Managing External Relationships in IS

Managing external relationships with a wide variety of suppliers and partners has become critical to an IS organization’s effectiveness in recent years. The theoretical literature in this area has looked extensively at sourcing relationships and suggests that there are a variety of different types of relationships currently in use. However, while it explains a great deal about how and when to outsource, there has been little study of the actual management of external relationships within IS. This paper seeks to address this situation by brining an experiential and practitioner-oriented focus to bear on these relationships. Using a focus group of practitioners from a variety of industries, the authors sought to tap into the group’s insights to balance the theoretical perspective. Using these two perspectives, this paper describes the nature of external relationships in IS, groups them into categories, and presents a number of strategies for dealing with them effectively. 1. Impetus for external relationships in IS The push towards building external relationships arises from two opposing forces; the need for greater functionality from the IS department in ever shortening cycles, and the reluctance to expand the IS staff on a permanent basis. These two forces provide the organizational context within which the decision to look externally for help is taken. Because of these factors, IS managers have come to the realization that they can no longer be all things to all people and that IS should, in many cases, be a service coordinator as well as a service provider. The result has been the necessity for IS organizations to deal with a veritable host of suppliers and partners. Managing these external relationships has become critical to an organization’s success. Significant expansion of the permanent IS staff is not in keeping with the restructuring and downsizing initiatives in place throughout most organizations. At the same time, it is clear that the business expects to pay more for faster delivery of IT functionality. That is, the case against expanding the permanent workforce is not necessarily financial. Despite its slightly incongruent appearance, this organizational bias exists and predisposes organizations to view the establishment of external relationships favourably. The driving factor is the need to be flexible ... not necessarily to be frugal. This paper first reviews the theoretical literature that pertains to managing external relationships. To balance this, a practitioner’s view was obtained to reveal how organizations are currently addressing the management of external relationships. Based on these two perspectives, the paper describes the nature of external relationships in IS, groups them into categories, and presents a number of strategies for managing them effectively. The goal of the paper is to bring an experiential, practitioner-oriented focus to the ongoing debate. 2. The “theory” of external relationships Grover et al [7] define IS outsourcing as “the practice of turning over part or all of an organization’s IS functions to external service provider(s)”. Lee and Kim [13] further classify IS outsourcing into two categories ... “asset outsourcing which involves transfer of assets such as hardware, software, and people to service providers, and service outsourcing which involves system integration and system management services without asset transfer”. In all such conceptualizations of IS outsourcing, the real mission is the attainment of shared goals – goals that are typically specified in advance using the vehicle of a contract. Inter-organizational relationships to achieve these shared goals have been classified into two types: transactional (where the relationship is governed almost exclusively via the contract) and partnership (where both risk and benefits are shared and the contract serves only to guide the exchanges of the partners and to monitor operations) (Fitzgerald and Willcocks [5], Henderson [8]). Grover et al [7] identified five major components of IS to be consid0-7695-0981-9/01 $10.00 (c) 2001 IEEE 1