Outsourcing Relationships: The Contract as IT Governance Tool

IS outsourcing literature emphasizes the importance of governance for a successful outsourcing relationship. However, in theory and practice there is a lack of management concepts on the concrete design and implementation of IT governance within the outsourcing context. Based on the IT governance framework by Webb, Pollard, and Ridley (2006) we aim at answering the following research questions within an outsourcing context: (1) How can IT governance mechanisms be contractually implemented? and (2) What activities contribute to a successful implementation of such mechanisms? Based on multiple case studies of IT outsourcing arrangements in the banking industry, we show that contract clauses such as service level agreements and penalty-reward-mechanisms are key success factors for establishing an IT governance mechanism that contributes to outsourcing success. Furthermore, our findings provide details on how the implementation of certain activities -such as regular meetings between key account management - positively influences the success of an outsourcing deal