascertainable (Guba & Lincoln, 1994, p. 111), and quantifiable (Kvale, 1996, p. 11). Another assumption is that research can and need to be conducted in an objective way (Bryman & Bell, 2007, p. 16) and free of values (Guba & Lincoln, 1994, p. 114). This means that what is not objectively ascertainable cannot be considered scientific (Bryman & Bell, 2007, p. 17). Researchers in a positivistic paradigm have the role of experts (Guba & Lincoln, 1994, p. 113), and are detached from the object of research, and the "…voice is that of the ‘disinterested scientist’…" (Guba & Lincoln, 1994, p. 115). Since only quantitative research is accepted within the positivist paradigm (Guba & Lincoln, 1994, p. 114) and the research questions of this research cannot be answered in a quantitative way - therefore the positivist paradigm is not adequate.
4.3.2.2 Realism
Realists believe that it is only possible to get an approximation of the real world (Guba, 1990, p. 21) and that finding truth is impossible (Hunt, 1992, p. 93). The world exists independently of the person who perceives it (Sobh & Perry, 2006, p. 1199). For realists there is only one reality, which needs to be triangulated to be more fully perceived
66
(Healy & Perry, 2000; Perry et al., 1999). For a realist the truth is "out there" but the researcher never knows if it has been discovered (Guba, 1990, p. 21). This is in contrast to the view of constructivists and critical theorists who believe that there are multiple realities (Healy & Perry, 2000, p. 18).
4.3.2.3 Critical theory
According to Perry et al. (1999) the objectives of researchers who conduct research from a critical theory paradigm are to critically assess and convert "…social, political, cultural, economic, ethnic and gender value" (p.17). Reality can only perceived through a value lens and this value lens impacts research findings therefore research is a "political act" (Guba, 1990, pp. 23-24). Through the interchange of arguments people get more informed and misunderstandings and ignorance decrease (Guba & Lincoln, 1994, p. 113). For example critical theory researchers conduct inquiry regarding feminism, neo-Marxism, and participatory-inquiry (Guba, 1990, p. 23). This research aims not to transform (Guba & Lincoln, 1994, p. 114) the switching of ITO providers but foremost to understand the factors which are related to the success of this endeavour. And since this research is neither a "long-term ethnographic" study, nor a study of history (Perry et al., 1999, p. 17) this paradigm has been considered as not adequate.