Reversing a relationship spiral: From vicious to virtuous cycles in IT outsourcing

IT outsourcing (ITO) remains a popular business practice, but many buyers and suppliers of IT services are caught in a vicious relationship spiral of low trust, bad collaboration and mediocre performance. This paper describes a novel process understanding of how vicious cycles work and suggests a new method for how they can be reversed into virtuous cycles. Based on the action research and complementary system dynamics simulation, this paper demonstrates how an ineffective ITO relationship between a European Harbour Authority and its main IT supplier ITCo was formed and, later, transformed. The method, involving collaborative redesign of service workflows, applied in this action research triggered the reversal of an otherwise downward relationship spiral. Both the empirical facts from the action research data and the system dynamics simulation data are provided as evidence. We conclude the paper with conceptual and methodological contributions as well as scope for future research.