Norm development in outsourcing relationships

This paper considers the role of norms within networks by describing how BP Exploration out-sourced its information technology (IT) function a major business activity. This outsourcing venture led to an attempt to create a network rather than to use a “market” form of organization. However, in some ways this attempt was found to have failed. It is suggested here that central to the effective failure of the consortium as an outsourcing arrangement was the issue of “norms”. Introduction This paper will describe a decision by BP Exploration (BPX) to out-source a major business activity its information technology (IT) function a function that was subject to rapid technological change and where there were multiple technological dimensions. Unusually this outsourcing decision led to an initial attempt to create a network rather than to use a “market” form of organization. However, in some ways this attempt was found to have failed and the outsourcing deal was subsequently reorganised using a “hierarchical” form of organization. IT outsourcing is the practice of contracting out or selling the organization’s IT assets, people and/or activities to a third party supplier, who in exchange provides and manages the assets and services for monetary returns over an agreed time period (Loh & Venkatraman 1992; Lacity & Hirschheim 1993). The paper describes the history of this process and suggests that a crucial factor leading to the failure of the network approach was the failure to establish norms of behaviour.