Offshore IS Vendors: Capability, Quality, and Performance

Information systems (IS) offshoring has become a widespread practice and a strategic sourcing choice for many firms. While much is known about client issues, the vendor perspective is much less investigated. The vendor perspective is equally important as offshore IS vendors need to make important decisions in order to deliver operational and strategic performance and align their resources and processes in order to meet or exceed targeted outcomes. We propose and test a three-level capability–quality–performance (CQP) theoretical framework to understand vendor outcomes and their antecedents. The first level of the framework represents three vendor capabilities: relationship management, contract management, and IT management. The second level has three mediating variables representing process quality: partnership, service, and deliverable quality. The third level has three dependent variables representing vendor outcomes: operational performance, strategic performance, and satisfaction. Based on model testing with 188 vendor firms in India and China, the CQP framework is supported. Vendor capabilities are significant predictors of intermediate quality measures which in turn affect vendor outcomes. These results have implications for both theory development and IS offshore vendor strategic decision making.