Researching IT multi-sourcing and opportunistic behavior in conditions of uncertainty: A case approach

Abstract

Multi-sourcing arrangements are a major trend in the contemporary outsourcing landscape, but our understanding of what makes these complex ventures effective remains relatively fragmented. Our study focuses on the multi-sourcing and opportunistic behavior of service providers, and in particular a relatively neglected but major driver of opportunistic behavior, namely the uncertainty surrounding the transaction. Developing an extended transaction cost economics perspective, our investigation focuses on the roles of internal and behavioral uncertainty and the occurrence of opportunistic behavior. We research a rich multi-sourcing case study within the financial services sector and compare and re-analyze a detailed case in the literature. According to our findings, internal uncertainty creates an 'alignment of actions' problem between outsourcing partners, while behavioral uncertainty can shape an 'alignment of objectives' problem, leading to the occurrence of opportunistic behavior. Our findings further contribute to a more thorough understanding of ways to reduce these uncertainties and facilitate coopetition between multiple vendors.

Multi-homing in B2B services: a psychological perspective

“…Additionally, there are also notable trends in the methodologies used in previous research. For example, though Aubert et al (2016) and Lioliou et al (2019) used a case-study approach for their multi-sourcing and multi-homing studies, respectively, many studies opted for numerical experiments. Such studies include Armstrong and Wright’s (2007) work on multi-homing and works by Berger and Zeng (2006), Costantino and Pellegrino (2010), Gurnani et al (2014), Silbermayr and Minner (2014), Namdar et al (2018), Kumar et al (2018), Wu et al (2019), Ai and Xu (2020), Mehrjerdi and Shafiee (2021) and Salama and McGarvey (2021) on multi-sourcing.…”

Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing

“…Empirical examinations of this assertion have focused on the construct outcome control, defined as the extent to which a client specifies and monitors the outcomes delivered by the vendor (Choudhury & Sabherwal, 2003;Gopal & Gosain, 2010;Rustagi et al, 2008). Similarly, in multisourcing arrangements, client firms specify and monitor the outcomes to be delivered by each vendor (Aubert et al, 2003;Lioliou et al, 2019). We call this formal governance mechanism bilateral outcome control, as it emphasizes the dyadic formal governance in multisourcing.…”

“…Thus, it establishes accountability for and transparency regarding the extent to which each vendor meets its expected outcomes (Bapna et al, 2010). Individual accountability and performance transparency will not only discourage vendors from shirking on their primary task (Aubert et al, 2003;Lioliou et al, 2019), it will also lead vendors to perceive the multisourcing arrangement as a market setting, where vendors need to maximize their individual performance relative to the other vendors' performance. Doing so will secure their returns by meeting their individual contractual requirements as well as motivate the client to seek future business with the vendor in the competitive multisourcing environment (Podolny, 1993;Wiener & Saunders, 2014).…”

“…The existing information systems (IS) multisourcing literature hints at two formal governance mechanisms relevant for achieving individual and joint performance: bilateral and collective governance. Bilateral governance addresses the relationship between the client and one vendor at a time, thus emphasizing the individual performance dimension (Aubert et al, 2003;Lioliou et al, 2019;Poston et al, 2009). Clients exercise bilateral governance, for instance, when they specify and monitor detailed service level agreements (SLAs) for individual vendors, which creates transparency about the vendors' individual performance and thus deters them from shirking on their primary tasks (Aubert et al, 2003;Bapna et al, 2010;Lioliou et al, 2019;Poston et al, 2009).…”

“…Bilateral governance addresses the relationship between the client and one vendor at a time, thus emphasizing the individual performance dimension (Aubert et al, 2003;Lioliou et al, 2019;Poston et al, 2009). Clients exercise bilateral governance, for instance, when they specify and monitor detailed service level agreements (SLAs) for individual vendors, which creates transparency about the vendors' individual performance and thus deters them from shirking on their primary tasks (Aubert et al, 2003;Bapna et al, 2010;Lioliou et al, 2019;Poston et al, 2009). At the same time, bilateral governance may provide little direction and incentives for vendors in the multisourcing arrangement to cooperate with each other and resolve interdependencies between tasks, a key feature of a multisourcing setting (Bapna et al, 2010).…”