THE DEVELOPMENT OF A PARTNERSHIP QUALITY MODEL IN THE OFFSHORE INFORMATION TECHNOLOGY OUTSOURCING FROM VENDOR’S PERSPECTIVE

• Main Author: YUSUF WIBISONO NIM 33413004, YOGI
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/31751
• Institution: Institut Teknologi Bandung

A company’s outsourcing strategy is taken by involving other companies doing some of its functions in order to obtain greater benefits than by doing those functions alone. An offshore outsourcing concerns with supplier and clients from different countries. The increasing number of information technology suppliers (IT providers) with their superior capabilities has made the offshore outsourcing remarkably developed. In 2016, the worldwide spending for information technology reached a considerable number that is US$ 333 Billion only for software spending. It is predicted that this number will keep on rising. Nevertheless, Indonesian IT providers have not been able to compete with others from India and China. One of many reasons that Indonesian providers are trailing behind their competitors is their inability to effectively work with their clients. <br /> <br /> Relationship-related factors are significant elements that determine the likely of a successful information technology outsourcing. In an outsourcing context, inter-organizational relations have been shifted from transactional relations into partnership relations. A partnership between clients and suppliers are becoming instrumental for a successful outsourcing. However, only few researchers have empirically investigated the quality of IT outsourcing. It is therefore the purpose of this study is to develop a partnership quality model in the context of IT offshore outsourcing. <br /> <br /> The proposed model is based on two partnership quality models developed by Lee and Kim (1999) and Gupta and Sushil (2014). In this study, partnership quality is modeled as a second order variable with six dimensions: trust, commitment, cooperation, integration, client’s business understanding, and proactive improvement; with which quality affects the sustainability of the relation. The determinants which affects partnership quality are project’s team management, industrial understanding, information exchange, coordination, participation, managing cultural differences, managing temporal differences, and dealing with standards differences. The relationships among dimension in partnership quality are also modeled, they are: trust and commitment, integration, and cooperation; cooperation with integration, cooperation, and proactive improvement; and business understanding and proactive improvement. <br /> <br /> The model is tested using a two-step method, a survey that followed by case studies. The survey is conducted to IT providers who have experiences with offshore clients. A total of 78 completed responds from 40 companies is collected. The Partial Least Squares – Structural Equation Modeling (PLS-SEM) is used to quantitatively test the model. The results show that there is a significant effect of partnership quality to relationship sustainability with explained variances R2 equals to 0.571. Significant effects from the quality determinants are project’s team management, information exchange, coordination, and participation where R2 = 0.852. Among quality determinants, there are significant effects from managing cultural differences to information exchange (R2 = 0,686), from managing temporal differences to coordination (R2 = 0.299) and from managing standards differences to participation (R2= 0.269). The results also show that there are significant effects from trust to commitment (R2 = 0,565), from trust to cooperation and from commitment to cooperation (R2 = 0.797 and R22 = 0.406 respectively), from commitment to integration (R2= 0.326), from business understanding and commitments to proactive improvement (R2 = 0.292). From this quantitative analysis, it is discovered that cooperation is the main characteristic of partnership quality followed by commitment, business understanding, integration and proactive improvement. <br /> <br /> The results obtained from the survey tests are validated using two case studies within two IT providers who conduct sustainable relationship with offshore clients. From those cases, it can be shown that a smaller R2 value of a relationship sustainability indicates that there exist other influencing variables, i.e. quality of deliverables, value of project, provider alternatives, and client’s internal capacities. It is also shown that project team’s management, information exchange and coordination have significant influences to partnership quality. From the cases, there exists an insignificant relationship between trust and integration because contracts are written before internal process adjustments can take place which means that no risks involves. The insignificant relationship between industrial mastery and participation with partnership quality arises because of the technical and specific relationships between the company and its clients. <br /> <br /> This study offers a theoretical contribution with a new dimension, which characterize partnership quality, i.e. proactive improvement, and on how managing differences affect the quality through interaction. The study also confirms the results from previous research that partnership quality does have significant effects to a successful outsourcing; that there exist interactions among quality dimensions; and that partnership quality is determined by project’s team management, information exchange, and coordination. Contrary to previous research, this study shows that there exist no significant effects from industrial understanding to partnership quality.