Designing outsourcing relations in knowledge intensive business services

While the management practice of outsourcing knowledge-intensive business services (KIBS), such as information technology services, has become increasingly popular in recent years, a distinct pattern in KIBS outsourcing failure can be observed in the outsourcing market. Recent studies indicate that a large portion of KIBS outsourcing relations is ended prematurely. This work discusses the question of how KIBS outsourcing clients can design their KIBS outsourcing relations more successfully. Neither of the grand theories relating to KIBS outsourcing – the governance perspective of organisation economics and the competence perspective of management theory – can fully resolve the problems inherent in the design of KIBS outsourcing relations. Against this background, this work applies the modular systems theory to the problems of KIBS outsourcing design. The modular systems theory yields two complementary organisational design parameters: modularisation and systems integration. Based on these design parameters, this work develops an organisational design framework for KIBS outsourcing relations. Implementing these design parameters helps KIBS outsourcing clients reap the specialisation benefits of KIBS outsourcing, while ensuring the overall performance of their complex, boundary-spanning production systems. This work is directed at prospective and present KIBS outsourcing clients confronted with the task of managing the relations with their outsourcing vendors. Scholars and students of organizational theory will also find it useful.