The fit between client IT capability and vendor competence and its impact on outsourcing success

Abstract

This study investigates the impact of client firm's IT capability, vendor firm's competence and their fit on the outsourcing success. In theory building, by concretizing the concepts of IT capability and competence based on the resource-based view, the importance of fit between the client's IT capability and the vendor's competence is emphasized. We then hypothesize that both factors are stronger together than the individual impact of either the client's IT capability or the vendor's competence. For validation, 267 client-vendor-matched-pair data were collected. To avoid potential imbalance caused by the bilateral perspective, an exploratory approach, all-possible-subsets-regression method was adopted. The results reveal that the vendor's competence is the most significant factor in outsourcing success, but interestingly, the fit between vendor competence and the client's IT capability is the second most important. The client's IT capability also has a positive impact on outsourcing success but with the smallest explanation power.