The Construction of Client Organizations and Contract Structures in Outsourcing within Dynamic Contexts

This explorative study investigates how bureaucratic public sector client organizations deal with information technology (ITO) and business process (BPO) outsourcing in terms of internal management. Through contextual and micro-level analyses, the research found that client organizations appear to work at transforming outsourcing-related strategy, contract structure, and their own organizations, which are interrelated, in the context of five IT governance concerns: strategic alignment, delivery of business value, performance management, risk management, and control and accountability. The paper provides rich data on how the organizations decomposed and recomposed existing bureaucratic structures and processes. Contrary to expectations, explicit distinctions, such as cultural disparity and differences between ITO and BPO, did not sufficiently explain the core phenomena regarding outsourcing and client organizational change. Instead, institutionalized human behaviors were strongly involved with these processes. Overall, the research supports Kallinikos’s formal organization perspective for explaining outsourcing as an enabler of organizational change, and provides an enriched outsourcing configuration framework for disaggregating and studying, and for practitioners helping to manage, outsourcing arrangements in depth.