Exploring the complexity of balancing trust and formal controls in IS outsourcing selationships

Information systems outsourcing is not a new phenomenon. It has evolved over time and has been widely used by organisations to reach their goals mainly through lowering operational costs and mitigating risks. Building a long-term relationship between a client and a vendor in the outsourcing environment is one of the ways in which to sustain amidst fierce global competition, reposition in value networks and achieve business benefits. Trust and formal controls are critical in contemporary IS outsourcing arrangements. Trust has been recognised as the relationship factor that facilitates the development and further maintenance of outsourcing relationships, while formal controls have been treated as the governance mechanism that coordinates the ongoing progress of the outsourcing arrangement according to the signed contract. The complementary relationship between trust and formal controls in managing IS outsourcing arrangements has received a lot attention in the literature due to the better outcomes it promises. Although existing research on the combination between trust and formal controls does offer interesting insights, it is largely descriptive and, does not establish a sound conceptual base for the nature of such combination. In this thesis, I investigate the trust-control nexus in the dynamic nature of IS outsourcing arrangements and argue that the balance, as a complementary relationship between trust and controls can have different effects on the perceptions of outcomes in the IS outsourcing context. Drawing from theories adapted from IS outsourcing and organisational studies, I conceptualise balance as a ‘comfort zone’ between trust and formal controls and define three types of balance (antithetical, orthogonal, synergistic), in which the outsourcing stakeholders make deliberate changes to adapt to the outsourcing environment in order to achieve high service quality and good outsourcing relationships. In doing so, a conceptual framework has been developed to explain how the balance between trust and formal controls is achieved and further evolved over time in the IS outsourcing arrangements. For this purpose, a qualitative research approach and multiple case study methodology have been selected. In particular, five outsourcing case studies have been employed with a total number of 30 in-depth interviews conducted with more than 20 outsourcing stakeholders across three organisational levels (i.e. executive, management and operational) from both client and vendor organisations. The data collected has been further analysed to reveal that the actions of clients and vendors oscillate between different trust and formal controls activities, which led to the formation of three different types of the balance conditional on the degree of dependence between trust and formal controls. In particular, it has been found that trust and formal controls can be negatively related (i.e. antithetical balance), they can co-exist but not impact on one another (i.e. orthogonal balance) and they can be mutually reinforcing and, thus, one can impact on another (i.e. synergistic balance). Based on the derived perceptions of the participants, the study also explores different effects of the balance on the perception of the achieved outsourcing outcomes. Consequently, the synergistic and orthogonal types of balance have been found to be appropriate (and effective) in pursuing outsourcing outcomes in relation to project performance and relationship satisfaction, whereas the antithetical balance has been found to be ineffective and too risky to pursue in IS outsourcing arrangements. Also, the case study findings have revealed that the balance is dynamic and emergent concept and therefore, can change throughout the life of the IS outsourcing arrangement. Overall, the study provides a new way to understand the balance between trust and formal controls in IS outsourcing arrangements and explains how balance impacts outsourcing outcomes through uncovering interpretive patterns of different combinations between trust and formal controls. For practitioners, the research offers recommendations on whether there is a ‘right’ balance to ensure better outcomes for both outsourcing parties involved and how the balance can be changed throughout the course of the outsourcing arrangement.