On Bilateral Effort Contribution to IT Outsourcing

The success of an IT outsourcing project depends crucially on the close collaboration between both the outsourcing organization and the service provider. In this paper, we present a model to study the effort contribution from the two parties during the IT outsourcing process. The model incorporates two important and commonly observed features: 1) the true quality of the delivered project is unobservable, and 2) the outsourcing organization tends to downplay the quality of the project upon its delivery. The model is solved as a four-stage dynamic bilateral effort contribution game, and the results shed more lights on the interactions and dynamics between various parties during the IT outsourcing process.