Enhancing Inter-firm Alignment in IT Vendor-Client Collaborations

Abstract

There has been a quick shift on the way organizations look at the IT value proposition. If in the past decades it was considered a cost-reduction driver, now CIOs view it as a new source of novelty and innovativeness - key factors to respond to changes in the economic, social, and technological environments. IT vendors are required not only to support various IT functions, but also to enhance business value through the internal development of cutting-edge applications and breakthrough services. In addition, CIOs are increasing the number of strategic collaborations as to take advantage of the vendors’ innovation capabilities. This is in line with the Open Innovation paradigm, which has been successfully applied in many domains but whose benefits are still unreap in the IT field.
These trends rise several complications, due to the various challenges that innovation-oriented inter-firm collaborations imply from a managerial perspective. Specifically, it has been argued that inter-firm alignment is a fundamental element to successfully initiate IT innovation partnerships. However, little guidance is available concerning the management of the first phases of such collaborations.
To address this problem, this study explores the vendor-client relationship from three different but complementary perspectives (e.g., organizational, contractual and social), which have been identified as the main dimensions to be considered in the study of inter-firm collaborations and whose alignment between firm is necessary to build successful innovation partnerships. As such, this research proposes a conceptual model where the organizational, social and contractual dimensions represent the independent variables and where inter-firm alignment represents the dependent variable. Furthermore, our model incorporates two additional elements, namely vendor size and relationship age, which represent the moderator variables and influence the abovementioned relationship.
This qualitative study has been carried out in the working setting of AirFrance-KLM Group, a world leader in the airline service industry. Through the analysis on embedded case study consisting of three study cases, it has been possible to capture the three different facets of vendor-client collaborations and identify those elements and conditions critical to achieve inter-firm alignment during the formation of innovation partnerships with strategic IT vendors.
The findings of this research suggest that while all three dimensions need to be addressed during the initial phases of a strategic partnership oriented to innovation activities, the interrelations between social and contractual dimensions and between social and organizational dimensions required a more careful consideration. In regards to the intertwine between social and contractual dimensions, the results indicate that during the early stage of a joint innovation project in the IT environment, a governance based on relational and behavioural elements tends to substitute formal governance, due to a fluidity of goals, requirements and expectations. In regards to the linkages between organizational and social elements, the findings suggest that shared and well-defined organizational practises are critical to foster inter-firm social interactions and support the development of trust and commitment. Interpersonal exchange and mutual understanding are likely to increase when the governance of the collaboration is less centralized and formalized, as well as when more autonomy is given to its members and an integrative work structure exists.
Drawn from the analysis of the moderator variables, Vendor Size turned out to have a great influence in achieving inter-firm alignment. Difference sizes represented an important element that had to be taken into account in aligning the various facets of the collaboration. A smaller vendor requires less effort in building a positive social context, as well as in achieving organizational coordination. On the other hand, it requires more resources to assess its real long-term value and contribution. A larger vendor is characterized by more layered and complex structures, and thus necessitates higher efforts to align processes and actions. However, it also provides a larger sets of skills and capabilities, as well as more industry knowledge and experienced people. In regards to the second moderator, Relationship Age greatly influenced the causal relationship: a longer relationship allowed to avoid complex contractual agreements. On the other hand, a lack of previous joint experience necessitated a higher initial efforts to build trust and assess each other commitment. Conversely, the findings suggest also that long-lasting business relations do not necessarily support initial inter-firm alignment in innovative vendor-client collaborations. Specifically, the study cases provide evidence that also the type of content exchange and the focus of previous business relations may also represent another moderating factor in achieving inter-firm alignment.
Furthermore, this Thesis provides a set of actions to be undertaken to achieve inter-firm alignment by covering the three different dimensions of vendor-client collaborations.
Follow-up research could further support the findings through more quantitative approaches, as well as provide additional insights on the dyad relational and contractual governance, as well as on those organizational factors and practises that enhance the relational and social elements necessary to foster inter-firm alignment.

Key words: IT Service Industry, Open Innovation, IT Relationship Management, IT Collaborations, Airline Service Industry, AirFrance-KLM