An Information Processing View on Joint Vendor Performance in Multi-Sourcing: The Role of the Guardian

Abstract

This paper examines joint vendor performance in multi-sourcing arrangements. Using an Information Processing View, we argue that managing interdependencies between multiple vendors imposes substantial information processing (IP) requirements on clients. To achieve high joint performance, clients therefore need to possess sufficient IP capacity. We examine how three sources of IP capacity, two internal (i.e., the client’s inter-vendor governance and the client’s architectural knowledge) and one external (i.e., the guardian vendor), work together in realizing joint performance. Our results show that formal governance and architectural knowledge contribute to joint performance. The guardian vendor contributes to joint performance in settings where the client deploys strong governance but lacks architectural knowledge. This suggests that, contrary to common views in the literature, guardian vendors should not be understood as mediators (or single points of contact) who relieve clients from governance efforts. Instead, guardian vendors are more fruitfully understood as architects, who complement the client’s governance efforts by compensating for knowledge gaps. Put simply, client firms should consider using a guardian vendor to compensate for weak architectural knowledge while still maintaining strong formal and informal governance of all vendors.

Key words and phrases:

• multi-sourcing
• joint performance
• guardian
• governance
• architectural knowledge
• information processing view

Notes

1. e-Dialog was part of GSI Commerce (which was acquired by eBay and renamed eBay Enterprise in 2013), and sold to Zeta Interactive in 2015 (http://zetaglobal.com/clients).

2. It is important to note that the IS outsourcing literature has so far conceptually discussed the role of the guardian and suggested that it corresponds with the notion of a mediator. More specifically, two key studies have explored the guardian role: Bapna et al. [4] is a research commentary and largely conceptual; second, while Wiener and Saunders [49] report a case study that follows a direct rather than a guardian model, with some suggestions made regarding the guardian.

3. Multi-vendor settings have been broadly studied in the supply chain literature [e.g., 1] in the context of production, logistics and procurement of physical goods (e.g., automotive and manufacturing industries), where clients use multiple suppliers to procure similar/identical physical parts. In the case of IT-enabled business processes and services, each vendor is delivering a unique yet interdependent service (as illustrated in the British Airways example in the Introduction). Thus the nature of the interdependencies and joint performance in IT multi-sourcing that are the focus of this paper is different to the interdependencies in triadic relationships between suppliers of physical parts discussed in the literature [e.g., 10].

4. http://www.computerweekly.com/blog/Investigating-Outsourcing/IT-sourcing-models-are-shifting-A-Deloitte-perspective.

5. As put by Tiwana [46], “Two things are complements if more of one increases the benefits of using the other. They are substitutes if more of one diminishes the benefits of using the other” (p.88).

6. This is different from situations where the prime contractor is used, because in such a scenario the prime contractor is the only vendor contracted by the client and thus responsible for delivering the service. In the academic and professional literature, the prime contractor model “consists of a network with several vendors that operate under the control of the head contractor. The head contractor is accountable for the delivery of the service and liable for this under the terms of the contract” [34, p.134]. For example, Koo et al. [29] refer to the prime contractor outsourcing configuration as the “single-vendor-dominant model” where “a client directly contracts with one dominant vendor and indirectly contracts with other vendors through the dominant vendor” (p. 3). Such contracting should not be confused with a true multi-sourcing scenario, where each vendor is contracted directly by the client firm, as depicted in Figure 1a.

7. E.g. https://www.slaughterandmay.com/media/2535633/multi-sourcing-a-different-way-of-contracting.pdf.

8. https://www.information-age.com/how-to-make-multi-sourcing-work-123457348/

9. The market research firm used these criteria to select key informants from a panel of individuals that had agreed to participate in surveys.

10. The survey included three items measuring individual performance (composite reliability .87), which were not used for this study.

11. Only one respondent selected the “Other” category. The comment suggested than a third vendor (not vendor A or B) was responsible for managing the other vendors. We therefore coded this response as a guardian model.

12. We performed two further analyses to examine threats of endogeneity. First, to examine whether clients deliberately chose highly capable vendors as their guardian vendors, we compared the clients’ assessment of the vendors’ individual (rather than joint) performance (measured through three items not used in this study, composite reliability .87). Individual performance was very similar for guardian vendors and for non-guardian vendors, with average standardized scores of -.02 for guardian vendors and .00 for non-guardian vendors (difference not statistically significant). This suggests that clients did not select highly capable vendors as their guardian vendors. Second, we estimated a switching regression model, using the movestay command in Stata [11]. The switching regression model produced results that were highly consistent with the results from OLS regression. Specifically, the differences between coefficients in sub-sample with guardian model and the coefficients in sub-sample with direct model were highly similar to interaction coefficients obtained from OLS regression (architectural knowledge: difference between coefficients in switching regression of -.55 compared to an OLS interaction effect of -.52; formal governance: difference between coefficients in switching regression of .37 compared to OLS interaction effect of .42; informal governance: difference between coefficients in switching regression of .35 versus OLS interaction effect .38).

Additional information

Notes on contributors

Ilan Oshri

Ilan Oshri ([email protected]) is a professor at Graduate School of Management, University of Auckland business school, University of Auckland, Auckland, New Zealand. He is the author of “Offshoring Strategies: Evolving Captive Centers Models”(MIT Press, 2011), and the co-author of “The Handbook of Global Outsourcing and Offshoring” (Palgrave, 2015). He co-authored 20 books and published numerous articles in academic and professional journals including MIS Quarterly, European Journal of Information Systems, Journal of Information Technology, and Strategic Journal of Information Systems. His work on outsourcing was featured on BBC Radio 4, Wall Street Journal, Businessweek and Financial Times. Ilan currently serves as associate editor of MIS Quarterly and senior editor of Journal of Information Technology.

Jens Dibbern

Jens Dibbern ([email protected]) is Professor of Information Systems at the University of Bern, Department of Business Administration in Switzerland. His research focuses on IT sourcing, platform ecosystems, system implementation/use, and distributed collaboration. His publications appeared in Information Systems Research (ISR), Management Information Systems Quarterly (MISQ), Journal of Management Information Systems (JMIS), Journal of the Association of Information Systems (JAIS), and others. He served as associate editor of MISQ and as senior editor of JAIS and ACM Sigmis Database and currently serves as senior editor of MISQ Executive and department editor of Business & Information Systems Engineering (BISE).

Julia Kotlarsky

Julia Kotlarsky ([email protected]) is a Professor of Technology and Global Sourcing at the University of Auckland Business School in New Zealand. Her research interests revolve around technology sourcing and innovation in knowledge-intensive business services, and more recently, studying interface between artificial intelligence technologies and humans. Her work was published in numerous journals including MIS Quarterly, European Journal of Information Systems, Journal of Strategic Information Systems, Wall Street Journals and others. Her book “The Handbook of Global Outsourcing and Offshoring” is widely used by academics and practitioners. She is co-founder of the annual Global Sourcing Workshop (www.globalsourcing.org.uk). Julia serves as a Senior Editor for the Journal of Information Technology and a former Associate Editor for MIS Quarterly.

Oliver Krancher

Oliver Krancher ([email protected]) is an associate professor in the Business IT department of IT University of Copenhagen. He holds a Ph.D. from University of Bern. His research interests revolve around knowledge processes in the development, use, and management of information systems. He has published in outlets such as the Journal of Management Information Systems, the Journal of the Association of Information Systems, and the Proceedings of the International Conference on Information Systems. Prior to his academic career, he served as a consultant in enterprise software and outsourcing projects.