Characteristics of IT outsourcing contracts

Once the decision to outsource an activity has been made, managers are faced with issues related to the management of the relationship with their service providers. A critical element of relationship management is the contract itself, which defines, more or less completely, the nature of the services to be rendered and of the relationship itself. In this paper, we rely on transaction cost theory to develop a series of propositions on the relationship between the characteristics of the transaction - asset specificity, number of suppliers, measurement problems, uncertainty, and permanent character of the contract - and the level of contract completeness. A survey of 200 firms was conducted to test the propositions.