Research Finding

E M P I R I C A L A R T I C L E

Critical success factors in relationship management for services outsourcing

Joan Rhodes • Peter Lok • Wilson Loh •

Vincent Cheng

Received: 31 January 2014 / Accepted: 19 August 2014 / Published online: 31 August 2014

� Springer-Verlag Berlin Heidelberg 2014

Abstract This study examines the relationship between outsourcing motives, supplier–customer relationship and perceived customer value in non-core services

outsourcing. 1,757 companies were randomly selected. 234 valid questionnaires

were returned (13.4 % response rate). The structural equation method was used to

obtain the best fit model. The most significant contribution of this study is that

‘relationship interaction’ (communication, cooperation, coordination, collaboration,

conflict resolution and integration activities) has a greater impact on customer

perceived value than ‘relationship quality’ (loyalty and trust) in services out-

sourcing. The perceived customer value is reflected in improved services quality,

reliability and agility rather than the expected cost savings.

Keywords Services outsourcing � Customer value � Relationship interaction � Relationship quality � Outsourcing motives

1 Introduction

In today’s global economy, businesses are increasingly interdependent, with

companies facing significant pressures to maximise productivity and profitability.

J. Rhodes (&) MGSM, Macquarie University, North Ryde, NSW, Australia

e-mail: [email protected]

P. Lok

University of Sydney Business School, ITLS, University of Sydney, Sydney, NSW 2006, Australia

W. Loh

Oracle, Singapore, Singapore

V. Cheng

Macao University of Science & Technology, Macao, China

123

Serv Bus (2016) 10:59–86

DOI 10.1007/s11628-014-0256-8

The existing levels of standardisation and industrialisation of business services

enable the strategy of outsourcing, a means by which firms can focus on their core

activities and extend their capabilities by leveraging vendors (Sharma and Loh

2009; Weidenbaum 2005). However, a high percentage of outsourcing activity fails

to achieve the desired objective, as the complexity of services delivery spanning

multiple vendors and/or countries produces unexpected costs through the compli-

cations of managing vendors (Sharma and Loh 2009).

In the past decade, the outsourcing of business services (services outsourcing) has

grown tremendously in both scale and scope, and firms demand more than just cost

advantage (Lamminmaki 2011; Lewin et al. 2009; Bunyaratavej et al. 2007; Farrell

2005; Lam and Han 2005). In the context of this study, the outsourcing of business

services is mainly related to non-core business activities (general services) such as

call centres, back office activities, information technology (IT) support, accounting,

legal, logistics and others. The decision as to which partner to select is mainly based

on what the overall motive or value creation involved with this interaction is.

Hence, services outsourcing firms are looking for increased value as well as other

outcomes such as improvement in quality and performance, reduction in capital and

risk, greater flexibility and scalability, cost saving, improvement of know-how and

innovation, securing long-term relationships and time-to-market. Although many of

the values and outcomes that drive outsourcing decisions are discussed in past

studies (Sako 2006; Gronroos 2011; Lapierre 2000; Kroes and Ghosh 2010), the

issue of cost saving as a main outsourcing motive is still inconclusive. Furthermore,

previous studies are based on manufacturing industries with little empirical study in

the area of services outsourcing (Akehurst 2008; Lee et al. 2007); this study will

investigate this gap.

The issues of trust and relationships in partnerships have been explored in past

studies (Svensson et al. 2010; Han et al. 2008; Rauyruen and Miller 2007).

However, how to optimally manage the supplier–customer relationship effectively

in outsourcing is still unclear. It is the ‘partnering role’ (Lacity et al. 2008; Kedia

and Lahiri 2007) which focuses on the relative importance of ‘relationship quality’

(Ulaga and Eggert 2006) or ‘relationship interaction’ (Goles and Chin 2005)

between supplier and customers which has largely been ignored. Previous studies

have failed to deeply explore the relationship construct between outsourcer and

customers and have mainly focused on trust and commitment as the key success

factors in the ‘relationship’ construct (Han et al. 2008; Ulaga and Eggert 2006).

However, others (Kedia and Lahiri 2007; Goles and Chin 2005) have argued that

how the two parties ‘interact’ to create value is more important than depending on

trust and commitment to bond the relationship. That is, how the two parties

communicate, cooperate, manage conflict and integrate their activities to create

interdependence for mutual benefit may have a greater impact on relationships; this

identified gap in the literature will be addressed in this study.

This study provides a conceptual framework to examine the impact of key

outsourcing motives on supplier–customer relationships and their consequent

influence on customer perceived value. That is, the relative effect of ‘relationship

quality’ and ‘relationship interaction (process)’ on customer perceived value will be

determined. The findings of this study will contribute to three areas: First, the

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impact of services outsourcing motives on supplier–customer relations and

customer value; second, understanding how to manage supplier–customer relation-

ship effectively in services outsourcing, that is, how the relative impact of ‘quality

relationship’ and ‘process relationship’ on customer perceived value can be

determined and third, a managerial framework for describing and explaining the

customer perceived value of services outsourcing, using a relationship perspective,

which can be adopted by practitioners.

2 Literature review

A review of the outsourcing literature has identified many factors or motives and

processes for effective outsourcing. Overall, these can be grouped into three major

components: why, how and the outcome. The ‘why’ is mainly concerned with

motives, the ‘how’ is mainly concerned with ‘relationships’ and the ‘outcome’ is

mainly concerned with value.

2.1 Outsourcing motive

The outsourcing motive is related to a firm’s goals and strategies, and is driven by

several aspects ranging from cost reduction, focus on core business, securing

business flexibility, expansion and obtaining strategic advantage to support the

business goals (Kroes and Ghosh 2010; Varadarajan 2009).

Economic factors often dominate the outsourcing motivation debate (Lammin-

maki 2011; Holcomb and Hitt 2007). First, strategic outsourcing improves

production economies in which cost advantages can accrue through sufficient

product scale from suppliers. Second, as outsourcing can reduce bureaucratic

complexity, it can therefore eliminate excessive costs. Lastly, firms can achieve a

lower break-even point by reducing overheads and avoiding investments in certain

facilities and equipment (Lewin et al. 2009; Bunyaratavej et al. 2007; Farrell 2005).

In addition, by leveraging external supplier economies of scale, responsiveness to

variability in demand can be achieved whilst minimising financial investments

(Bengtsson and Dabhilkar 2009). Furthermore, external partners’ resources and

capabilities could be leveraged to improve know-how and innovation (Tallman and

Chaear 2011). Consequently, the optimal supplier–customer relationship manage-

ment strategy may sustain or gain the desired value from the outsourcing

programme (Handley and Benton 2009; Fisher et al. 2008; Espino-Rodrigues and

Padrón-Robaina 2006; Lam and Han 2005).

Services outsourcing decisions should be assessed and evaluated through a

multitude of factors (motives) that may be strategic (e.g. cost competitiveness and

specific capabilities, risk sharing), as well as tactical (e.g. meeting conformance

quality requirements, lack of in-house expertise and lack of capital). A review of the

literature identified 14 key motives which can be grouped into five categories

(Table 1). These five categories are compatible with Dabhilkar et al.’s (2009) five

dimensions instrument.

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2.2 Supplier–customer relations

Lacity et al. (2008) examined over 500 companies globally, in a wide range of

industries and concluded that managing supplier–customer relationships effectively

is the most important factor in outsourcing success. This finding is supported by

other studies (Chen and Paulraj 2004; Ellram et al. 2004, 2007). Key factors in

supplier–customer relationship building such as quality, trust, collaboration, cost

and communication were all highlighted. Although contractual agreements between

the supplier and customer are a standard practice in outsourcing, dependence on

contractual factors may not be the best option. For example, depending on where the

contract is breached the country may not have an efficient and fair legal system to

obtain timely and fair compensation. Whilst managing supplier–customer relations

successfully is an acknowledged priority in outsourcing, how to manage supplier–

customer relations successfully is still unclear.

Kedia and Lahiri (2007) suggest three types of supplier–customer relationships in

outsourcing: first, tactical arm’s length relationships which are used mainly for firms

attempting to achieve cost reduction and higher quality; second, strategic

relationships that tap into a vendor’s cumulative experience and learning for

acquiring new capabilities and resources; Lastly, transformational relationships that

can help firms share risks, whilst increasing flexibility and enabling business

transformation.

Table 1 Categorisation of services outsourcing motives

Motives Sources

Cost related motive

Lower total cost Kroes and Ghosh (2010)

Cost reduction Bengtsson and Dabhilkar (2009)

Cost control/reduce operating cost

Improve the efficiency of operations

Focus related motive

Allow resources to focus on core competencies Gottfredson et al. (2005)

Release resources for other business Bengtsson and Dabhilkar (2009)

Quality related motive

Improve conformance quality Bengtsson and Dabhilkar (2009)

Prompt resolution of customer complaints/inquiries Kroes and Ghosh (2010)

Flexibility related motive

Increase volume flexibility Bengtsson and Dabhilkar (2009)

Lack of capacity Kroes and Ghosh (2010)

Ability to adjust deliverables

Innovativeness related motive

Access to specific labour and/or technology expertise Lewin et al. (2009)

Supplier innovation capabilities Bengtsson and Dabhilkar (2009)

Lower development cost

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2.3 Relationship interaction (process)

Vachon et al. (2009) discuss two types of supplier–customer interactions: cooper-

ative relational interactions and arm’s length transactional-based interactions. The

former covers conflict resolution mechanisms and common goal setting, where

agreement of performance is associated with mutual support and benefits. Goles and

Chin (2005) adopted the following five factors of communication, conflict resolution,

coordination, cooperation and integration to explore the cooperative relationship

interaction processes between suppliers and customers in services outsourcing.

Interorganisational communication is a critical factor in promoting strategic

collaboration among firms and in enhancing customers’ and suppliers’ performance

(Paulraj et al. 2008). In particular, conflict resolution may enhance communication by

signalling that both suppliers and customers are committed to the relationship (Ambrose

et al. 2008). In support of this view, supplier–customer relations in cooperative

relationships tend towards joint problem solving to achieve their outcomes, which can

then better satisfy the needs and concerns of both parties. This is a more constructive

approach than the use of coercion as there is a positive effect where a consensus can be

reached to resolve problems. As both parties continue to learn from experience, they

further contribute to the success of the entire services outsourcing venture (Wullenweber

et al. 2008). Furthermore, integration activities, whilst more costly and complex, ensure

more control that is critical to the enhancement of supplier–customer relations and the

ensuing mutual benefits (Suh and Houston 2010).

The arm’s length approach is a contractual transactional-based arrangement

mainly used for short-term economic efficiency with little involvement or integration

between the two parties and no long-term, strategic focus (Vachon et al. 2009; Gupta

et al. 2007). Organisations are more likely to have a long-term, strategic focus, with

the trend being more towards the cooperative relational interactions approach or

transformational approach as suggested by Kedia and Lahiri (2007).

According to Hansen et al. (2008), flexibility, the supplier’s ability to adapt to a

changed situation where it deviates from the norm or existing standards, positively

influences customer perceived value (CPV). Changes in a customer’s environment

may necessitate changes in the services from a given supplier, and the supplier’s

ability to adapt to such changes demonstrates that the supplier is responsive to

changing customer needs. When customers receive this kind of flexibility and

responsiveness, the perceived value of the relationship partner is likely to increase

because economic losses due to unexpected external changes might be reduced.

Interdependent relationships are essential in moving away from the traditional

adversarial model which is grounded in power-based bargaining. This requires

frequent communication and cooperation around issues such as product and process

design, quality and scheduling, all of which are evidenced by increased adaptation

on the part of both customer and supplier (Fynes et al. 2008).

2.4 Relationship quality

Relationship quality is referred to as ‘‘how well the outcome of a partnership

delivered matches the participants’ expectation’’ (Jae-Nam and Young-Gul 1999,

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p. 57). A review of the literature on relationship quality suggested the following key

attributes: commitment, trust, consensus, culture compatibility, flexibility and

interdependence as being the most commonly used elements to operationalize

relationship quality (Han et al. 2008; Rauyruen and Miller 2007; Svensson et al.

2010). Other studies (Svensson et al. 2010) reported that commitment between

organisations had the stronger effect on supplier–customer relations when compared

with cooperation and coordination.

Relationship quality is a higher order construct which has an influence on the

long-term stability of customer–supplier relations (Ulaga and Eggert 2006).

However, the simple existence of longer term relationships does not necessarily

mean that the relationship quality is stronger. As customers and suppliers enter into

contractual relationships, the interorganisational relationships begin to build, but

such outsourced interorganisational relationships are not static, and are likely to

evolve over time due to changes in the external and internal environment of both

parties.

Trust and commitment are the two main dimensions of the higher order relationship

quality (RQ) variable in interorganisational business relationships (Svensson et al.

2010; Han et al. 2008; Rauyruen and Miller 2007). Trust is a feature of relationship

quality conceptualised in the outsourcing literature as ‘‘the firm’s belief that the other

firm will perform actions that will result in positive outcomes for the firm’’ (Jae-Nam

and Young-Gul 1999, p. 32). However, if suppliers and customers are not sufficiently

compatible it is challenging to build a trusting relationship.

In services outsourcing, firms prefer their suppliers to be committed and to

conform as this reduces the risk of opportunistic behaviour, enhances the

effectiveness of cooperation and aids in the control of potential negative effects

resulting from the dependence of the vendor. Nevertheless, the understanding of

commitment for both parties requires some firm definitions and an understanding of

the effects different outsourcing policies can have on commitment (Walker et al.

2009). According to Krause et al. (2007), commitment between the two firms is an

important complementary condition to establish performance goals and provides

value to buy firms that seek social capital accumulation with suppliers in order to

achieve the performance gained from the outsourcing.

The impact of culture compatibility is highlighted by Ellis et al. (2006), who

notes that a high degree of cultural compatibility can positively influence the

atmosphere of the supplier–customer relations. Cultural difficulties between

supplier and customer can result in invisible costs which may derail the desired

outcomes (Stringfellow et al. 2008). Managers need to conduct cultural due

diligence to ensure that the appropriate culture exists with their service providers,

especially for offshore services delivery, as this may impact the level of quality and

innovation (Youngdahl et al. 2010).

2.5 Customer perceived value (CPV)

Customer firms considering an ongoing services outsourcing relationship have

results or outcomes expectations. Firms will cease to continue an outsourcing

programme with a service provider who is not delivering the desired direct and

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indirect net benefits, particularly when there are alternatives to choose from.

Fundamental to the concept of customer perceived value (CPV) in business

relationships is the recognition that customers and supplier firms do not trade with

each other solely on the basis of the value of the good or services being exchanged

as there are other social elements of the relationship (intangibles) that makes one

service provider more attractive or more valuable than another (Lindgreen and

Wynstra 2005). For example, Ulaga and Eggert (2006) suggested that CPV could be

a balance between benefits and sacrifices. They concluded that customer value

benefits could be derived from quality, performance, support services, interaction

and time-to-market benefits.

Gronroos (2011), Ahola et al. (2008) and Lapierre (2000) argued that some

benefits and sacrifices are not always immediate but may take a longer period of

time to realise. Hence, to avoid short-term optimisation, customers should consider

both short-term and long-term benefits and sacrifices in order to understand how

value is realised over time.

Customer perceived value (CPV) is multidimensional and most often defined in

terms of benefits and sacrifices (Gronroos 2011; Eggert et al. 2006; Walter et al.

2002; Lapierre 2000). Although service providers may create benefits for

outsourcing firms, or by the relationship itself, what counts as a benefit is defined

through the customer’s perceptions (value expectations). Sacrifices are the

economic and non-economic costs that are required to gain access to the

relationship benefits. For example, developing and sustaining supplier–customer

relations in services outsourcing are resource intensive and are only viable when

negative value components (costs/sacrifices) are exceeded by positive value

components (benefits) (Pardo et al. 2006). Consequently, the CPV construct

developed for this research identifies the two dimensions of ‘‘relationship benefits’’

and ‘‘relationship sacrifices’’.

Calculation of CPV is not merely a way to indicate a company’s competitive

advantage relative to competitors, but it may also become a driving factor to

continuously improve product and process quality (Setijono and Dahlgaard 2007).

Value is a useful basis for determining the relative importance of business

processes. As previously stated, Ulaga and Eggert (2006) have investigated both the

cost and the benefit dimensions of key supplier relationships. On the basis of their

empirical findings, they define CPV in a key supplier relationship as a formative,

higher order construct that represents the trade-off between the benefits and costs

perceived from the supplier’s core offering, the sourcing process and at the level of

a customer’s operations, taking into consideration the available alternative supplier

relationships (Ulaga and Eggert 2006). Among the various multidimensional

measurements of customer value, the Ulaga and Eggert’s typology (see Ulaga and

Eggert 2005, 2006) is adopted in this study as it captures customer perceived value

in the supplier–customer relation aspects of the outsourcing experience. In this

study, the CPV model is adapted from Ulaga and Eggert’s (2005) empirical study.

Their research studies have contributed frameworks for studying the CPV of

manufacturing outsourcing relationships, as shown in Fig. 1.

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2.6 Services outsourcing

A study on service supply chains suggested that services outsourcing could be

significantly different to manufacturing outsourcing (Baltacioglu et al. 2007). The

principal distinguishing characteristic of services is intangibility (Parasuraman et al.

1985). Services cannot be seen, touched, smelt or tasted, as they are ‘performances’,

‘processes’ rather than ‘things’. Intangibility of services is the main reason why a

number of logistics activities cannot be applied to service supply chains. The role of

service providers has evolved from the traditional role of an ‘‘agent’’ where firms

mainly focused on cost advantage. Service providers need to ensure competency-

based service delivery to help firms strategically improve their competitiveness

(Lacity et al. 2008; Kedia and Lahiri 2007). Successful management of a service

business requires an integrated relationship management approach, including a high

involvement in the value chain, and close relations with both suppliers and customers,

to gain the synergy advantage of cooperation in the chain. It is no longer simply cost

driven (Baltacioglu et al. 2007). Hence, the management of service outsourcing

processes (or intangibles) such as intensity and frequency of interactions, commu-

nication and conflict management abilities may be necessary to sustain a long-term

relationship. Thus, managing a supplier–customer relationship in services outsourcing

could be significantly different as compared to manufacturing outsourcing.

3 Research questions, hypotheses and conceptual framework

Thus, this study is designed to answer three key questions:

(1) What is the impact of outsourcing motives on supplier relationship

management in services outsourcing?

(2) What are the key variables of supplier–customer relations and their influences

in services outsourcing?

(3) How can the supplier–customer relations impact the customer perceived

value in services outsourcing?

Fig. 1 Customer perceived value framework from Ulaga and Eggert (2008)

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Based on the discussion and reflection of the literature review (Kroes and Ghosh

2010; Varadarajan 2009; Dabhilkar et al. 2009; Table 1), Dabhilkar et al.’s. (2009)

motive constructs, Goles and Chin’s (2005) ‘relationship interaction’ and

‘relationship quality’ constructs and Ulaga and Eggert’s (2006) customer perceived

value constructs were adopted for this study. The independent ‘motive’ variable and

its dimensions, the mediating variables of ‘relationship interaction’ and ‘relation-

ship quality’ and their dimensions plus the dependent variable of ‘customer

perceived value’ and its dimensions are shown in Table 2.

4 The relationship between outsourcing motive and relationship interaction

Organisations typically outsource non-core activities to gain lower labour costs and

other benefits. Gopal et al.’s (2003) study indicates that outsourcing more complex and

strategic business activities is often more profitable. In view of this, the long-term

relationship instead of arms-length contractual relationship with service providers will

be the enabler for firms to gain the right partners to handle more complex outsourcing

projects (Gupta et al. 2007). Ketchen et al. (2008) share this viewpoint, that executives

determine the best relationship to develop between themselves and suppliers, which is

based on the value each party delivers in the business value chain.

In this study, outsourcing motives as higher order variables comprise cost

reduction, focus on core competency, better quality and flexible on demand changes

and innovation capabilities. These dimensions of the outsourcing motive can

reasonably explain the influence of supplier–customer relations and customer

perceived value. Furthermore, it has been suggested that the interaction between

supplier and customer could be an essential element to sustain a long-term relationship

(Lamminmaki 2011; Wullenweber et al. 2008; Goles and Chin 2005). This study

adopts the Goles and Chin (2005) model of supplier–customer relationships which

systematise the supplier–customer relations constructs into two groups: ‘relationship

quality’ and ‘relationship interaction’. The quality group constructs are the inherent

characteristics or properties that contribute to the functionality and harmony of the

relationship—such as trust and commitment. The interaction (or processes) group

constructs are the interaction activities between supplier and customer such as

intensity of interactions and communication and conflict management. Thus, based on

the foregoing discussion, the following hypothesis is formed:

Hypothesis 1 Outsourcing motive has a positive impact on ‘relationship interaction’.

5 The relationship between ‘relationship interaction’ and ‘relationship quality’

Previous studies have confirmed that effective relationship management is critical

for outsourcing success between suppliers and customers (Ellram et al. 2004; Chen

and Paulraj 2004, 2007). With the array of attributes and processes suggested, it is

difficult’ to focus on key success factors. Hence, the Goles and Chin (2005) two

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factor model (‘relationship quality’ and ‘relationship interaction’) was adopted in

this study.

Despite the lack of consensus on whether relationship interaction could influence

relationship quality or vice versa, the evidence from previous studies (Zhijian et al.

2009; Han et al. 2008; Wullenweber et al. 2008) suggested that relationship

interaction is more likely to be an antecedent to relationship quality. Furthermore, it

is logical to assume that the more interaction (e.g. communication, meetings,

networks), the greater could be the quality of relationships. Hence, it is reasonable

to expect their relationships as stated in H2.

Hypothesis 2 Relationship interaction has a positive effect on relationship quality.

Table 2 Constructs, variables and dimensions

Construct Variables Dimensions

Outsourcing Motive Outsourcing motive (independent

variable)

Cost reduction

Increased company focus

Improved quality

Increased responsiveness to variability in

demand

Innovation capability

Supplier–buyer

relations

Relationship interaction (mediating

variable)

Communication

Cooperation

Coordination

Conflict resolution

Integration

Supplier–buyer

relations

Relationship quality (mediating

variable)

Trust

Commitment

Flexibility

Consensus

Interdependence

Culture compatibility

Customer perceived

value

Core benefits (dependent variable) Quality

Performance

Customer perceived

value

Sourcing benefits (dependent

variable)

Support services

Personal interaction

Customer perceived

value

Operations benefits (dependent

variable)

Know-how

Time-to-market

Customer perceived

value

Cost sacrifices (dependent variable) Purchase cost

Ordering processing cost

Hidden cost

Downtime cost

Coordination cost

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6 The relationship between relationship quality and customer perceived value

Relationship quality is one of the two supplier–customer relations variables in the

study, which are higher order variables comprising commitment, consensus, culture

compatibility, flexibility, interdependence and trust. These dimensions of relation-

ship quality can reasonably explain the influence of supplier–customer relations to

customer perceived value. Based on Ulaga and Eggert’s (2005, 2006) multiple

studies on manufacturing outsourcing in supplier–customer relations management,

four variables (three benefit variables and one sacrifice variable) are identified for

customer perceived value. The benefit variables are as follows: core benefits,

sourcing benefits and operations benefits each with two dimensions. The cost

sacrifices variable has five dimensions. The link between these four variables was

tested in H3-H6 to determine the relationship between the intervening variable and

the dependent variable.

Chakrabarty et al. (2007) concur that service quality and relationship quality are

significantly and positively related to each other, and that both have a significant

impact on user satisfaction. In addition, 45 % of the variances are found in Goo

et al.’s (2007) quantitative study on information technology (IT) outsourcing, where

trust and commitment elements of supplier–customer relations are central to the

outsourcing, This is strong evidence that both trust and commitment are key

components to the management of outsourcing success, and that they have a strong

effect on service performance.

The supplier’s ability to adapt to such changes in a short time will be an

indication of flexibility, and will show that the supplier is providing the necessary

support to meet the changing customer needs. When customers face this kind of

flexibility and responsiveness, the perceived value of the relationship partner is

likely to increase because economic losses faced due to unexpected external

changes may be reduced (Hansen et al. 2008). In most cases, these supporting

services (non-core services) will be considered as important value in the supplier–

customer relations.

Aubert et al. (2004) studied conditions of success related to two phases of the IT-

outsourcing relationship: the relationship formation phase and the relationship

management phase. Flexibility is one of the four conditions of relationship success

on the relationship management phase. According to Hansen et al. (2008), flexibility

is the supplier’s ability to adapt to changed situations, especially to meet tight

timelines. In their study, flexibility positively influences the customer value of both

parties of the relationship.

According to Corsaro and Snehota (2010), Ulaga and Eggert (2005, 2006),

Zeithaml (1988) and Woodruff (1977), customer value is the net difference between

perceived benefits and sacrifices. Obtaining benefits from service providers may

require substantial involvement with them, which, in turn, increases relationship

costs. Relatively new relationships may impose substantial costs for supplier

development, and relationship costs include structural costs, i.e. communications

links and administrative systems and general process adaptations. Hence, cost (cost

sacrifices) is seen as negative in the overall PCV concept. In close long-term

relationships, firms will seek a greater efficiency in the alignment of the business

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processes that tie them to the partners involved. Based on the above discussion, it is

justifiable to establish the following four hypotheses between relationship quality

and customer perceived value constructs.

Hypothesis 3 Relationship quality has a positive effect on core benefits.

Hypothesis 4 Relationship quality has a positive effect on sourcing benefits.

Hypothesis 5 Relationship quality has a positive effect on operation benefits.

Hypothesis 6 Relationship quality has a negative effect on cost (cost sacrifices) on perceived customer value (PCV).

Figure 2 summarises the hypotheses within the conceptual framework of this

study. A plus sign (?) indicates a positive influence and a minus sign (-) indicates a

negative relationship between the two variables.

Table 3 shows the relationship between research questions and hypotheses. That

is, H1 and H2 are related to research questions 1 and 2. H3–H6 are related to

research question 3.

7 Research design

7.1 Sampling and data collection

The rationale to use Singapore is that it is a developed economy, and firms in

Singapore are on the leading edge in adopting services outsourcing. Hence, the

Fig. 2 Conceptual framework and hypotheses for this research

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results and the framework derived from this study could be generalised to other

developed nations. All companies in both the Fortune 150 companies with offices in

Singapore, and the Singapore Stock Exchange (SGX) listed companies were

included in this study. These 17,570 companies (all listed firms in Singapore) were

grouped and sorted in alphabetical order, and assigned a serial number. Companies

with serial numbers ending with 1 (for instance 1, 11, 21, 31, etc) were selected for

the questionnaire survey. A total of 1,757 companies were randomly selected from

the above two lists in Singapore for the survey.

A structured questionnaire was mailed to CEOs (or the Chief Operation Officer-

COO) of the selected companies with a self-addressed return envelope, and a

covering letter stating the purpose; confidentiality was ensured via the anonymously

returned questionnaire. A second round of the survey was sent out to the total

sample 4 weeks after the initial one as a reminder to the non-returns. 234 valid

questionnaires were returned after the second round (i.e. 13.3 % response rate). This

response rate is considered to be acceptable in Singapore, where the average

response rate for similar survey studies is around 13.6 % (Harzing 1997; 2000).

Respondents were expected to respond either in round 1 or 2 only.

7.2 Instrument design

A five-point Likert scale ranging from strongly agree (5) to strongly disagree (1)

was used in all questions. All items in this questionnaire were reviewed by five

senior executives from five different companies (who had managed services

outsourcing for more than 5 years), and eight PhD candidates were invited to

review the survey for clarity and meaning. Apart from minor correction in

construction of sentences with three questions, no modification was required after

their feedback.

A 5-item scale adopted from Dabhilkar et al. (2009) was chosen to measure

outsourcing motive. The wording was modified slightly to suit the context of this

Table 3 Relationship between research questions and hypotheses in this study

Research questions Hypotheses

(1) What is the impact of outsourcing motives on supplier

relationship management in service outsourcing?

(1) Outsourcing motives will have a positive

impact on ‘relationship interaction’

(2) What are the key variables of supplier–customer

relations and their influences in service outsourcing?

(2) ‘Relationship interaction’ will have a

positive impact on ‘relationship quality’

(3) How can supplier–customer relations impact the

customer perceived value (CPV) in service

outsourcing?

(3) ‘Relationship quality’ will have a positive

impact on core benefits in CPV

(4) ‘Relationship quality’ will have a positive

effect on sourcing benefits in CPV

(5) ‘Relationship quality’ will have a positive

effect on operation benefits in CPV

(6) ‘Relationship quality’ will have a

negative effect on cost sacrifice in CPV

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study (but not the content and meaning). That is, changing of the word

manufacturing to services outsourcing only. The five items in Dabhilkar et al’s

(2009) multidimensional instrument reflect the five categories of motives suggested

in Table 2 of this study. That is, cost reduction, increased company focus, improved

quality, increased responsiveness to variability in demand and innovation compat-

ibility. Goles and Chin (2005) 11-items scale on the relationship interaction variable

and 12-items scale on the relationship quality variable were adopted, respectively, in

this study. Ulaga and Eggert’s (2006) items scale was adopted for measuring

customer value in this study; the measurement was on perceived value. This is an

acceptable approach when objective data are not available in research (Corsaro and

Snehota 2010; Barry and Terry 2008; Ulaga and Eggert 2005, 2006). Sample items

in survey of this study are presented in ‘‘Appendix’’ section.

7.3 Data analysis

Structural equation modelling (SEM) was used to analyse the data collected from

the survey using the SPSS 18 and AMOS TM

(Analysis of Moment Structure) 18.0

software package. A recommended two-step model-building approach was adopted

(Kline 2010; Hair et al. 2009; Anderson and Gerbing 1988).

8 Results

8.1 Descriptive statistics

Data were collected from more than twelve industries, with the Information

Technology industry having the highest rate of response (38 %), and office

equipment the lowest, with three respondents (1.3 %); the sample had a good

balance of small medium enterprise (less than 600 employees) (59 %) and large

companies (600 and more employees) (41 %). The results show the different

activities outsourced by firms, ranging from the highest in information technology

(28.4 %) to the lowest in research and development (1.7 %). 57.8 % of the

companies had outsourcing relationships with their service providers for over

3 years and more than half of the respondents (51.3 %) had been involved in

outsourcing operations for more than 3 years. Table 4 provides the response rates

from different industries in this study.

8.2 The best fit model

The result from an initial best fit analysis showed a better fit model of four motive

items (Table 5); the cost reduction variable was dropped because of its low factor

loading (0.23). The best fit model also collated the four remaining items into a

single motive dimension for this study.

A structural equation model thus consists of two components, the ‘‘measurement

model’’, in which latent variables (theoretical constructs) are proposed and tested

72 J. Rhodes et al.

123

through confirmatory factor analysis (CFA), and the ‘‘structural model’’, in which

the constructs are linked together by means of hypotheses in a relational way.

The best fit model obtained in this study revealed significant relationship paths

between the independent variable (outsourcing motive), mediating variables

(relationship interaction and relationship quality) and dependent variables (core

benefits, sourcing benefits and operations benefits). The result also showed a

positive standardised path coefficient (beta) of path between outsourcing motive and

relationship interaction (B1 = 0.45). This finding suggests that the outsourcing

motive dimension is generally able to foster a good working relationship between

the supplier and customer. However, the results did not show that there is a linear

relationship between ‘relationship interaction’, ‘relationship quality’ and ‘customer

perceived value’ as predicted from the literature review. The findings revealed that

‘relationship interaction’ can directly influence all three customer perceived value

variables: core benefits (b2 = 0.47), sourcing benefits (b4 = 0.42), operations benefits (b5 = 0.39) and no significant influence on cost sacrifices (B = -0.071).

Table 4 Descriptive statistics of company profile

Variables Categories Percentage (%)

Industry group Office equipment 1.29

Food related 1.72

Oil and gas 1.72

Chemicals/plastics 2.16

Logistics 3.02

Electronics 4.31

Healthcare 5.17

Wholesale/retail 5.17

Construction 5.60

Banking/finance 8.62

Manufacturing 10.78

Others 12.07

Information technology 38.36

Number of employees Less than 20 17.20

20–50 7.80

51–99 11.60

100–299 16.40

300–599 5.60

More than 600 41.40

Company turnover (revenue size) Less than S$500,000 7.80

S$500,000–S$1,000,000 9.90

1–10 million 17.70

10–50 million 15.50

50–250 million 10.30

More Than 250 million 38.80

Critical success factors in relationship management 73

123

Furthermore, a significant path was found between two mediating variables,

relationship interaction and relationship quality, with a factor loading of 0.82. That

is, relationship quality could be seen as part of relationship interaction, thus

relationship interaction would have a direct influence on customer perceived value

(Fig. 3). A summary of path coefficient (b) between the variables in the best fit model is provided in Table 6.

This best fit model had a maximum-likelihood estimation (MLE), Chi square of

374.926 with p value of 0.000 and degrees of freedom of 303. The mean Chi square

value using bootstrapping procedure was 305.468. The Bollen–Stine bootstrap

p value was 0.062. The above result showed a model that fits the data well (Weston

and Gore 2006). Two other absolute fit measures were checked: 1) Root mean

square error of estimation (RMSEA) was 0.048, which is less than 0.05 and

indicates a close fit. 2) TFI = 0.938 (within the range of 0.90–1.00) was also

considered a good fit (Hair et al. 2009). The comparative fit index (CFI) = 0.945

and Incremental fit index (IFI) = 0.946, which are incremental fit measures, were

greater than 0.90 either. The v2/df ratio (normed Chi square), which is a parsimonious fit measure, was 1.537, which was lower than the threshold 2.0.

Overall, the fit statistics suggest that it can be considered as a good fit model.

Based on the results of the above analysis, the outsourcing motive factor has a

positive influence on relationship interaction, with a beta coefficient (regression

weight) of 0.45; hence H1 is supported. This is consistent with Ketchen et al.’s

(2008) study, which reported that managers determine the best relationship to

develop with suppliers on the basis of the value of the outsourced services activity in

the business value chain.

The results of the final best fit SEM model (Figs. 3, 4) showed that the

relationship quality factor was absorbed into the relationship interaction factor and

the relationship interaction factor had a direct influence on the three factors (core

Table 5 Selected AMOS text output for hypothesised CFA model for outsourcing motive model

Model v2 v2/df GFI NFI TLI CFI RMSEA

Model 1 (5 items) 8.170 1.634 0.986 0.934 0.944 0.972 0.052

Model 2 (4 items) 2.713 1.357 0.994 0.975 0.979 0.993 0.039

74 J. Rhodes et al.

123

benefits, sourcing benefits and operations benefits) within the perceived customer

value. That is, beta 0.47 on core benefits; beta 0.42 on sourcing benefits and beta

0.39 on operations benefits, respectively. Hence, Hypothesis H2, H3, 4 and 5 are

Fig. 3 Final best fit model

Table 6 Summary of path coefficient (b) on variables in best fit model

Relationship between variables b p \ 0.001

Motives on Relationship interaction 0.45 Significant

Relationship interaction on core benefits 0.47 Significant

Relationship interaction on sourcing benefits 0.42 Significant

Relationship interaction on operation benefits 0.39 Significant

Relationship interaction on cost sacrifice -0.071 Insignificant

Relationship quality on relationship interaction 0.82 Significant

Critical success factors in relationship management 75

123

rejected. Instead, there is a direct positive influence of relationship interaction on

customer perceived value.

The results are inconsistent with those of some recent studies on customer

perceived value that argued supplier–customer relations is significantly and

positively related to the quality relationship of the supplier (Eisingerich and Bell

2008; Chakrabarty et al. 2007; Goo et al. 2007). Furthermore, this finding is

inconsistent with those of previous studies that argued that trust-based relationships

between service providers and customers are very important for knowledge sharing

which contributes significantly to outsourcing success (Lee et al. 2008). The results

showed that there is no significant association between relationship interaction and

quality with cost sacrifice. Hence, H6 is rejected.

9 Discussion

The results of hypotheses testing in this study are discussed to demonstrate the

contribution of this study based on the research questions initially posed.

Research Question 1 What is the impact of outsourcing motive on supplier–

customer relations management in services outsourcing?

The results of this study confirm that four key elements in outsourcing motive

(focus, quality, flexibility and innovativeness), excluding cost reduction, will

establish a cooperative relationship between suppliers and customers, as supported

by Hypothesis 1 (H1).

The elimination of the cost reduction dimension (cost reduction) from the

outsourcing motive variable suggests that cost reduction is no longer a strategic

Fig. 4 The final framework with path coefficients

76 J. Rhodes et al.

123

driver of companies’ service outsourcing decisions to invest resources for

developing stronger supplier–customer relationship. This is contrary to the findings

of many studies that have shown cost advantage to be the most significant

consideration and the reason for companies to engage service outsourcing (for

example, Ellram et al. 2007; Tate et al. 2009) and short-term cost savings as the

predominant reason for outsourcing (Corbett 2004).

However, evidence from previous studies also revealed that cost-related drivers

in outsourcing are often short-sighted in nature, and outsourcing for financial

reasons is often a response to short-term financial indicators. When concerned solely

with minimising costs, managers tend to follow a reactive rather than a proactive

and cooperative relational management approach (Sanders et al. 2007). In their

business processing outsourcing (BPO) study, Fritsch et al. 2008 also emphasis that

for companies with cost reduction as a reason for outsourcing, supplier–customer

relations are often at an arm’s length, in that they are exclusively economic and rely

solely on formal means of governance. Today, the role of a service provider is no

longer limited to the traditional role of an ‘agent’ who is delegated the responsibility

of business process operations for gaining cost efficiency. Rather, the role has

changed to ‘partnering’, where the service provider ensures competency-based

service delivery to clients to help the latter improve their strategic position (Lacity

et al. 2008; Kedia and Lahiri 2007). Leahy and Montagna (2007) concluded that

cost saving does not offer an exhaustive explanation of the widespread use of

outsourcing; rather, the competitive pressure from the market is the force that drives

companies to outsource. Recent studies in information services outsourcing and

business process management found that reducing labour costs is no longer the only

key driver of outsourcing decisions; the opportunity for accessing pools of a highly

skilled workforce from around the world is a strategic reason for outsourcing

(Lewin et al. 2009; Bunyaratavej et al. 2007). Similarly, companies’ outsourcing

decisions have changed from lower operation costs to higher service delivery

quality and innovation capabilities (Dossani and Kenney 2007). In summary, cost

reduction is not a major motive in services outsourcing and has little effect on

customer–supplier relationship. Although this is not a new finding, this study has

provided the latest empirical support.

Research Question 2 What are the key variables of supplier-customer relations

and their influences in services outsourcing?

Two important variables were identified in the literature review on supplier–

customer relations management. The current results are consistent with those of

other information system (IS) outsourcing studies: the customer and service

provider interface is critical to build a progressive partnership, with sub-processes

working together simultaneously (Cai and Yang 2008). Similar results were found

by Kedia and Lahiri (2007), who indicated that the evolution from a simple buyer–

seller transaction to a deeper long-term relationship in a service outsourcing

partnership is based on a continued interaction and trust-based relationship over

time. That is, when relationship interaction activities increase between the supplier

and customer, the higher level of relationship quality can be observed. In summary,

the empirical validation in this study supports the findings from prior outsourcing

Critical success factors in relationship management 77

123

research showing the strong link between relationship interaction and relationship

quality.

The final framework (Fig. 4) for outsourcing motive, supplier–customer relations

and customer perceived value provided a significant and interesting finding whereby

the factor relationship quality was absorbed by the relationship interaction factor.

That is, relationship quality elements such as trust, commitment, loyalty and culture

compatibility may not be as important and relevant as relationship interaction

elements such as communication, conflict management, efficient networks and

processes, integration, coordination, cooperation and collaboration. Although

previous studies on outsourcing have provided evidence that relationship quality

has a positive influence on relationship interaction (Siakas and Siakas 2008; Cong

and Chau 2007), this proposition was rejected because the SEM analysis in this

study using the bootstrap technique showed that the significant mean v2 (bootstrap), with the Bollen–Stine bootstrap p value was less than 0.05 (p = 0.046). This is an

interesting finding and will be explored further in the discussion section.

In summary, the current finding is consistent with the findings of previous

studies: relationship interaction processes are important to develop a stronger

relationship between the supplier and customer (Cai and Yang 2008). Furthermore,

effective collaboration between partners has become a priority in network

organisations and outsourcing firms (Pisano 2008).

Research Question 3 How can the supplier-customer relations affect customer

perceived value in services outsourcing

The best fit model (SEM analysis) revealed that the original two factor

(‘relationship quality’ and ‘relationship interaction’) supplier–customer relation has

been merged into a single factor. That is, ‘relationship quality’ is absorbed by

‘relationship interaction’ (Fig. 4). Furthermore, the ‘relationship interaction’ factor

of supplier–customer relation has no significant impact on perceived customer

value. ‘Relationship interaction’ had the highest impact on core benefits (B = 0.47),

followed by sourcing benefits (B = 0.42) and operations benefits (B = 0.39)

(Fig. 4). This is a significant finding which could be seen as incompatible with

previous findings. The major relative important of ‘relationship interaction’ rather

than ‘relationship quality’ on customer perceived value could simply indicate that

priority should be focused on communication, conflict resolution, coordination,

cooperation and integration (key elements of relationship interaction).

The main contribution of the final framework is the development and

confirmation of a framework to describe outsourcing motive, supplier–customer

relations and customer perceived value and their interrelation in services

outsourcing as presented in Fig. 4. Figure 4 presents the final framework with only

one intervening variable (relationship interaction) that links the outsourcing motive

variable and the three customer perceived value variables. That is, this study

concludes that interaction activities/processes such as communication, cooperation,

conflict resolution, coordination and integration are more important in a supplier–

customer relationship.

The customer perceived value construct has only three benefits variables (core

benefits, sourcing benefits and operations benefits), and the cost sacrifices variable

78 J. Rhodes et al.

123

was eliminated in the final framework. There are three new paths in the final

framework as shown in Fig. 4, which directly link relationship interaction variable

to core benefits, sourcing benefits and operations benefits.

The findings of the final framework indicated that relationship interaction has a

positive influence on the core benefits variables of the customer perceived value

construct, with a beta coefficient (regression weight) of 0.474. Hence, this path is

supported and is statistically significant. The result is consistent with that of studies

where the interaction process, especially communication (one of the dimensions of

relationship interaction) between supplier and customers in outsourcing can reduce

product and performance-related errors, thereby enhancing quality, time-to-market

and customer responsiveness (Paulraj et al. 2008). Similarly, Elmuti (2003) also

concluded that communication had a positive association with operations benefits in

the manufacturing outsourcing context.

According to the final framework (Fig. 5), relationship interaction has a positive

influence on the sourcing benefits variable of the customer perceived value

construct, with a beta coefficient (regression weight) of 0.424. Hence, this path

supports that a better relationship interaction between suppliers and customers leads

to better sourcing benefits for the customer. The present findings are consistent with

Rajamani et al.’s (2010) work, which suggested that customers and suppliers prefer

to maintain the right level of relationship through beneficial interaction, and this is

driven by appropriate incentives.

The relationship interaction factor has a positive influence on operations benefits

with a beta coefficient (standardised regression weight) of 0.390. This result proves

that the greater the relationship interaction between the suppliers and customers in a

services outsourcing engagement, the better will be the operations benefits for the

customer. The finding is consistent with those of previous studies from the angle of

service providers. Ochel (2002) highlighted the importance of a close interaction

between service providers and outsourcing companies, particularly in knowledge-

intensive industries, where service providers must provide not only cost-effective

solutions but also creative problem solving as well as specialised know-how in order

to compete in the marketplace.

The results of the final framework also showed that the cost sacrifices variable

does not have any impact on the level of the relationship interaction between

supplier and customer. It is generally perceived by managers that the magnitude of

the supplier–customer relations does not reduce the cost sacrifices in services

Fig. 5 Implementation diagram based on final framework

Critical success factors in relationship management 79

123

outsourcing. The final framework demonstrates that the services outsourcing will

depend on the strategic value of the resources constituting them; strategic value can

be enhanced by the supplier–customer relationship, especially with the relationship

interaction processes. For instance, when a company chooses to outsource an

activity in the business value chain, if the desired value is equivalent to that of the

three dimensions shown in the integrative framework, managers can develop

stronger relationships with their suppliers to enhance these value or benefits.

Previous studies have not collectively considered these aspects in order to explain

services outsourcing decisions, which give this research certain additional value.

10 Management implication

From the managerial contribution perspective, the implementation diagram derived

from the final framework in this study is shown in Fig. 5. This provides the

operational framework for both customers and service providers to achieve better

interorganisational business relationships with better understanding of both the

outsourcing motive and of customer perceived value. The strategic element of

outsourcing motive systematically requires an integrated supplier–customer

relations management approach to achieve the potential benefits and improve the

overall business value chain. Thus, the results of this final framework where the

supplier–customer relations and its association with motives and perceived value are

empirically tested should enrich a company’s value creation process.

The current results are consistent with those of previous studies: communication

is a critical element for effective interorganisation relationships, and strategic

outsourcing tends to evolve into cooperative partnerships over time and requires

substantial effort to develop (Holcomb and Hitt 2007; Modi and Mabert 2007). In

addition, communication is the key dimension in the entire relationship interaction

process, and it can improve relationship quality between the supplier and customer.

This finding is consistent with Goo et al.’s (2007) study on ITO: the service

outsourcing duration can influence the supplier–customer relations and yield long-

term benefits.

11 Conclusions

The main contribution of this study is the development of a conceptual framework

in outsourcing motives, supplier–customer relations and customer perceived value

in services outsourcing. The second contribution is that the results of this study

support the findings of previous studies (Lewin et al. 2009; Bunyaratavej et al. 2007;

Dossani and Kenney 2007) whereby cost saving may not be a top priority in

outsourcing and that strategic alignment and focus, quality, innovation capabilities

and responsiveness have taken priority as motives for services outsourcing. The

third contribution is that the ‘relationship interaction’ factor between suppliers and

customers is more important than ‘relationship quality’ in services outsourcing. This

is an interesting and significant finding. Although previous research (Svensson et al.

80 J. Rhodes et al.

123

2010; Han et al. 2008; Rauyruen and Miller 2007) suggested that trust and

commitment (that is, ‘relationship quality’) are essential for successful partnerships

between suppliers and customers, the finding in this study revealed that ‘relationship

quality’ is absorbed into ‘relationship interaction’. This finding reflects that trust and

commitment are outcomes for effective partnership in manufacturing outsourcing

and not necessarily for services outsourcing. Hence, the benefits of services

outsourcing were mainly derived from effectively managing the daily ‘relationship

interaction’ factor—e.g. communication, conflict resolution, integration and

collaboration of activities, rather than relying on the ‘relationship quality’

factor—e.g. trust and loyalty. Although the relationship quality factor may lead

to long-term success, it may not provide the efficiency and effectiveness in

transactions between suppliers and customers in services outsourcing. The fourth

contribution is that customer perceive value (CPV) in services outsourcing is a

balance between benefits and sacrifices and management should focus on measuring

core, sourcing and operations benefits in services outsourcing. Cost saving is

considered as non-significant in services outsourcing.

Despite the vast amount of outsourcing studies, a comprehensive theory of

interfirm cooperation and partnership has not yet emerged (Hoffman and Schlosser

2001). Studies which subscribe to the resource-based view (RBV) (Espino-

Rodrigues and Padrón-Robaina 2006) emphasise the importance of resources

(including tangible and intangible assets and capabilities) in guiding business and

outsourcing activities to competitiveness. Suh and Houston (2010) supported this

proposition and concluded that companies seek relationships to create synergy and

acquire needed assets or capability from other companies through outsourcing.

From the transactional cost economics (TCE) viewpoint, relationships between

suppliers and customers are interaction (a resource and capability) intensive. A

close relationship with a supplier can be justified only when the benefits exceed

costs. Thus, the findings of this study suggested that ‘relationship interaction’ in

partnerships and benefits with outsourcing is more closely related to TCE viewpoint.

12 Limitations and future research

The final conceptual framework is limited by the cross-sectional nature of the

research design. Naturally, a longitudinal study would enable stronger inferences to

be made about the directions of the causal sequencing of model constructs.

Second, although the returned sample size of 234 and related data have enabled

the researcher to conduct this study with reasonable confidence, a larger sample

could be better, particularly for SEM analysis. Gallagher et al. (2008) state that it is

important to consider sample size in SEM, like other multivariate techniques,

because it affects the achievement of statistical significance. A larger sample size

would make intergroup analysis possible within the sample to examine the possible

differences among service outsourcing units. Furthermore, this study adopted a

mono-method that relied on single-source data is another limitation. Finally, this

study focuses on Singapore data. Future research can extend this framework to other

countries or regions to explore possible differences in outcomes.

Critical success factors in relationship management 81

123

Appendix: Sample items of survey

Section D: Motive of outsourcing

Please circle a number, which best reflects your opinion.

The following section is about the motive of service outsourcing for your

organisation’s outsourced business activities.

Motives for service outsourcing of your organisation

business activities?

Not important Important Determining factor

1 Reduce cost for outsourced component(s) 1 2 3 4 5

2 Improve company focus 1 2 3 4 5

Section E: Supplier–customer relations

Please circle a number which best reflects your opinion.

The following section is about the relationship attributes of between your service

supplier and your organisation.

Relationship Quality Strongly

disagree

Neutral Strongly

agree

6 Both parties are highly committed to the relationship 1 2 3 4 5

7 Both parties are willing to commit resources to sustain

the relationship

1 2 3 4 5

8 The two parties are able to reach agreement on most

matters

1 2 3 4 5

The following section is about the relationship processes of between your service

supplier and your organisation.

Relationship Interaction Strongly

disagree

Neutral Strongly

agree

18 Both parties in the relationship communicate well with

each other

1 2 3 4 5

19 Both parties in the relationship effectively exchange

information with each other

1 2 3 4 5

82 J. Rhodes et al.

123

Section F: Customer perceived value

Please circle a number which best reflects your opinion.

The following section is about the customer benefits of the service outsourcing.

Customer Benefits Strongly

disagree

Neutral Strongly

agree

29 Compared to the internal resources, the supplier provides us

with better service quality

1 2 3 4 5

30 Compared to the internal resources, the supplier meets our

quality standards better

1 2 3 4 5

31 Compared to the internal resources, the supplier’s service is

more reliable

1 2 3 4 5

Costs of the outsourced services Supplier’s cost

is much lower

Supplier’s cost

is the same

Supplier’s cost

is much higher

1 Reduce cost for outsourced component(s) 1 2 3 4 5

2 Improve company focus 1 2 3 4 5

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