Managing change in IT outsourcing arrangements

Purpose Clients and IT outsourcing service providers are regularly confronted with changes in their business and IT environment. This paper aims at understanding the need for adaptability and the capabilities of service providers in outsourcing arrangements. Design/methodology/approach The paper uses a combination of literature research and case study research. A retrospective view on the case study was investigated using interviews, and analyses of reports and observations. Findings Clients are dependent on their service providers to adapt to changes and their service providers can help to better deal with their ever‐changing environment. This case study shows that the level of adaptability of service providers affects their sourcing capabilities, which results in improved customer retention by service providers and in their clients gaining competitive advantage. Service providers can create adaptability by developing their organizational capabilities, specifically by managing relationships and developing procedures for dealing with change. Research limitations/implications As the aim was to improve the understanding, an explorative, single case study was performed. More detailed research of the various factors influencing the level of adaptability of services providers is recommended. Multiple case studies are recommended to gain a more in‐depth overview of a variety of causes and effects in different situations. Practical implications For outsourcing service providers this study suggests that they should create and continuously evaluate capabilities to remain competitive. In the case study the offshore service provider gained a larger share of the outsourced business. Furthermore, contracts are more likely to be extended. This research suggests that the service provider's ability to adapt should be part of the sourcing decision process of clients. During both the sourcing strategy and the tender selection phase, clients can identify to what extent an outsourcing partner will cater for environmental uncertainty. Originality/value The role of service providers in outsourcing arrangements has received only limited research attention so far. Furthermore, adaptability in sourcing arrangements has hardly been investigated at all.