A Study of the Risks in an Information System Outsourcing Partnership

The objective of this paper is to report the findings of a case study into the risks involved in an information systems outsourcing partnership between a retail bank client and the vendor, an information technology service provider. By drawing on the case study, the paper proposes a theoretical development of shared benefits and shared risks in IT outsourcing partnerships. The paper argues that the longevity and success of the outsourcing partnership depends largely on managing shared risks and goals in the outsourcing partnership, which may gradually deteriorate over time without frequent, open interactions between partnership members. The outsourcing partnership contractual agreements alone may have limited scope in contributing to shared risk reduction in the IT outsourcing partnership if relationships deteriorate.

This research is based on an investigation of two organizations that used a formal contract to bind each partner’s benefits, risks, roles, and responsibilities in an IT outsourcing partnership. Future research should seek to explore shared outsourced partnership benefits and risks across organizations in other sectors. Findings indicate that shared outsourced partnership risks need to be actively managed in order to reap the benefits. This paper argues that success in an IT outsourcing partnership relies on managing shared risks in the outsourcing relationship.