Rescuing IT Outsourcing: Strategic Use of Service-Level Agreements

IT outsourcing has become increasingly difficult to manage due to its growing complexity and multitude of objectives. To mitigate the management risks, most outsourcing arrangements include service-level agreements (SLAs); but, without proper designs, they tend to be either too limited to be useful or too expansive to be manageable. Our study, based on theoretic conceptualization and analysis of survey data, offers practical guidelines for companies to effectively structure SLAs to warrant the success of IT outsourcing. Specifically, we find that foundation accords of SLAs are important to operationally oriented outsourcing, while change accords should be the focus of those relationships intended to achieve strategic benefits. In addition, firms engaging in "alliance" type of outsourcing relationships should structure their SLAs by carefully selecting SLA elements best for their specific case to provide a mechanism for the practice of interorganizational trust.