Capabilities in managing offshore it outsourcing challenges and the influence on outsourcing success from the it vendor perspective

Abstract

An IT vendor requires excellent capabilities to achieve success in offshore IT (information technology) outsourcing. This study aims to contribute to IT outsourcing research by identifying IT vendor capabilities from the perspective of offshore IT outsourcing challenges. A model is proposed that explains the relationship between capabilities in managing offshore IT outsourcing challenges (i.e., interaction capability, management capability, and capability to managing the distance involved) and the impact of these capabilities on outsourcing success. The proposed model is empirically tested by Partial Least Squares - Structural Equation Modelling (PLS-SEM) for validation, with 64 samples obtained from a survey of Indonesian IT vendors with experience in conducting offshore IT outsourcing projects. The results indicate that interaction capability consisting of communication and coordination has a positive impact on outsourcing success, and that this capability is in turn influenced by management capability. This includes management support, talent management and the ability to manage distances, in addition to cultural understanding and managing the temporal distance.