Giovanni Vaia

The Role of Contracts and Informal Relations in the Governance of IT Outsourcing Processes

This paper aims to give a contribution to represent and comprehend the characteristics of the relationships between customers and providers in the specific context of IT services supply; furthermore it provides its peculiar perspective on the relationship between the formal governance, which is mostly realized through the use of contracts, and the informal relations based on trust and commitment between the parties. Moreover, the current study underlines that within contexts which are strongly based on the uncertain evolution both of market and technology, the governance of IT outsourcing processesneeds the development of complex informal relationships in support of the contracts. The study shows how it is possible to absorb the effects of the market and technology uncertainty within the IT outsourcing contracts. Moreover, the research shows how the use of dynamic contracting together with an explicit attention to the social processes can lead to remarkable operative and strategic benefits.

Digital IT Governance

This chapter presents how IT governance approaches are evolving to drive corporate transformation in this digital era. Today we are learning that new digital firms, embracing the digital transformation, are able to speed up and automate decision making processes, and build more agile, collaborative communities among internal resources, suppliers, customers and external experts. Consequently, the traditional view of IT governance may no longer be valid in today’s digital enterprises. The question that arises from many scholars and practitioners is: to what extent do the well-established IT governance models still apply in the digital era? And, if they no longer apply, what new models and mechanisms can be proposed to address the changing demands placed on digital companies? This chapter reveals through the case of Banca Mediolanum how the traditional “functional” separation between business and IT is insufficient to support digital transformation. Digital initiatives must be well integrated into all organisational functions, as part of a unique, digital company DNA. Indeed, “Digital” Governance plays a critical role by supporting the change of organizational behaviours, pushing down digital decision-making, activating pervasive, horizontal, and collaborative communications, and supporting a shared decision-making culture.

Conceiving and Implementing the Digital Organization

The digital transformation is affecting numerous industries, including media, retail, automotive, transportation, and healthcare. To address the modern challenges of digital technologies, increasing customer demands, and a rapidly changing enterprise setting, CIOs and their IT organizations are required to extend their performance profile, adopting a new organizational design and a broader range of behaviors. Today, CIOs are learning that they cannot manage current strategic, operational and investment responsibilities within existing company boundaries while still ensuring stability and hard cost management. IT organizational units should move beyond their current focus on operations and systems and adopt new behaviors, to facilitate and lead new digital innovations, seize new opportunities, and raise business performance in the marketplace. CIOs recognize that they must remove historical and legacy commitments to create new connections in processes, structures and roles and to reinvigorate IT value potential in a new digital environment. They need to redesign internal organizational interactions to liberate resources, time and attention dedicated to new challenges. They also need to move beyond enterprise boundaries and navigate new ecosystems to search for innovation opportunities. This chapter presents insights on how CIOs must orchestrate innovation across functions and external networks to reinvent and structure value delivery and new business models, stimulating a wider and more productive conversation with different actors. This chapter also argues that CIOs need to combine and harmonize physical and digital, thusly breaking from traditional processes and establishing new digital methods of working.

What Client Firms Want and Are Willing to Do to Achieve Innovation from Their Suppliers: Insights from the Nordic, Italian, and British Outsourcing Sectors

So far we have established in this book that nearly any client firm is now taking interest in the following question: how can we achieve innovation from our suppliers? Interestingly, it has also emerged that, while innovation has become a common practice within the firm, the road to achieving innovation from external suppliers is still bumpy. There are numerous open issues that make innovation in outsourcing a true challenge. Let us pick out four major ones emerging from the previous chapters. Firstly, innovation is defined and understood in different ways by the client and the supplier. Secondly, as innovation is delivered via an external party, the implications for the way innovation will be governed and delivered as part of the outsourcing engagement are not clear for many practitioners, though the evidence from the previous chapters gives a strong steer. Thirdly, many still debate whether the contract is an enabler or an inhibitor of achieving innovation. Fourthly, many practitioners remain unclear whether good relationships are the ‘holy grail’ of innovation, or whether contracts can substitute for ‘relationships,’ making good relationships just another contributing factor.

CIOs and the Digital Transformation: A New Leadership Role

Over the past few years, digital transformation and digital disruption have been widely addressed in both academic literature and business press. Still, these contributions notwithstanding, many IT executives are still struggling to find a go-to reference that would help them to orientate and fully exploit new digital opportunities through their transformational journey. This is partly due to the still limited collaboration between the two communities—academics and managers. Scholars are supposed to be focused on developing abstract models and theoretical representations of the new digital reality. Conversely, business and IT professionals seem to be primarily concerned with obtaining workable solutions to a concrete problem. In this book, we attempt to blend the two perspectives and explore new, fresh areas that are highly relevant for researchers and practitioners alike. To that end, each chapter of this book is written by scholars and co-authored with an IT executive, to bring together the rigorousness of academic research and the richness of practical experience in a single volume. This book is a collection of stories and experiences written jointly by academics and CIOs from the IT community, and is aimed particularly at managers and executives looking for inspiration to advance their digital journeys. The book opens with this introduction as an interview with Paolo Cinelli, Digital Business Manager at IKEA and one of the most influential figures in the international digital community. Paolo Cinelli talks about his experience with the digital transformation at IKEA, openly discusses the challenges he had to overcome along the way and shares his thoughts on what makes a CIO successful in today’s digital world. This original contribution covers a wide range of experiences interlacing multicultural environments and gives an interesting perspective on the definition of Digital Transformation, the needed customer journey and the various challenges that this process is facing. Confronted with the various factors related to this unavoidable and ongoing change, a resilient manager should be able to recognize and seize all opportunities that every epochal disruption ultimately presents to existing organizations.

Innovation: Where Do Consultants Fit In?

Mitigating risks and achieving collaboration between clients and suppliers have been extensively discussed in the Information Systems (IS) outsourcing literature (e.g. Gopal and Koka 2012). A major concern identified by the extant literature is information and knowledge asymmetries that may result in opportunistic behavior by either side. Indeed, while such concerns have mainly been examined vis-a-vis contract choices (Gefen et al. 2008; Gopal and Sivaramakrishnan 2008), the implications of these studies have relevance for the study of innovation through outsourcing (Weeks and Feeny 2008).

Exploring the effect of familiarity and advisory services on innovation outcomes in outsourcing settings

Innovation through outsourcing can be hindered as a result of opportunistic behaviour. As a remedy, the extant literature encourages firms to enhance familiarity between the parties and/or consider using advisory services. In this paper, we seek to examine the effect of knowledge familiarity (client–supplier and supplier–client) and relational familiarity on innovation outcomes. Further, we also examine whether the presence of advisors improves innovation outcomes. Our results suggest that a higher degree of relational familiarity and client–supplier knowledge familiarity are associated with better innovation outcomes. We also reveal that client–supplier knowledge familiarity mediates the effect of supplier–client knowledge familiarity on innovation outcomes. We did not find support for the direct effect of advisors on innovation outcomes. Instead, the presence of advisors moderates the effect of supplier–client and relational familiarity on innovation outcomes. We consider the implications for the IS outsourcing literature and practice.

Outsourcing and Innovation: A Comparative Study of Italy and the UK

Italy is known for bringing to the world some of the greatest inventions and arts. Indeed, creativity and innovation are not strange phrases in many Italian sectors such as fashion, automotive and leather. But challenges to achieve innovation in the Italian service outsourcing sector still lay ahead. Recent reports have highlighted the complexity involved in fostering collaborative innovation between a client firm and a supplier, often resolving is unsatisfactory results. Hence, in this report, we seek to unveil whether the long innovative tradition plays a role in its local service outsourcing industry. A study of 150 British and Italian Service Outsourcing executives was carried out to examine their comparative innovation performance and the mechanisms that support innovation in each country. The results show that Italian client firms reported more satisfaction with the quality, frequency and impact of innovation delivered by suppliers than their British counterparts. The main differences between the Italian and British cases that may explain our results were (i) Italian client firms’ strategic intent has been revolving around the objective to increase the pace of innovation within the firm while their British counterparts have been focusing on cost reduction, (ii) Italian client firms have mainly been using outcome base pricing model while British client firms have mainly been using fixed-price model and (iii) Italian client firms have been using advisory firms to a far more extent than their British counterparts. We conclude by offering a practical framework to achieve innovation through outsourcing.

How to Drive Innovation Within Outsourcing Relations: The Role of Performance Evaluation and Management Control Systems

The themes of performance and outsourcing have been the subjects of extensive studies in academic literature for a long time. Literature has explored a variety of control structures and practices, as archetypes of management control within and between organizations, with the aim of identifying the optimal control design. The design of management control in ITO becomes part of a general problem of effective governance structures and the role of accounting information. However, many accounting related aspects remain unexplored.

Reshaping the IT governance in Octo Telematics to gain IT–business alignment

The case shows how a technology services company shaped and reshaped – and reshaped again – its IT governance structure to better integrate the IT function with business clients. The company is a large Italian telematics provider – Octo Telematics – which is specialized in the provision of telematic services and systems for the insurance and automotive markets. During the period described in this case, the company was growing and globalizing rapidly. The desired alignment between IT and the business units is needed to promote behaviors consistent with the organization’s mission and strategy. As Octo experimented with new processes, committees and reorganizations the company ‘traveled’ through several governance archetypes.