The situation can be worse if the client chooses an offshore supplier (located in another country), when several barriers can arise for client-supplier relationship, . Findings: Offshoring can lead to increased effort on client side in terms of production costs and transaction Level of Analysis: Customer–vendor relationship. Choosing the right vendor for a long term business relationship is imperative. This arrangement enables both the client and offshore service provider to attain.
The agency theory strives to identify the most efficient form of contract to the agency relationship, in a situation of potential divergence of interests between principal and agent, which strengthens the conditions of opportunism and uncertainty outcome to the fulfillment of the expected results Eisenhardt, The pricing model must fit these aspects.
Innovation in outsourcing and offshoring - InfoBeans
Furthermore, regarding the pricing model, the use of service level agreement is common in the IT client-supplier relationship.
This corresponds to the mandatory acceptance by the supplier to reach certain levels of performance agreed with the client, as well as supplying rights and solutions to the client Click and Duening,p. Thus, the following propositions are posited: Alternative suppliers are a regulatory element in the IT strategic partnership; P1b: Hostage is a regulatory element in the IT strategic partnership; P1c: Periodic contract renewal is a regulatory element in the IT strategic partnership; P1d: Long-term contract is a regulatory element in the IT strategic partnership; P1e: Reputation is a regulatory element in the IT strategic partnership; P1f: Pricing model is a regulatory element in the IT strategic partnership; and P1g: Service level agreement is a regulatory element in the IT strategic partnership.
The reference standards emphasize the "normative rules that introduce a prescriptive, evaluative and mandatory dimension to social life" involving both values as norms Scott,p. These rules offer a positive contribution that is a cooperative contribution derived essentially from work division Durkheim,p.
Law, however, is not the only form to regulate cooperation between the parties.
There is another element that comes from moral aspects Durkheim,p. While the contractual relationship lasts, both parties must respect the rules either in a direct or indirect way. These rules, whose order is social as is that of the laweven if not sanctioned by a legal code, also carry a binding character, although in a diffuse way.Legal Concerns And The Offshore Software Contract
Thus, rules of a purely moral character or collective practices under the protection of public opinion follow legal rules. These rules of moral order compel individuals to act according to the ends that are not their own, implying mutual allowances, agreeing to commitments and considering the interest of the others as superior to their own Durkheim,p. In other words, this kind of rules imposes flexibility on self-interests Durkheim,p. Macneil characterizes these rules as relational norms. They involve behavioral expectations which "occur in relations, must occur in relations if the relations are expected to last and must occur as long as their continuation is prized [by the parties]" Macneil,p.
Dunning and Lundanp. Values are normative standards that describe a desired social system, while norms contextualize these standards to specific situations and members, defining the desired expectations and the rewards or penalties to apply Parsons, b, p. The norms, nomenclature adopted in this paper legal norms and relational normshave the power to reduce the political manipulation by the individual on their own interest, binding them not only to the laws but also to the description of jobs, procedures for activity performances, standards of quality, etc.
Legal norms are normative elements in the IT strategic partnership; and P2b: Relational norms are normative elements in the IT strategic partnership. Hence, emphasis is on "the cognitive dimensions of human existence" Scott,p.
Client-Vendor Relationships in offshore Applications Development: An Evolutionary Framework
In ethnomethodology, Garfinkelp. These descriptions are the knowledge shared and used by the collectivity members to communicate with each other Garfinkel,p. Hakansson highlights the importance of communication during the institutionalization of a long-standing client-supplier relationship, while Dey, Clegg and Bennett point out communication as a major risk factor to an ERP implementation.
In this context, Khan et al. In an interdependent relationship between the parties, typical of a strategic partnership, Sheppard and Sherman consider essential the capacity to exchange information. Sharing meanings and interpretations, or cognitive sharing, allows communication of a better quality Lander, Purvis, McGray and Leigh, and contributes to a framework of trust between the partners Lewicki and Bunker,p.
It provides "the necessary basis to a non-opportunistic behavior", while avoiding the development of asymmetric power Hardy, Phillips and Lawrence,p. Willcocks, Lacity and Kern mention the risks of power asymmetry development that benefits the supplier in the post-transitional phase of IT outsourcing, while Kwahk and Ahn point out the negative impact of client-supplier misfits due to different countries on ERP implementation success.
Thus, the following proposition is posited: Common language is a cognitive element in IT strategic partnership. RESEARCH METHOD The nature of this research is descriptive-exploratory through a single case study strategy, as the phenomenon under study is contemporary, not easily dissociable from its context and characterized as a "technically unique situation in which there might be many more variables of interest than data points" Yin,p.
The case study "contributes in a unique way to the understanding of individual, social and political phenomena" Yin,p. Further, this research follows both Miles and Hubermanp. The purpose of this licensing is the businesses processes automation of BANK's international branches. It will reduce costs related to the actual replicated structures of IT abroad; automate the businesses of BANK's international branches; redesign the management processes of these branches; process in a centralized way at BANK's IT headquarters, located in Brazil; standardize the actual different routines used by international branches; integrate the international branches with current BANK's processes, including not only its legacy systems, but also its management practices accounting, auditing, customer relationship, and policies for products and services ; and mitigate the actual operational risks with the current three ERP systems used by international branches, which have several deficiencies related to their obsolescence.
How to improve performance when managing offshore contracts
These systems do not provide strategic, economic, or technological benefits to BANK. Moreover, the licensing of an ERP system is a fast way for a bank to put in place the best practices in the banking industry technology infrastructure, businesses, electronic security, compliance to norms, etc. These employees authorized the researcher to record the interviews, who transcribed them for analysis purposes.
Table 1 shows the profile of the employees interviewed according to their departments, as well as the date, duration and the interaction form of the interview i. For the analysis of the data collected from the documents, interviews and researcher observation, this study applied qualitative content analysis technique through categorical analysis Bardin,p.
The unit of significance, or register, was themes thematic analysis. In this way, the categorization criterion was semantic and not syntactic aggregating verbs, adjectives, pronouns, etc. The themes are clippings of units with variable length extensions, including several sentences.
For the categorization of the themes this study developed a category-system, which was not sufficiently exhaustive to restrict the analysis Miles and Huberman,p. Regulatory, normative and cognitive institutional elements already presented in this study formed the category-system, which was the basis of the protocol used for data collection during the interviews, observations and documents. The regulatory elements of the category-system are: The reliability of the study derives from the use of several sources of evidence, allowing data triangulation Yin,p.
Moreover, it derives from the following criteria recommended by Tashakkori and Teddliep. The model is segmented into regulatory, normative and cognitive institutional elements, which are the ones for establishing a strategic partnership between BANK and its ERP system supplier " Although the analysis confirmed periodic contract renewal category, it is specific for maintenance services " error-corrections, procedural questions, recovery and backup information, and general consultation exist Thus, both client and supplier consider the importance of their relationship future.
The analysis of the pricing model category allowed the identification of three correspondent subcategories Click and Duening,p.
This last form of pricing is typical in client-supplier strategic partnership involving IT outsourcing Lacity and Willcocks,p. There are four forms of pricing in the agreement negotiated between BANK and the selected supplier: If concurrent users, customer accounts, or Internet subscribers increase or decrease to certain levels established in the license agreement, BANK pays an additional license fee or receives a discount, respectively.
This study considers license fee and annual maintenance charges in the fixed pricing subcategory; customization charges in the unit pricing subcategory; and the possibility of BANK paying more or receiving discounts over the license fee levels of concurrent users, customer accounts, and Internet subscribers in the risk and reward sharing subcategory. The data analysis identified due diligence as a new category, meaning the inspection or auditing of the information provided by the supplier Click and Duening,p.
This category encompasses BANK's visits to the supplier's clients; the workshop when the supplier presented the functionalities and technical architecture of the ERP system and when BANK could identify gaps for its requirements; and ERP performance tests by specialized companies. A final regulatory category is the sequential implementation of the ERP system.
I would like to reproduce my answers here. Here are the questions When does innovation happen in offshore outsourcing relationships?
What are the main differences between clients that have that vision of allowing to innovate and those who do not? Has this increased or decreased over the last 8 years?
"Client Communication Practices" by Robin S. Poston, Judith C. Simon et al.
What types of innovation comes out of comfortable client-vendor relationships? Continue reading for the answers. When does innovation happen in offshore outsourcing relationships? Off the bat, we need to understand that innovation by nature is a risky proposition. Sometimes it works, most times it does not. Innovation happens when there is hunger for innovation on both sides of the relationship. This is true even in a normal corporate environment — your team read your boss and you need to be thinking on the lines of innovation.
First is the culture clash. If we talk about Indian offshoring, there is a tendency amongst Indian companies to just follow the leader read client. They are afraid of proposing new ideas — one of the reasons of which is the fact that sometimes the vendor construes new ideas as a way to increase billing. And yet, an astounding 50 percent of such projects fail outright or do not meet client requirements. While the academic literature had already examined formal and informal modes of control such as contracts, shared norms, and so onthe two co-authors sought a more nuanced understanding of control.
They described the process mechanisms at work within different modes of control; i. Almost all outsourced client-vendor relationships function under the broad framework of a formal contract the structural control mechanismwhich defines the type of work expected, the delivery date, and so on.
The contract may go into great detail or not, but the involved parties choose how closely they will follow its specifics. If it is implemented to a tee, then the contract governance is mechanistic.