Buyer–supplier relationships in IT outsourcing: consultants’ perspective

• DOI: https://doi.org/10.1108/IJLM-11-2017-0288
• Pages: 1215-1236
• Published date: 07 September 2018
• Date: 07 September 2018
• Author: Ana Lucia Martins,Henrique Duarte,Daniela Costa
• Subject Matter: Logistics,Management science & operations

Buyer–supplier relationships

in IT outsourcing:

consultants’perspective

Ana Lucia Martins, Henrique Duarte and Daniela Costa

Business Research Unit, Instituto Universitário de Lisboa (ISCTE-IUL),

Lisboa, Portugal

Abstract

Purpose –Supply chain relationships have often been analysed from the macro-perspective of the

companies involved, but there is less evidence of how relationships relate to the micro-perspective of persons

involved. The purpose of this paper is to investigate, in IT outsourcing (ITO), how the buyer–supplier

relationship type strengthens buyer performance from the perspective of consultants.

Design/methodology/approach –IT consultants were surveyed, and analysis was performed considering

the aggregated values of variables that characterise buyer–supplier relationships adjusted to ITO.

Findings –The results show that strategic relationships are associated with higher supplier investment in

relationalmanagement than in transactionalones. Similarly,in this type of relationship,higher levels of trustare

linked to therecognition of more activitiesshared between parties involvedthan in transactional relationships.

The improvement ofsupplier development by buyers was alsofound to improve buyers’performance.

Research limitations/implications –The model proposed here was developed for nonspecific industries

but tested in the context of ITO. Further research should be undertaken to broaden generalisability.

Originality/value –The paper provides an understanding of the influence of the buyer–supplier

relationship type on buyer performance based both on relational management and, more specifically, how the

formal dimension of supplier development can also contribute to performance. ITO is increasing worldwide,

and relational management affects outsourcing outcomes in broad supply chain integration. This analysis is

usually visited from buyer and supplier perspectives using decision makers. This paper assesses it from the

perspective of consultants.

Keywords Survey, Europe, Supply chain integration, Buyer–supplier relationships,

Outsourcing–insourcing

Paper type Research paper

1. Introduction

Relationships betweencompanies are paramountto supply chain performance, asthey involve

access to resources or competences and impact outcomes and the value proposition of the

buying company (Ford et al., 2003). These relationships can be strategic/collaborative or

transactional in nature (Dyer and Singh, 1998; Johnston and Staughton, 2009; Whipple et al.,

2010). In either case, the relationships type w ill impact the quality of services buyer companies

provide and their competitive positioning in the supply chain (Johnston et al., 2012; Dyer and

Singh, 1998). Transactional relationships are often characterised as “arm’s length”

relationships (Henderson, 1990). They are often short-term arrangements in which the b uyer

can easily replace the supplier without harming its regular business. Strategic/collaborative

relationships, on the other hand, involve interdependence between both parties to attain

common goals. These are usually long-term relationships with sharing of risks and benefits

between the parties (Johnston and Staug hton, 2009; Whipple et al., 2010).

In 2015, IT outsourcing (ITO) business represented $157bn worldwide (Martorelli and

Benkel, 2015). This amount highlights the importance of this type of outsourcing to

companies and the relevance of studying the relationships between the parties and their

effects on performance. Managing ITO contracts involves both a hard and soft side

(Barthélemy, 2003). The hard side relates to developing and executing a rigid contract; it

affects the quality of the IT service provided by reducing output ambiguity. The soft side

relies on strengthening the relationship, increasing trust between partners, and contributing

The International Journal of

Logistics Management

Vol. 29 No. 4, 2018

pp. 1215-1236

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-11-2017-0288

Received 6 November 2017

Revised 8 March 2018

7 June 2018

11 July 2018

Accepted 16 July 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

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Buyer–supplier

relationships

in ITO

to greater mutual obligations and enhanced outcomes (Lacity et al., 2016; Liang et al., 2016).

However, the literature does not specify the type of relationship in which investment in

relational management can influence expected outcomes. This paper maintains that,

from a buyer–supplier perspective, relational management is more associated with

strategic/collaborative relationships (Krause et al., 2007) than with transactional ones.

The latter parties might concentrate on the strict fulfilment of the contract, but for the

former, relational quality will significantly affect IT consultants’performance and lead to

improved performance for both parties involved.

From the perspective of supply chain relationships, strategic/collaborative relationships

between organisations are expected to contribute more to buyer’s performance than are

transactional relationships through the supplier’s ability to provide the outsourced service. This

is a consequence of the buyer assuming that there will be a return from the two companies’

mutual activities and sharing of information (Kwon and Suh, 2005). A complementary argument

derives from the mutual investment in development, as it is argued that strategic/collaborative

relationships require more commitment from the parties ( Johnston and Staughton, 2009),

allowing space for mutually dedicated investments and development (Dyer and Singh, 1998).

Some research has already been developed on the topic of relational capital and supplier

development in the supply chain (i.e. Ekanayake et al., 2017; Tsanos et al., 2014; Kannan and

Tan, 2006). Nonetheless, research is scarce in terms of linking these influences to the more

strategic/collaborative or more transactional types of relationships in ITO. Relational capital

in ITO is put into practice, to a great extent, by the consultants and is strongly influenced by

the collaboration of the buyer company. It is thus useful to approach this industry from the

consultants’perspective (micro-level analysis). This operational perspective is relevant

because at this level, internal ties influencing the overall relationship are formed

(Ekanayake et al., 2017). Consultants offer an alternative perspective to that provided by

managers about the company (a more macro-level analysis) or the supplier’s employees

(Boh and Wong, 2015). This paper fills these gaps in the literature by analysing, in ITO, how

developing the relationship between buyer and supplier strengthens buyer performance

over time, as seen from the consultants’perspective. This viewpoint might shed light on

how the vivid experience of actors in the field affects and is affected by relational

management and the soft side of ITO relationships, generically.

Our selective literature review builds on previous systematic literature reviews on the

social issues in supply chains (Yawar and Seuring, 2017) and ITO (Lacity et al., 2016; Liang

et al., 2016). This review focusses on the types of buyer–supplier relationships ( Johnston

and Staughton, 2009; Whipple et al., 2010) and how they can be explained in two paths: a

relational management perspective (Blonska et al., 2013; Dyer and Singh, 1998); and a

mutual investment perspective (Heide and John, 1990; Ganesan, 1994). This approach led to

a finding of connected theorisation and illustrative empirical studies that allowed sustaining

of the main hypotheses (see Figure 1). Data were collected from consultants working in

different pairs of buyer–supplier relationships and then aggregated at the organisational

level, allowing for testing the proposed hypotheses.

2. Theoretical background and hypotheses

2.1 The role of relationship type on perceived performance of buyer’s company

Companies collaborate in the supply chain to fulfil their performance goals and gain

competitive advantages (Dyer and Singh, 1998). The extent of collaboration between

companies impacts the performance of the business (Zacharia et al., 2009). Moreover,

strategic/collaborative relationships have shown to provide improved outcomes when

compared to transactional relationships ( Johnston and Staughton, 2009; Whipple et al.,

2010). However, collaboration between parties in the supply chain depends not only on the

definition of formal bonds but also, and mainly, on the nature of the relationship set through

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