Client Strategies in Vendor Transition:

Many outsourcing contracts are expiring, and vendor transition is becoming an increasing concern in business. However, little research exists to help organizations manage vendor transition, a tripartite problem between the client, outgoing and incoming vendor. This paper applies balance of threat theory, a political science theory about interactions among nations, to explain and predict client strategies in vendor transition. The theory suggests that a client organization should pursue either a “soft” or “hard” balancing strategy, depending on the outgoing vendor’s capability and aggressive intent to disrupt client operations. A soft strategy is adopted when the perceived threat is low, while a hard strategy is adopted when the threat is high. A soft strategy requires the client to balance the incoming and outgoing vendors by reciprocating vendor overtures or remaining neutral in vendor disputes. With a hard strategy, the client allies with the incoming vendor and actively engages in the vendor transition process to directly counter the power and threat posed by the outgoing vendor. Balance of threat theory is explored across two case sites, one low threat, and one high threat. In addition to demonstrating the explanatory and predictive power of balance of threat theory, the empirical cases enable us to identify, in the context of vendor transition, specific tactics associated with the two broad strategies of hard and soft balancing, as well as key areas of dispute in vendor transition. The cases also demonstrate how hard and soft balancing tactics are used in these disputes.