Page 1 of 32 Department of Management [630645]

Page 1 of 32 Department of Management

IS Development and Implementation in a Business Context
Winter exam, December 2016
___________________________________________________________________________

Name of Supervisor:
P
LEASE TICK OFF :
Bjarne Schlichter
Nikolaus Obwegeser: X

Full name and study programme (IM/BI) of the
group members:

Full name MSc
IM or BI
Valon Buxhovi BI
Snorre Aven BI
Heidi Ukvitne BI
Aurelian Tudor Du mitrescu BI

Written Group Project

Client -Vendor R elationship in IS/IT outsourcing:
A systematic review of the progress in high -quality
contributions from 2005 onwards.
_____________________________________________________________

Page 2 of 32 Research article
Client -Vendor Relationship in IS/IT outsourcing:
A systematic review of the progress in high -quality
contributions from 2005 onwards.

Authours: Valon Buxhovi, Snorre Aven, Heidi Ukvitne, Aurelian Tudor Dumitrescu
Institution: Aarhus University, Business and Social Sciences, Department of Management

Abstract: …

Keywords: Information Technology Outsourcing, Information systems outsourcing, Relations

Page 3 of 32 1 Table of Contents
2 Introduction ……………………………………………………………………………………………………….. 4
3 Prior literature reviews of IS/IT outsourcing: …………………………………………………………….. 4
4 Methodology ………………………………………………………………………………………………………. 7
4.1 Step 1: Syst ematic search …………………………………………………………………………………… 7
4.2 Step 2: Superficial exclusion ……………………………………………………………………………….. 8
4.3 Step 3: Content exclusion …………………………………………………………………………………… 8
5 Analysis ……………………………………………………………………………………………………………… 8
5.1 Contractual go vernance …………………………………………………………………………………….. 9
5.1.1 Contract detail …………………………………………………………………………………………………………….. 9
5.1.2 Contract type …………………………………………………………………………………………………………….. 10
5.1.3 Control mechanisms …………………………………………………………………………………………………… 11
5.1.4 Contract size ……………………………………………………………………………………………………………… 12
5.1.5 Contract duration ………………………………………………………………………………………………………. 12
5.1.6 Contract flexibility ………………………………………………………………………………………………………. 13
5.1.7 Contract detail and contract duration …………………………………………………………………………… 13
5.2 Relational governance ……………………………………………………………………………………………….. 13
5.2.1 Relationship quality ……………………………………………………………………………………………………. 14
5.2.2 Relational flexibility ……………………………………………………………………………………………………. 14
5.2.3 Relationship characteristics …………………………………………………………………………………………. 15
5.2.4 Relational governance, contractual governance and relationship quality ………………………….. 15
5.2.5 Vendor opportunism ………………………………………………………………………………………………….. 16
5.2.6 Trust and formal control ……………………………………………………………………………………………… 19
5.3 Prior relationships …………………………………………………………………………………………………….. 20
5.4 Relational learning ……………………………………………………………………………………………………. 21
5.5 Procedural learning …………………………………………………………………………………………………… 22
6 Future research …………………………………………………………………………………………………. 22
7 Discussion …………………………………………………………………………………………………………. 24
8 Limitations ……………………………………………………………………………………………………….. 26
9 Conclusion ………………………………………………………………………………………………………… 27
10 References …………………………………………………………………………………………………….. 28

Page 4 of 32 2 Introduction
Many papers have been written on the topic of IT outsourcing , and these contributions have researc hed
many angles and fragments within the field (Lacity et al. 2010) . There seems to be a reason for this
strong movement in the academic body of literature. According to Lacity et al. (2010), the field of
IS/IT outsourcing is continuously evolving. Not only is the IT outsourcing market growing , but also the
expectations for the future returns are changing. Clients ’ expectat ions towards the outcome of IT
outsourcing are increasingly moving towards a more strategic objective (Oshri et al. 2015, Li 2012).
This in turn has caused a shift from a cost saving and rational economic perspective towards a strategic
and relational focu s on IT outsourcing (Lioliou and Zimmerman 2015; Oshri et al. 2015; Lacity et al.
2010; Gulati, 1995 ). The interesting question in this regard is , thus, how has this shift been represented
in the specialty literature and whether further research insights have been provided. The answers to
this questio n will be analysed using high- quality literature .

The aim of this paper is to look at high quality literature contribut ions within the period 2005 -2015 to
observe the progress of the IT outsourcing field within the client and vendor relationship . Furthermore, this
paper will mention what expectations there are and have been for future research.

This paper will first visit prior literature reviews to establish a point of departure, followed by a
systematic account of the research published. Furthermore, the final step will be to account for possible
directions for future research . This process is illustrated in figure 1.1.
Figure 1.1 Roadmap
3 Prior literature reviews of IS/IT outsourcing :
The initial overview of IS/IT outsourc ing will be provided by examining prior review papers published
in the period 2005 to 2015. This will offer an overview and insight in to what has already been
identified as important factors with in the field, and what opportunities there are for future research
at the time when t he reviews w ere conducted . Additionally, this section will further highlight the
distinctions of this paper from prior publications . The reviews identified through the literature search
can be seen in table 2.1.
Prior reviews:
Establishing a point
of departure.
Published research:
A synthesis of
published work.
Future research:
A synthesis of future
research suggestions.

Page 5 of 32
Authors Time frame of
literature
included Number of
included articles Number of
Journals included The research question(s) addressed Analysis
Lacity et
al. (2010) 1992 -2010 164 50 “What has the empirical academic
literature found about information
technology outsourcing (ITO) decisions and
outcomes? What are the gaps in knowledge
to consider in future ITO research? ” (Lacity
et al. 2010 p. 395 ) “We summarize the empirical academic
literature by coding the independent and
dependent variables and their
relationships. The paper also addresses gaps in knowledge .” (Lacity et al. 2010
p. 397 )
Lacity et
al. (2009) 1990 -2008 191 70 “Our aim in this paper is to extract the
insights academics have identified for ITO
practice ” (Lacity et al. 2009 p. 131 ) The paper relates academic finding to
insight for practice.
This
review 2005 -2016 11 6 “The aim of this paper is to look at high
quality literature contributions within the period 2005 –
2015 to observe the
progress of the IT outsourcing field within
the client and vendor relationship.
Furthermore, this paper will mention what
expectations there are and have been for
future research. ” (this review ) Summarizes the findings in high quality
papers based on key concepts form the
literature and their suggestions for future
research.
Table 2.1 Literature reviews

Lacity et al. (2009) reviewed 191 both qualitative and quantitative articles covering 70 journals in
the period up till 2008. The authors present their paper focusing on six main points (1) determinants
of ITO (38%) , (2) ITO strategy (12.5%) , (3) ITO risks (18%) , (4) determinates of ITO success (45%) ,
(5) client and supplier capabilities (33.5%) and (6) s ourcing varietals: offshore, ASP (application
service providers) , and BPO (business process outsourcing) (26%)1. This review of determinants of ITO
found three main client elements influencing ITO: (1) financial, (2) s ize and (3) industry. In regards to
ITO strategy the authors found two considerations: (1) t he strategic intent behind IT outsourcing
decisions and (2) the strategic effec ts of IT ou tsourcing decisions, with a total number of 143 articles
covering this topic. Additionally, 27 common risks w ere published within the ITO ris ks headline. The
authors also presented a model showing the relationship between ITO success and three main influen tial
factors relate d to (1) the ITO decision, (2) contractual governance and (3) relational governance.
Furthermore, a reciprocal relationship amongst contractual governance, relational governance, ITO
decision and ITO success was acknowledged. Within c lient and supplier capabilities the authors
recognized that different papers treated the set of proposed capabilities differently, i.e. discussed
the capabilities as being complements , while the authors them selves tre ated the capabilities as being
independent entities (Lacity et al. 2009). However, both types of approaches yielded capabilities as
being determinants of ITO success. Finally, the authors summarised the findings within the sourcing
varietals: offshore, ASP and BPO . Offshoring is more costly and difficult, ASP on the other hand seems
to be riskier . Furthermore, the authors discovered that the many papers reviewed found a relationship
between contractual and relational governance an d thei r effects on BPO succ ess.

1 The articles in the review where overlapping in terms of topics.

Page 6 of 32
A year l ater Lacity et al. (2010) publis hed an additional review concerning the elaboration on
dependent and independent variables and their relationship from both quantitative and qual itative
research in the field of ITO. This review encapsulated 169 ITO papers publ ished between 1992 and
2010 covering 50 journals. The authors coded all 169 papers with the objective of categorizing a
conceptual master list of outsourcing variables and their relations. This resulted in 36 dependent and
138 independen t variables. The dependent variable s where further fragmented in two main topics:
(1) the ITO decision and (2) the ITO outcome. The independent variables where categorized into 13
main subject areas: (1) motivation for outsourcing, (2) transaction attribut es, (3) relationship
characteristics, (4) client characteristics, (5) client firm capabilities, (6) ITO decision, (7) contractual governance, (8) supplier firm capabilities, (9) decision characteristics, (10) ITO outcome, (11)
environment, (12) influence s ource and (13) supp lier firm characteristics. This review made it clear that
different papers treated variable s differently, and that there was an overlap between the dependent
and independent variables identified. Amongst these are contractual governance, relational
governance and prior relationship. The authors furthermore report ed on the findings of the examined
papers and display ed whether there is significant positive or negative evidence for the influence of
the variables on the ITO decision and outcome respectively. Important findings in regards to the
relations and interaction of variables w ere also made. The authors could deter mine two interactive
effects between (1) ITO decisions and contractual governance, and (2) contractual governance and
relational governance (Lacity et al. 2010).
The review also touched upon topics deemed not worthwhile considering in more depth, as resea rching
these mixed results only would lead to marginal return s. This, amongst others include the effect of
contract duration on the ITO outcome (Lacity et al. 2010) .

This paper will encapsulate ten papers from six high quality journals determined by the SenS -8. With
a focus on the client and vendor relationship , this paper will use the selected collection of literature to
establish what important determinants have been identified to be responsible in the shift toward a
relational perspe ctive within IS/IT outsourcing. This will be done by coding important concepts and
synthesizing the findings across papers . The paper will distinguish itself from other reviews by the
narrow approach to the field and the focus on high quality papers. Furthermore, the determinants will
be elaborated upon opposite Lacity et al. (2010) and Lacity et al. (2009).

Page 7 of 32 4 Methodology
A systematic review was chosen to further explore the progress of the IS literature within the field of
client and vendor relations in IS/IT outsourcing. Following the field standards ensuring transparency
and reproducibility, the review method applied in this paper follows t hree simple steps partly adapted
from Okoli and Schabram (2010) and Fink (2005).
Figure 3.1
4.1 Step 1: Systematic search
The systematic search was performed in the literature database Scopus. Scopus was considered a suitable platform to fulfil the research objective as it has a considerable number of current and peer
reviewed articles (Aghaei et al. 2013). The initial search included the search terms: “IS/IT outsourcing,
Client/Vendor and relation*”. This search with additional specifications in ter ms of (1) quality and (2)
time resulted in 26 articles. Quality and time w ere necessary limitations to the search due to the
research objectives.
Quality within the search results was ensured by only including contributions published in the SenS -8
journals. SenS -8 (also referred to as the “basket” of eight) is a list of journals recognized among peers
Step 1: Systematic search
TITLE-ABS-KEY(IS OR IT AND outsourcing) AND TITLE -ABS-KEY(client OR ve ndor) AND TITLE -ABS-KEY(relation*) AND (
LIMIT-TO(EXACTSRCTITLE,"Journal Of Information Technology" ) OR LIMIT -TO(EXACTSRCTITLE,"MIS Quarterly
Management Information Systems" ) OR LIMIT -TO(EXACTSRCTITLE,"Information Systems Research" ) OR LIMIT –
TO(EXACTSRCTITLE,"Journal Of Management Informatio n Systems" ) OR LIMIT -TO(EXACTSRCTITLE,"European Journal
Of Information Systems" ) OR LIMIT -TO(EXACTSRCTITLE,"Journal Of Strategic Information Systems" ) ) AND ( LIMIT –
TO(DOCTYPE,"ar" ) OR LIMIT -TO(DOCTYPE,"re" ) ) AND ( LIMIT -TO(LANGUAGE,"English" ) ) AND ( LIMIT –
TO(SRCTYPE,"j" ) ) AND (PUBYEAR > 2004 )

(search result: 26)
Step 2: Superficial exclusion
Exclusion based on title and abstract.
(search result: 19)
Step 3: Content exclusion
Exclusion based on scope.
(search resu lt: 11 )

Page 8 of 32 as the top eight journals withi n the field of IS literature (Lowry et al. 2013). Lowry et al. (2013) found
strong evidence supporting the quality claim put f orward by t he Association of Information Systems’
Senior Scholar College. Consequently, supporting the limitation of this paper. I n addition to the quality
limitation, the research objectives specified a further limitation in time. To satisfy this limitation only
contributions to the literature published after 2005 were included in this review. Thus, also limiting the
search in regar ds to the document type , only considering articles and other reviews. This safeguarded
that prior research was not neglected while keeping the focus on the specified time frame.
No further limitations in respect to the field or study area were applied with in the literature search, as
the client and vendor relation is not exclusive to one field of study. This potentially provided a multi –
perspective view from different academic fields.
4.2 Step 2: Superficial exclusion
The second review -round was dedicated to t he superficial exclusion based on title and abstract. Fink
(2005) and Okoli and Schabram (2010) stress this step and use the term practical screening . They
defined the need for such procedure as the systematic search leads to an abundance of proposed
articles. Thus, there is a need for a practical consideration of the title and abstract of the articles and
whether the content is applicable to the research objectives. This superficial exclusion resulted in the
reduction of the articles considered to 19. This process followed the recommendation of Okoli and
Schabram (2010) : “… if in doubt, the articles should definitely be included” (p. 22).

4.3 Step 3: Content exclusion
This step excluded articles that did not adequately mention the relation between client and vendor .
This encouraged the inclusion of 11 articles that satisfied the search terms and the research objectives.
As the initial search of literature was highly predetermined based on the research objectives, other criteria mentioned by other researchers as content in terms of topics and variables (Dawson and
Ferdig, 2006) and scope in terms of choosing quality journals (Singh et al. 2007) w ere already
addressed in the systematic search phase and are su fficiently explained. This step was therefore also
highly practical in nature. The above -mentioned review and scan procedures laid the ground work
and po int of departure of this paper.
5 Analysis
This part of the paper will present and analyse the identified literature on client and vendor
relationships within our research area . The analysis is structured in a manner in which the client and

Page 9 of 32 vendor relationship is divided into the main areas of relational governance and contractual
governance. Contractual g overnance is viewed as the formal (written) schemes behind the client –
vendor relationship , while relational g overnance is considered to cover the “soft” (social) elements
behind the client -vendor relationship (Lacity et al. 2009; Lacity et al. 2010).
5.1 Contractual governance
Contractual governance is the official, written contractual scheme between the client and supplier
parties (Lacity et al. 2010). The existence of contractual governance is set to be paramount in order
for harmonious economic exchanges, in this case outsourcing, to take place. Overall, contractual
govern ance stipulates the duties and rights of the contracting entities (Gopal & Koka, 2012).
Contractual governance can be analysed within four main areas: contract detail, contract type, control mechanisms and contract s ize. Other less discussed areas of contr actual governance are contract
duration and contract f lexibility (Lacity et al. 2010). This paper however will address contract duration.
Lacity et al. (2010) compiled a literature review regarding the determinants of IT outsourcing. They
set one of the dependent variables to be IT outsourcing outcomes. IT outsourcing outcomes w ere
defined using relationship q uality between client and supplier, among others such as outsourcing
outcomes -success. The paper went on to determine the effects of the elements of contractual
governance on IT outsourcing (ITO) outcomes. In the following lines, the findings of Lacity et al. (2010)
will be presented and analysed, together with findings from the other visited research papers.
5.1.1 Contract detail

Contract detail, or con tract complexity, is a collection of clauses that are present in the outsourcing
contract. These can refer to: pricing, service levels, warranties, non -performance sanctions and
warranties (Lacity et al. 2010). The more detailed a contract is, the lower th e chance to misunderstand
contract terms, and the lower possibility for post -contract opportunism on behalf of the vendor
(Ravindran et al. 2015).

Lacity et al. (2010) discovered strong positive relationships between contract detail and ITO outcomes,
meaning that contracts with higher level of detail generated greater positive ITO outcomes. The same
point was made in a previous review on IT outsourcing literature conducted by Lacity et al. (2009).

Page 10 of 32 Susarla et al. (2010) used the term contract extensiven ess instead of contract detail, however, stressing
management of contingencies in the client -vendor contract. They argued also using past literature that
although contracts with great levels of detail are known to mitigate contract opportunism, thus lead t o
a better client -vendor relationship, they very much depend on task complexity and level of
enforcement, which can vary. Susarla et al. (2010) tested the relationship between contract
extensiveness and contract extendibility, which is the belief in future payoffs. Their paper had a more
in depth approach towards contract detail than Lacity et al. (2009) and Lacity et al. ( 2010) due to
them including the determinants of this element (contract extensiveness) as well.

5.1.2 Contract type

Contract type outlines the different formats of contracts within outsourcing. The most notable forms of
contracts described throughout literature are: customized contracts, fee -for-service contracts, fixed
price, time and materials contracts, and partnership based contracts (rel ational contracts) (Lacity et al.
2010).
1. Customized contracts are contracts that offer possibilities to adapt to contingencies or take on
several parts from the other types of contracts. They are also called contract portfolios (Oshri, 2015).
2. Fee-for-service contracts entails that for each service or good acquired, a separate payment has
to be made instead of paying for the total (Office of Personnel Management, 2016).
3. Fixed price contracts require exact sums of money to be acquired by the vendo r(s) to complete a
project for the client(s) (Gopal & Koka, 2012).
4. Time and materials contracts contain a billing rate which is used by the vendor to charge the client
for its requested services (Gopal & Koka, 2012).
5. Partnership based/relational con tracts are contracts which are based on ongoing relationships
between client and vendor. In contrast to the other types, relational contracts entail a higher degree
of risk sharing, commitment and mutual trust developed over time between the parties (Rowli nson &
Cheung, 2004). Relational contracts are most frequently utilized in the cases in which the client and
vendor have the belief that the range of their relations hip can be increased further (Li, 2014).

In Lacity et al. (2010) , contract t ype was found to have an extremely significant relationship with ITO
outcomes. However, the nature of the relationship varied from study to study, leading to the
impossibility of declaring whether a certain type of contract creates better ITO outcomes. Lacity et al.
(2009) also supported the above claim in their collection and analysis of IT outsourcing literature.

Page 11 of 32
According to Li (2014), clients and vendors who realize the possible benefits of expanding their current
contractual relationship in the form of a partnership are those who most likely have put a great amount
of effort in cooperating in the primary phases of the contract. Also, Li (2014) argued that parties who
encounter difficulties in envisioning a future developed relational contract are more likely to present
discrepancies when it comes to awarding bonuses in a contract. For example, when a client is more
confident towards the idea of expanding the relational contract, the client will try to motivate the
vendor to participate by offering infrequent large bonuses, however the number of instances in which
this happens is very low (Li, 2014).

5.1.3 Control mechanisms
Control mechanisms refer to the different techniques used by the controller in order to influence the
performance of the controlee (Choudhury & Sabherwal 2003). Formal c ontrol refers to the various
control mechanisms that are put in place to control the co ntrolee (Choudhury & Sabherwal 2003).
Choudhury & Sabherwal (2003) defined the controller as the individual or group of individuals within
the client party which create the IT requests, and the controlee as the individual or group of individuals
within th e vendor party accountable for the execution of the IT project. Rustagi et al. (2008)
operationalized the concept of amount of formal control by studying data from 138 client -vendor
pairs. Amount of formal control is defined as “ the extent to which the cli ent uses various mechanisms to
exercise control over a vendor ” (Rustagi et al . 2008 p.127).
The study of Rustagi et al. (2008) found multiple factors that were positively related to the amount of
formal control. Task uncertainty, defined as “the degree to which the specific requirements or intermediate
outcomes associated with a task or activity cannot be anticipated or forecasted” (Rustagi et al. 2008 p.
130), showed a positive relationship with the amount of formal control (Rustagi et al. 2008).
The re searchers also found a significant negative relationship between the amount of formal control
and the client’s technical and relationship management knowledge. The findings suggested that clients
with a high degree of technical knowledge used formal contro ls more efficiently, and thereby used
fewer mechanisms and used them less extensively (Rustagi et al. 2008). Similarly, clients with less
relational management knowledge was found to use more control mechanisms to ensure the wanted
vendor behaviour (Rustag i et al. 2008).

Page 12 of 32 A significant negative relationship between client trust in the vendor and the amount of formal control
was also found. More trust suggested that the client would use less mechanisms and use them less
extensively (Rustagi et al. 2008). Furthermore, Rustagi et al. (2008) hypothesised that the degree of
core competency involvement in the outsourced t ask would be positively correlated with the amount of
control used, this was neither supported nor denied . An earlier study has showed a positive relationship
(Saunders et al. 1997), but were later challenged by Smith et al. ( 1998).

As in the case of contract type, in Lacity et al. (2010) control m echanisms were found to have significant
relationships with ITO outcomes. However, variability among the papers was again an issue. Hence, a
clear conclusion regarding which portfolios of control led to more positive ITO outcomes was not able
to be drawn.

5.1.4 Contract size
Contract s ize measures the value of a contract from the monetary point of view (Lacit y et al. 2010).
Larger contracts were found to lead to better ITO outcomes in over 80% of the cases (Lacity et al.
2010). A similar discovery was made previously by Lacity et al. (2009) which was obtained using an
even greater collection of research papers than Lacity et al. (2010).

5.1.5 Contract duration
Contract d uration measures the time frame of a contract (Lacity et al. 2010). Contracts that are of
long term horizons are said to lower the chance of vendor underinvestment /opportunism due to the
parties having their interests aligned (Crocker & Masten, 1988; Joskow, 1987; Guriev & Kvassov,
2005).
This component of contractual gove rnance is considered to be th e most controversial in Lacity et al.
(2010) as there is a lack of evidence supporting its effect o n ITO outcome , additionally, research on
contract duration has yielded mixed results in terms of the general di rection of the effect i.e. whether
the effect is positive or negative on the ITO outcome .
Contract duration wa s studied previously in Lacity ’s et al. (2009) paper and yielded contrasting results
to the ones above. Specifically, they found that short -term contracts have greater chances to generate
more positive ITO outcomes .
Susarla et al. (2010) mentioned, based on past papers, that the longe r the duration a contract has,
the higher probability that the client and vendor will contribute more to their relationship so as to
increase its quality. High quality relationships are considered to have a lower incidence of problems
with opportunism.

Page 13 of 32 Ravindran et al. (2015) studied the connection between con tract duration and relational
embeddedness /relationship quality as well. However, instead of measuring the effect of contract
duration on relational embeddedness/relationship quality , they performed the reversed test. They
discovered that the quality of the past relationship between a client and vendor, or the “strength” of
the relationship as defined in the paper, positively affected the contract duration.

5.1.6 Contract flexibility
Contract Flexibility describes the amount of possibility to alter contractual terms and to indicate
contingencies (Lacity et al. 2010). Lacity et al. (2010) indicated contract f lexibility to be a component
of contractual governance, however, they did not s tudy its effects due to the limited amount of
literature to support the cla im of determining ITO outcomes.

5.1.7 Contract detail and contract duration
Susarla et al. (2010) in their paper used contract detail, duration and extendibility within the context
of op portunism and its mitigation by using the holdup problem, and discussed the effect of contract
detail on contract duration. Despite them using the term “contract extensiveness”, the component has
the same properties as contract detail, hence, they are cons idered to be analogous. In their paper,
Susarla et al. (2010) discovered that contract detail has a direct and positive influence on contract duration. It can be interpreted that the more exact a contract stipulates the responsibilities of the parties, the more efficient the collaboration between the client and vendor is, which serves as an
explanation for the longer relationship between the two. Their explanation is slightly different, they argue, using the context of risk, that the contract duration betwe en client and vendor increases if a
contract is more detailed because it is more likely for the conditions in the contract to be respected if
there is a longer time frame than a shorter one. In other words, if the responsibilities within the contract
are set to be finished within a reasonable amount of time, there is a larger chance that the contract
will be respected.

5.2 Relational g overnance
Relational g overnance deals with the more social elements of a client -vendor relationship (Lacity et al.
2009) . Lacity et al. (2010) using Macneil (1980) define relational g overnance as the set of unwritten
practices used to manage the client -vendor relationship. These elements are: norms, communication,
sharing of information, mutual dependency, coo peration, (relat ional) flexibility and trust (Lacity et al.
2009) . In Gopal and Koka (2012) relational governance was defined as an ex post, extra- contractual
relationship that was not formulated but manifests during the project.

Page 14 of 32 Interestingly, Oshri et al. (2015) in their study of the effects of contractual and relational g overnance
on achieving strategic inno vation via outsourcing , assumed relational governance to be measured by
relationship quality. They based this assumption on the paper by Lacity et al. (2010). Howev er, Lacity
et al. (2010) posit that in the papers they analysed, relational governance and relationship quality to
be two distinct entities. As a result, we consider the interpretation of Oshri et al. (2015) to deviate
significantly from Lacity et al. (2010).

5.2.1 Relationship quality
Relationship quality refers to the quality of the relationship between client and vendor. Lacity et al.
(2010) found this relationship to have been empirically studied five times in relation to ITO outcome.
In five out of five times studied, the relationship was positively and significantly related to ITO outcome
(Lacity et al. 2010).
Oshri et al. (2 015) also studied the relationship between relationship quality and ITO outcome, with
ITO outcome being strategic innovation in this case. They anticipated that high -quality relationships
would lead to more strategic innovation for the client, as the vendor gains more client -specific
knowledge (Oshri et al. 2015). This hypothesis is backed by the results that showed a significant
positive effect on the quality of the relationship and strategic innovation (Oshri et al. 2015).
It is worth noting that this study is subject to certain limitations. It only looked at three contract types
which does not include the complete range of contract types used in IT outsourcing, and it is biased
towards the European market and its practices (Oshri et al. 2015).
The main as pect of relational embeddedness can be defined as relationship quality, where the
researchers study the relationship between relational embeddedness and contract duration. The finding s show some support in that higher quality relationship s results in longe r contracts (Ravindran et
al. 2015).

5.2.2 Relational f lexibility
In Gopal and Koka (2012) it is mentioned that relational flexibility is a specific factor under the meta –
construct relational governance. Relational flexibility refers to the opportunity of the p arties
to renegotiate, share interpretations and create adjustments regarding the project parameters. The
properties of relational flexibility allow for the management of exchange hazards (Gopal and Koka,
2012). These definitions are the starting points fo r the paper by Gopal and Koka (2012) who
researched the concept of relational flexibility in the economic exchange between the client and
vendor. They found that relational flexibility serves an important role in the economic exchange for
the party baring the majority of the risk. As they explain, the benefits of relational governance have

Page 15 of 32 in many instances been assumed to favour both parties in the exchange. However, this assumption is
contradicting to the thought of contractual division of risk, which is asymmetric in nature (Gopal and
Koka 2012). Thus, they found an asymmetric connection between relational flexibility, contract and
the outcome, stating that the party baring risk will obtain the benefits depending on the contract. In a
fixed -price contract , the vendor will bear the majority of the risk, while in a variable -price contract,
the client bears the majority of the risk. In other words, the party that bears the highest level of the
risk will benefit more from the properties of relational flexibili ty.

5.2.3 Relationship c haracteristics
In comparison to Lacity et al. (2009), Lacity et al. (2010) developed a more extensive study of ITO
literature, and argues the existence of a wider class of relational determinants called relationship
characteristics, whi ch impact the relationship between client and vendor directly as well.
One central element for this section out of the relationship characteristics category from Lacity et al.
(2010) is trust. Other mentioned elements are: communication, prior client -vendor relat ionship,
knowledge sharing etc.
In Lacity et al. (2010) trust was found to have an overwhelmingly significant and positive relationship
with ITO outcome s, meaning, greater levels of trust between clients -vendors increase the likelihood of
better ITO outcome s.

Lacity et al. (2010) found in their literature review that relational g overnance was only included once
as a component of relationship c haracteristics. This result is most certainly due to the coding used by
Lacity et al. (2010) . Gopal and Koka ( 2012) acknowledged the fact that relational governance was
a meta -construct including relational flexibility, trust and so on. Lacity et al. (2010) have also
recognized the issue of terminology in their review. Which in turns, in this paper, leads to the adopt ion
of the view that relational governance pertains to relational characteristics, but is only one part of this
category.

5.2.4 Relational governance, contractual governance and relationship quality
By analysing the findings from Lacity et al. (2009) it can be understood that relational governance
and contractual g overnance influence ITO success, most likely relationship quality as well, not only
directly and independently but also complementary. It was presented and argued that the synergy
between th e two classes of determinants is greater than their individual effects (Lacity et al. 2009). In
other words, higher values of various elements of relational governance combined with higher values

Page 16 of 32 of some elements of contractual governance lead to a greater succes s in ITO (Lacity et al. 2009). The
same occurrence was found to exist and commented on in Lacity et al. (2010).

Lacity et al. (2009) constructed the model partly based on the findings of Goo et al. (2009), Poppo
and Zenger (2002) and Sabherwal (1999). In addition to the previously mentioned sources, Lacity et
al. (2010) also consulted the works of Saunders et al. (1997) and W üllenweber et al. (2008) on the
subject of the interaction between relational and contractual governance. Lacity et al. (2009) argued
and demonstrated the direct effects of relational and contractual governance on ITO success. Besides these findings, they have also proved the reciprocal relationship, that is, ITO success has a direct effect
on both relational and contractual gove rnance. Specifically, it is assumed that a very successful ITO
will crea te stronger governances overall (Lacity et al. 2009). By “stronger gov ernance ” it is assumed
that most likely the level of trust will be higher between the client and vendor, the control mechanisms softer and the contract duration longer (Lacity et al. 2009) . In addition, it is argued that unsuccessful
ITO will n egatively impact the governance , for example there is a strong possibility that the level of
trust will be weakened and t he contract duration decreased (Lacity et al. 2009).

5.2.5 Vendor opportunism
The search process within this paper led to discovery of several articles assessing the effect of trust,
uncertainty and opportunistic behaviour on the relationship between the client and vendor. There
appears to be a connection between these factors and their effect on the client -vendor relationship,
as it will be addressed in the following.
Lacity et al. (2009) found in their literature review an extensive list of risk factors for t he outsourcing
client. Many of these risks are related to the vendor relationship. These involve cultural differences between client and supplier, inability to manage supplier relationship, lack of trust, loss of control over the vendor, among others (Laci ty et al., 2009) . Mani and Barua (2015) found from specialized
literature that outsourcing relationships are considered incomplete contracts where opportunistic behaviour is of relatively high risk. Opportunism can be defined as " the incomplete or distorte d
disclosure of information, especially to calculated efforts to mislead, distort, disguise, obfuscate, or
otherwise confuse " (Lioliou and Zimmerman 2015 p. 308).

As cited by Lioliou and Zimmerman (2015 p. 308), “ Mechanisms regulating a partner’s behaviou r include
trust (Uzzi, 1996; Barthelemy 2003; Sahay et al., 2003; Lee et al., 2008), commitment (Mohr and Speckman, 1994), communication (Kern and Willcocks, 2002; Sahay et al, 2003; Tompkins et al. 2006)
and power -control (Lacity and Willcock s, 2009). ” Based on this, Lioliou and Zimmerman (2015) argue

Page 17 of 32 that these relational factors are influencing the level of uncertainty in the relationship and the possibility
of whether the vendor may act opportunistically or not. The study of Lioliou and Zimmerman (2015)
uses Transaction Cost Economics theory (TCE) combined with Social Capital theor y to investigate the
occurrence of oppor tunistic behaviour of a vendor, b ecause these relational factors mentioned above
are acknowledge d as determinants for behaviour. Lioliou and Zimmerman (2015) were the first to
combine TCE and s ocial capital theory.
As an example, according to Williamson (1985), when the theory of transaction cost economics was
applied to the study of opportunistic behaviour, it was proposed that an actor will act opportunistically
if given the opportunity to do so. Lioliou and Zimmerman (2015) challenge these claims by combing
Transaction Cost theory with Social Capital theory to test whether the social ties, meaning the
relationship, between vendor and client can reduce the level of uncertainty around the transaction and
by that the risk of opportunistic behaviour.

Nahapiet and Ghoshal (1998) divides social capital into three dimensions; the structural, cognitive and
relational dimension, that Lioliou and Zimmerman (2015) uses to specify which aspects of the client
vendor relationship affects uncertainty, and the risk of opportunistic behaviour. Social capital is defined as “the goodwill that is engendered by the fabric of social relations and that can be mobilized
to facilitate action” (Adler and Kwon 2002 page.17). These dimensions are explained in the following
Figure 4.2. The study is based on a qualitative research of two outsourcing engagements, and finds
that building social capital played a signi ficant role in reducing opportunistic behaviour. As illustrated
in Figure 4.2, building social capital through close interactions, will produce a shared understanding,
trust and communication norms, which will reduce the level of internal and behavioural uncertainty by
creating a common expectation that the other party will act trustworthy, even without formal control
applied onto the other party (Lioliou and Zimmerman 2015).

Page 18 of 32 Figure 4.2. Social Capital (Lioliou and Zimmerman 2015)

The topic of opportunist ic behaviour between outsourcing partners appears to be well discussed within
the research area of client -vendor relationships. Li (2014) found in an empirical study of outsourcing
partners’ relationships that each actor’s illusion of what their future rel ationship was going to look like
was a determinant of their actions at the time. The study examines the poaching problem with
information transfers in IT outsourcing relationships, and how the client and vendor’s prospects of their
future relationship affe cts the relational contract. A relational contract is defined as “ informal
agreements sustained by the value of future relationships ” (Baker et al. 2002 p. 39). Li (2014) explains
information poaching as information misappropriation, meaning when an outsou rcing partner
misappropriates its partner’s information to increase profits for itself. Li (2014) studied how the relational contract can mitigate some forms of opportunism, in this case the vendor’s propensity of
information misappropriation. The study fo und that if both sourcing partners are equally, positively
forward -looking towards their future relationship, they can coordinate a relational contract that
disciplin es information exploitation (Li 2014), meaning that both partners are more likely to behav e
cooperatively if their prospects for the future are similar. However, the study further showed how even
minor differences in the outsourcing partners’ prospects of the manner in which their future relationship will expand, meaning that there is a greater chance of opportunistic behaviour and a possible change
in how the relatio nal contract is implemented (Li 2014). These findings appear to show that uncertainty
in whether the relationship is going to expand will possibly affect the behaviour and the risk of

Page 19 of 32 opportunistic behaviour. It seems that Li’s (2014) connection between the relational contract and
opportunistic behaviour, and Lioliou and Zimmerman’s (2015) appliance of Social Capital Theory to
the study of opportunistic behaviour, are both independen tly explaining how relevant and fragile the
relational factors are in terms of the client and vendor relationship and the risk of opportunistic behaviour.
Returning to the literature review of Lacity et al. (2009), which found that prior research discusses
relational governance as one of the IT outsourcing success factors. Relational governance are the
practices and issues concerning management of the client -vendor relationship for instance trust, norms,
open communication, open sharing of information, mut ual dependency and cooperation (Lacity et al.
2009; Lacity et al. 2010). This definition has a remarkable resemblance to Nahapiet and Ghoshal’s
(1998) three dimensi ons of social capital in Figure 4.2 . Additionally, it was found that the relational
attributes between vendor and client led to ITO success (Lacity et al. 2009)
To state the obvious: when a vendor refrains from opportunistic behaviour, this will in turns lead to a
better outcome for the client, as no additional costs are incurred (Li 2014 ). These findings are also
supported by Lioliou and Zimmerman (2015) who suggest that building social capital in the client –
vendor relation will lead to greater IT outsourcing success by mitigating the risk of opportunistic
behaviour. It is additionally fo und by O shri (2015) that contract type between client and vendor has
an impact on the risk of opportunistic behaviour, and the effect of the quality of the relationship on
strategic innovation, as discussed earlier in the paper.

5.2.6 Trust and formal control
As found by Lioliou and Zimmerman (2015), and explained earlier in this text and illustrated in Figure
4.2, building social capital between client and vendor will reduce internal and behavioural
uncertainties in the relationship, and thereby mitigate oppor tunistic behaviour. Being a central
dimension of social capital theory, and under Lacity’s et al. (2009) definition of relational governance,
trust is a vastly discussed area within the research of client -vendor relationships. Lacity et al. (2010)
describe trust as the belief a party has, that the behaviour of another party will match its expectations
and level of goodwill. Rustagi et al. (2008) assumed in one of their research hypothesises that the client’s trust in the vendor is influencing the amount of formal control applied by former onto the lat ter.
Rustagi et al. (2008) applied Transaction Cost Economics theory (TCE) to explain the occurrence of
opportunism in the client -vendor relationship, which was also later done by Lioliou and Zimmerman
(2015). T hey claimed that trust is the opposite of opportunism, and that a significant risk of
opportunistic behaviour suggests lack of trust and the need to apply formal control mechanisms in the
relationship (Ghoshal and Moran, 1996; Williamson, 1985; Chiles and McMackin, 1996). Rustagi et

Page 20 of 32 al. (2008) therefore suggested that trust in the IT outsourcing relationship is contrarily associated with
the amount of formal control applied, which was supported by their research results. The study showed
a significant negat ive association between the amount of client trust in the vendor and the appliance
of formal control on the vendor (Rustagi et al., 2008).

5.3 Prior relationships
Prior client/supplier working relationships have been studied from multiple angles. Lacity et al. (2010)
found that prior client/supplier working relationships were positively and significantly related to ITO decisions and ITO outcomes. In their sample, they found this relationship to have been studied 10 times.
Further, in 5 out of the 6 times the effect on ITO outcomes was studied, they found the relationship to
be both positive and significant (Lacity et al. 2010).
Mani and Barua (2015) also studied prior client/supplier working relationships’ effect on ITO outcomes. They studied this relationshi p through relational learning. They found that outsourcing
agreements with no prior relationship with the vendor led to large negative abnormal long- term returns
for the client. Further, when segmenting the results in relation to coordination complexity, c ontract value,
contract type and uncertainty, the simpler outsourcing arrangements show less negative, long -term
abnormal returns. On the other hand, more complex arrangements showed very large negative long –
term abnormal returns for the client (Mani and B arua. 2015).
The results indicate that a client’s better understanding of a vendor’s action, through relational learning,
is associated with higher and positive long -term returns. Based on these findings, the researchers
suggest that more caution should be exercised when making complex outsourcing arrangements,
especially with new vendors (Mani and Barua. 2015). These findings are similar to those of Lacity et al. (2010) on ITO outcomes.
Gefen and Carmel (2008) studied prior client/supplier working relation ships from two angles with
respect to ITO decisions. The study is an analysis of a marketplace, like that of eBay, for smaller outsourcing arrangements. The first angle studies whether clients have a preference towards vendors that have won bids with them before – hence, a prior -working relationship. The second angle studied
whether losing a bidding round would affect the client’s ITO decision in future contract biddings (Gefen and Carmel 2008). While the first angle is similar to a part of the study of Lac ity et al. (2010), the
second angle presented in Gefen and Carmel (2008) is not present in Lacity et al. (2010).
Returning to the first ang le mentioned in Gefen and Carmel (2008), the results show a strong positive
effect on winning future contracts if a vendor has had a prior relationship with the client, meaning that
it has a positive effect on the ITO decision of the client. Also, the findings suggest that a past rejection

Page 21 of 32 of the vendor by the client in connection to setting up an outsourcing relationship will negatively affect
the probability of the current bid being won by the vendor, as well as future ones (Gefen and Carmel
2008).
Perhaps the biggest limitation of this study is that it discusses only small (in value) contracts. Gefen and Carmel (2008) argued that if the contracts were larger and more complex, the behaviour in the
marketplace therefore could be different (Gefen and Carmel 2008).
Ravindran et al. (2015) studied contract duration with a network perspective (of both client and vendor
being embedded in an interorganizational network), and tested whether long -term contracts are
preferable to both vendor and client (Ravindran et al. 2015). Unlike the other articles, this angle does not directly look at the effect on ITO decisions or ITO out comes. Rather, it looks at whether a prior
client/supplier working relationship has any effect on the contract duration (Ravindran et al. 2015).
The findings suggest that the existence of a prior relationship does not necessarily mean a longer
contract dur ation: “the mere existence of a prior relationship between the client and vendor is not
significantly associated with a longer contract duration.” (Ravindran et al. 2015 p.391). However, the
cumulative duration of prior contracts increases the likelihood o f the signing of longer duration contracts
in the future (Ravindran et al. 2015).

5.4 Relational learning
Mani and Barua (2015) studied the effects of relational learning on ITO outcomes. Relational learning
is defined as learning “driven by a client’s prior association with the vendor.” (Mani and Barua p. 11 2015). The study used stock returns as the measure for the ITO ou tcome. The results suggest that
relational learning has a positive effect on the ITO outcome in the long -run, but not in the short -run.
Mani and Barua (2015) argue that this could be due to the delay of pricing in stock markets. The effect is positive in b oth simple and complex ITO engagements, regardless of them being fixed or
variabl e price contracts (Mani and Barua 2015).
Relational embeddedness in Ravindran et al. (2015) also pertains to learning, and is similar to that of
relational learning in Mani an d Barua (2015). It implies successful outsourcing engagements through
maintaining current relationships, as well as entering new relationships. As mentioned, Ravindran et al.
(2015) found that prior client/supplier working relationships increase the probability of longer
contracts being signed in the future. In regards to relational learning, the findings suggest that
relational embeddedness has a positive effect on contract duration (Ravindran et al. 2015).
The relationship management knowledge studied in Rustagi et al. (2008) can also be compared to
relational learning (add the author – Mani and Barua). It refers to the client’s ability to understand

Page 22 of 32 vendor behavior and manage the relationship. Higher levels of relationship management knowledge
were positiv ely correlated with ITO outcome – hence, learning from prior associations with vendors
enhance the ITO outcome (Rustagi et al. 2008).

5.5 Procedural learning
Mani and Barua (2015) also studied the effects of procedural learning on ITO outcomes. Procedural
learning is learning derived from experience in managing strategic interfirm relationships. Unlike
relational learning, procedural learning did not seem to affect ITO outcomes in simple ITO
arrangements. It only showed a significant relationship in arrangemen ts that were complex and were
variable price contracts (Mani and Barua 2015).
The learning aspect of contractual embeddedness discussed in Ravindran et al. (2015) relates to procedural learning. It refers to gaining knowledge from previous outsourcing arra ngements, which in
turn helps the client design better future contracts. The study found that contractual embeddedness has a strong positive effect on the contract duration, implying that the learning aspect also positively affects the contract duration (R avindran et al. 2015).
From the literature review presented above, the factors within relational governance seems to be well represented in the study of the client -vendor relationship in IS/IT outsourcing.
6 Future r esearch
This section of the paper will address the future paths suggested by the research papers included in
this review.
Gefen and Carmel (2008) did not directly state any paths for future research although their approach
to IT outsourcing has received acknowledgement from Lacity et al. (2010 ), who commented on the
need for further insight on environmental variables in relation to outsourcing. Gefen and Carmel (2008)
researched the effect of ethnocentrism in relations to winning a bid on the website Rent -A-Coder.com.
Lacity et al. (2010) furth er mention the legal and environmental uncertainty as interesting areas of
focus in relation to IT outsourcing.

Rustagi et al. (2008) researched the use of control in client -vendor relations, and concluded that
technical and relationship management know ledge had a significant impact on the use of control
mechanisms. Technical and relationship management knowledge was found to decrease the amount of
control, as well as trust in the vendor. Task uncertainty on the other hand was found to increase the

Page 23 of 32 amoun t of control (Rustagi et al. 2008). Also, the study of Rustagi et al. (2008) did not show any
significant correlation between the amount of control used and the involvement of core competence,
leading to the suggestion for further research in this specific area, to clarify whether the involvement
of core competences in the ITO project causes the use of more control. Furthermore, Rustagi et al.
(2008) suggest that there might be differences between global and domestic outsourcing and which
could affect the u se of control. They suggest that the complexity of geographical, cultural and lingual
differences may have an impact on control. Additionally, the authors do not distinguish between formal and informal control, leaving this topic for further research. The use of formal control is most likely
associated with contractual governance whereas informal control is said to be related to relational
governance.

Sursala et al. (2010) also propose the use of longitudinal data to research the complementarity of
contractual and relational governance with a perspective on the relational norms that accompany IT
outsourcing. Sursala et al. (2010) similarly to Rustagi et al. (2008) researched the contractual
governance side of ITO, looking at contractual provisions and the ir effect on mitigating holdup or post –
contractual opportunism.
More longitudinal research within the field of relational governance is also requested by Gopal and
Koka (2012), who studied the asymmetric benefits of relational flexibility. Gopal and Koka (2012)
suggest that using panel data would give significant insight into the interplay between constructs such
as relational governance, outcome and contracts.
Li (2014) also recommends further research within relational flexibility in order to expand on
outsourcing efficiency by mitigating vendor opportunism. Li (2014) examined opportunistic behaviour
in his paper through the modelling of an incentive problem to further explore the impact of
homogeneous and heterogeneous beliefs.

Lioliou and Zimmerman ( 2015) had another approach to the problem of opportunistic behaviour and
heterogeneous beliefs. They proposed that social capital theory would reduce behavioural uncertainty, thereby, mitigating the risk of opportunistic behaviour. In their case study, they found th at in absence
of formal control, and presence of strong social capital , reliable and trustworthy be haviour was
encouraged . Thus, they suggest further examination of cases where the social capital is rather weak
in order to strengthen the appro ach proposed.

Page 24 of 32 Ravindran et al. (2015) find in their paper that relational embeddedness has a significant positive
effect on the contract duration. Thus, displaying that relational governance has an impact on
contractual governance. They further suggest t hat social capital and embeddedness can help con struct
better frameworks for contract design. This is in line with the suggestion of Lioliou and Zimmerman
(2015) in regards to further research within social capital theory to expand on knowledge of
opportun istic behaviour .

Mani and Barua (2015) in their study establish a link between value creation and learning. They found
significant effects of both procedural and relational learning in the value creation . Relational learning
is similar to relational emb eddedness, thus, supporting the findings by Ravindran et al. (2015).
However, since Mani & Barua’s (2015) paper does not distinguish between different underlying factors
adding to the relational and procedural learning, they suggest further research should focus on
determining what is learned.

Oshri et al. (2015) also advocate for more research around interactions and learning with a special
focus on portfolios. They found indications of a moderating effect on client portfolio. This construct was
also suggested by Lacity et al. (2010) as they suggested that ITO decision where not taken in a vacuum, but to a high degree where influenced by prior decision, expectations, goals and a need to
manage risk throughout a portfolio (Lacity et al. 2010).

7 Discussion
The purpose of this section is to further discuss the findings presented earlier in the paper and present
these find ings in a larger perspective. The findings of this paper will be presented in the light of what
has already been discovered regarding the client and vendor relationship. Additionally, some
practical implications and obstacles in regards to the analysis of the literature will be assessed.
It was earlier stated that there has been a shift from a cost saving and rational economic perspective
towards a strategic and relational focus on IT outsourcing (Lioliou and Zimmerman 2015; Oshri et al. 2015; Lacity et al. 2010; Gulati, 1995). This paper showed evidence supporting the statement when
analysing the elements within relational and contractual governance. Both types of governance have been applied to study the client and vendor relationship prior to our time l imitation, meaning before
2005 by Lacity et al. (2009) and Lacity et al. (2010) . However, our findings show that the recent
literature has contributed with different approaches to the previous findings. Lioliou and Zimmerman

Page 25 of 32 (2015) were for instance the f irst ones to use Social Capital theory in explaining opportunistic
behaviour of a vendor. Older studies, like Williamson’s (1985) study of opportunistic behaviour, which
is addressed in Lacity et al. (2009), have a more rational economic perspective on opportunistic
behaviour based on the Transaction Cost Economic theory. Furthermore, Oshri ( 2015) found that
contract type between client and vendor has an impact on the effect of the quality of the relationship
on strategic innovation, however, this result on ly holds for joint venture contracts. This finding illustrates
a connection between contractual governance, in this c ase specifically contract type , and relational
governance, here being the quality of the relationship. Moreover, the effect of relationship quality on
strategic innovation (Oshri 2015). Thus, Oshri’s (2015) finding is a clear example of how the focus of
recent literature on IT outsourcing has shifted to a more strategic perspective, where the focus is on
strategic benefits of IT outsourcing such as innovation rather than a pure rational economic perspective.

The analysis part of this paper found a strong representation of different approaches to researching
opportunistic behaviour. Ravindran et al. (2015) found a connection between contract detail, or
contract complexity, and opportunistic behaviour, that is, a more detailed contract lowers the possibility
of post -contract ual opportunistic behaviour. These findings were earlier addressed by Susarla et al.
(2010), who uncovered that contrac t detail, or contract extensiveness, was positively correlated with
contract extendibility. Li (2014) addressed that the reduction of heterogeneous beliefs would reduce
the risk of opportunistic behaviour by the vendor . Consequently, conforming the link between contract
detail and opportunistic behaviour.
Susarla et al. (2010) also found that longer contract duration increases the client’s and vendor’s
contribution to the relationship, which in turns further lowers the possibility of opportunistic behavi our.
Lacity et al. (2010) presented evidence from previous literature that supported the connection between
contract duration and the possibility of opportunistic behaviour. However, they challenge these
statements based on mixed results on contract durati on and ITO outcome.
In addition, Oshri (2015) found results showing that contract type between client and vendor impacts
the possibility of opportunistic behaviour. Moreover, Li (2014) found that the relational contract
between the client and vendor ca n mitigate some forms of opportunistic behaviour, in this specific case
information misappropriation. Opportunism is furthermore studied by Lioliou and Zimmerman (2015),
who state that mechanisms regulating a partner’s behaviour such as trust, commitment, communication
and power -control will affect the quality of the relationship and whether the vendor will act
opportunistically or not. These findings show that opportunistic behaviour has been a continuously
researched area within the client and vendor rela tionship, however, studied from different angles and
perspectives. Elements from both contractual and relational governance appear to have influence on Commented [VB1]: Shouldn’t be here for the logic to work
Commented [VB2]: Really? Where is that?

Page 26 of 32 the occurrence of opportunism (Ravindran et al. 2015; Loiliou and Zimmerman 2015; Oshri 2015; Li
2014; S usrala et al. 2010; Lacity et al. 2010). These results suggest that both contractual and
relational governance independently have an impact on the client -vendor relationship although more
research looking further into the interplay of these factors would be of immense value for the field. As
identified in the future research section more longitudinal data for researching both relational and
contractual governance in more depth was needed to fully shed light on the long -term effects on the
client-vendor relations.
Some practical implications were met when examining the literature conducted from the systematic
search on which this paper is based upon. The terminology within the research area of client and
vendor relationships in IS/IT outsour cing is broad in a way that occasionally may lead to confusion.
Particularly, due to the case studies having different approaches towards studying the elements within
relational and contractual governance. This led to certain difficulties when these elemen ts were
compared to Lacity et al. (2009) and Lacity et al. (2010) where several elements overlap and were
often analysed as both dependent and inde pendent variables . Consequently, as this paper’s purpose
is to analyse and synthesise the literature within t he scope, specific parts of the paper draw lines
between literature explaining similar concepts even though the terminology might be varying . As a
result, this paper has identified an opportunity for future research to establish a common terminology
within the research area of client-vendor relationship of IS/IT outsourcing.

Lacity et al. (2010) commented on topic s within the area of client -vendor relations hips that were not
worthwhile further studying, as prior research on these topics only showed contra dicting results. They
further argued that researching these topics would only lead to marginal results. Amongst the t opics
mentioned by Lacity et al. (2010) not worthwhile researching was contract dura tion on ITO outcome.

8 Limitations
The overall intent of this paper was to present an overview of recent literature in client and vendor relationships within the research area of IS/IT outsourcing. However, certain factors limited the research in specific ways, which will be presented in th e following lines.

Firstly, the paper disregarded literature that did not meet the requirements for high -quality research
papers. High -quality literature was considered to be published the top eight journals within the field
of Information Systems resear ch. Although, empirical evidence was found that supported the high -Commented [VB3]: Write the summary of future research
and suggest more about this
Commented [VB4]: Delete all this

Page 27 of 32 quality criterion, potential valuable papers which could have provided a more holistic view on the
matter were excluded.
Secondly, the search terms constructed for the Scopus literature se arch narrowed the research findings
in a way that possibly resulted in the exclusion of relevant papers.
Thirdly, due to the constantly evolving nature of IS/IT outsourcing literature, the time frame of ten
years was chosen to limit the scope of this stud y. This can pose as a drawback due to the possible
existence of valuable lit erature published before 2005.

For these reasons, other papers examining the client and vendor relationship that could have given
additional insight into the area of research have been excluded, which limited our findings.

The limitations acknowledged in this paper serve as areas of opportunity and debate for futur e
research within the topic of client -vendor relationship in IS/IT outsourcing.

9 Conclusion
The purpose of this paper i s to provide an overview of published literature from 2005- 2015 within
the area of the client and vendor relation ship in IS/IT outsourcing. Base d on existing literature from
eleven papers, consisting of two literature reviews and nine articles, this paper builds an analysis on
the elements that seem to have a significant association to client and vendor relationship. The elements
menti oned and discussed in this pa per are the ones represented in the articles, as well as in one or
both literature revie ws. The literature reviews from Lacity et al. were applied as a foundation
throughout most parts of the analysis in order to support the fi ndings from the articles

This paper found that the published literature has a pattern of distinguishing between two main
approaches to researching the client and vendor relationship within IS/IT outsourcing. The first approach use the elements within contractual governance to investigate the client and vendor
relationship, while the other approach uses the elements within relational governance for the same
purpose. Furthermore, the influence of a prior relationships between the vendor and client have been discussed.
Opportunities for future research suggested by literature in addition to suggestions from the respective
authors of this paper, have been identified. The research area of client -vendor relationships within
IS/IT outsourcing still has various opportunities for additiona l new or complementary research.

Page 28 of 32
As this paper is based on only high -quality literature published between 2005- 2015, it can contribute
with reliable further insight into the recent development of academic literature on the cl ient-vendor
relationship with in IS/IT outsourcing.

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