The Business Process Outsourcing

Published Date: 02 Nov 2017

Introduction

This Study is concerned about outsourcing and its effect on the service Quality provided,

Service Quality is a concern, because this is what causes customer satisfaction.

It has been reported on recent studies that the Satisfaction that companies have within the information system outsourcing business is around 33% only while on other sectors that don’t involve information systems it is between 70% and 80% (Gorla & Lau, 2009).

This leads us to ask a question of: "what is the effect of outsourcing on Service quality?"

To be able to answer this Question, this study is concerned on understanding outsourcing, and its types, its challenges and benefits.

It is also concerned about understanding quality, its definition, dimensions, and finally on understanding what can be done to maintain the benefits of outsourcing while reducing the risks and challenges.

In order to maximize the benefits of an outsourcing project and keep the risks as low as possible, some tools are used such as Service level agreements (BEAUMONT, 2006) which helps on regulating the relationship and defining its parameters, however, SLAs alone cannot guarantee the success of the outsourcing process (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

Another tool to complement the SLAs and has a positive effect on the overall performance is is the relational governance (McEvily, Perrone, & Zaheer, 2003)which is also discussed in this study along with its elements

Outsourcing

Definition of outsourcing

There have been various definitions of out sourcing, to some extent all the definitions of outsourcing revolve around the same meaning.

According to (Sen & Shiel, 2006) Outsourcing refers to the practice of transferring activities traditionally done within a firm to third party providers within the country or outside it’s Boarders While (Mahmud, Msum Billah, & Chowdhury, 2012) define outsourcing as a process in which a company delegates some of its in-house operations to a third party through which the company acquires services from another while maintaining ownership and ultimate responsibility for the processes,

On the other hand (Zhang & Sun, 2012)define outsourcing in the context of Government outsourcing as the delivery of a public service by a private or nonprofit organization and sometimes by another public organization.

As Stated on the above various definitions, we can notice that outsourcing consists of

a party that owns the business and usually performs activities in house which will be referred to in this paper as the "User"

a function/ Task that is required to be performed

a party that provides the Service and performs the required Functions/tasks/Processes which will be called in this paper the " outsourcer"

and for the Purpose of this paper the Definition of outsourcing will agree with (Sen & Shiel, 2006) and (Mahmud, Msum Billah, & Chowdhury, 2012) and define outsourcing as the activity of delegating a third party "outsourcer" to perform some Task/Functions for the company " user" in exchange of a fee.

Who Outsources? (THE USER)

Governments Contract Private organizations to perform Activities such as Public Transportation or Health insurance, for profit or nonprofit, to perform the work (Zhang & Sun, 2012), while Large corporations in Various industries and sectors Such As Computer Hardware/software, Banking Sector, outsource many functions such as IT function as well as contact centers.

An Example of corporations that outsource in the Computer Hardware/Software would be IBM & Dell. (Ren & Zhou, 2006)

While on the banking sector Lehman Brothers outsourced its contact center operations both offshore and in USA (Ren & Zhou, 2006)

Even on a smaller scale Companies that belong to the SMB Segment can seek outsourcing (Kotosaka, 2010) due to the various benefits that exist such as cost saving and focus on core business.

In a later section the benefits of outsourcing will be listed and discussed in details.

As a conclusion to the subtopic of who uses outsourcing, the answer can be "any Company/Entity can use and benefit from outsourcing irrespective of the Size of the entity."

Types of Outsourcing

There are 2 main types of outsourcing; one of them is a commonly used type, and another is a new type which is starting to emerge in the past few years

The old Type is the "Business process outsourcing" which will be referred to as BPO in this paper while the new emerging type is called Knowledge process outsourcing, in this paper it will be referred to as KPO.

Business Process Outsourcing

Business process outsourcing is divided into Sub types as classified by (KLIMAS & RUŽEVIČIUS) and they are as follows:

Common outsourcing:

Transfer of entire functional chain or process with all available resources to third parties; the organization preserves as internal solely the setting of strategies and goals and control of compliance with the terms of the contract

Global outsourcing (Offshoring):

Hiring 3rd party that is in a different country that can perform the Tasks/ Jobs handed by the User Company in a less costly manner.

Combined outsourcing:

Using outside resources on both the Short and Long Term in the incident of reorganizing Operations or implementing new important business process

Consulting outsourcing

Seeking the help of an outside high Caliber employees or organizations for one time to manage problems of single project/activity

Outsourcing of establishment of a new organization

Creating a new organization of which the Shares will be owned by a Key Organization with other parties engaged in the operation (third parties)

Knowledge Process Outsourcing

Knowledge Process outsourcing is relatively new. It is the process of which the service provider will add knowledge to their service, this knowledge comes from deep understanding of the customer’s needs and business nature. (Sen & Shiel, 2006)

KPO is growing Rapidly however, it is very challenging for the service receiver, because it takes a tough decision on which parts of the outsourcing process are to be performed within the firm and which can be outsourced.

It also involves a higher level of information and know-how disclosure, which can make many firms skeptical about it. (Sen & Shiel, 2006)

Stages of business process outsourcing

In the case where the Company or entity has taken the decision of out sourcing there are several stages of the process of outsourcing the Business Process

The BPO stages distinguished by (Clements, Donellan, & Read, 2004)are as follows:

The transition period:

• Determining which functions or services are to be outsourced and to which extent

• Preparing Changes in organization to ensure a smooth transition of outsourcing in terms of finances, and the employee’s acceptance

• Transferring the assets of the company in the case where the outsourcer will make use of them and operate them

• transferring the Staff in case the outsourcer will maintain the staff that used to do the Job in house.

Execution:

• specifying the revenue and profitability depending on the outsourced service

• Specifying how the Outsourcer will be paid in a fair manner

•feedback and corrective actions

Termination:

• Agreeing that the contract will not be renewed, or terminated;

• Financial consequences resulting from premature termination on the contract

As mentioned, in the case where the entity has decided that the service will be outsourced, parties will usually Draft a Service level agreement that will be referred to in this literature as SLA. In stage 2, SLA will be negotiated in the 4th, modifications if needed will be on the 7th & 8th Stages & will be used on the 6th stage.

In contrast to that, the Outsourcing Cycle and stages by (BEAUMONT, 2006) are as follows

1. Specifying the Service/Process that will be outsourced.

2. Specifying the objectives behind outsourcing to and getting ready for negotiation.

3. Shortlisting and Choosing Service providers.

4. Negotiate a contract and its Clauses.

5. Agreeing and implementation. Putting in consideration the process of transferring might be bumpy.

6. Monitoring and auditing performance done by provider.

7. Modifying the contract and SLA according to the new criteria imposed by Current Situation, Market and technology.

8. Renewal or termination of the agreement.

Benefits of outsourcing

After applying many Studies on several companies that Use outsourcing (Clements, Donellan, & Read, 2004) concluded the benefits to be:

Cost Saving for the company while still acquiring newly high qualified resources.

An opportunity to assess the performance and re organize how the processes are being managed, this is a strategic benefit and tool and a motivation to drive change to the organization

Outsourcing allows the Organization to be simpler and a Flat organization, this is a consequence of the fact that the processes and tasks are handed over to a third party which leads to some of the functions can be fully operated outside of the company, this helps in terms of communications and approval levels the organization to be less bureaucratic and more simple which reflects positively on the overall performance of the company as well as the performance of each department

Through outsourcing the organization ensures that departments have more time and resources allocated towards more important functions, this opens the door to more efficiency and effectiveness and better performance, as well as enables organization employees to be more creative and focused on the more important functions

By outsourcing companies get better and wider chances to use knowledge, more recent and available technological properties. By implementing Business process outsourcing projects, human resources are also moved to the 3rd party, hence the remaining employees get a better chance to learn and have to develop higher skills on other functions, which enriches the human resources within the company.

Outsourcing allows the company and its employees to re visit the inter department relationships, which strengthens the relationship between departments. This happens due to the fact that while re visiting the relations, responsibilities and processes of who is responsible for tasks? Why? How? And When are set and emphasized, this allows each party within the company comply to the rules as it knows that others will comply as well since it’s been re visited recently.

Enhance the Quality of the services performed within the company as well as the goods produced due to the increased focus and resource allocation.

Makes recruiting new employees with higher qualifications possible and more likely. This motivates such employees who appreciate and look forward to full utilization and enhancement of the capabilities.

Enables a more accurate forecast of the costs and expenses, the reason behind that is that the entire operation is moved to the third party that will endure the costs and charge the company at a fixed rate.

Reduced costs of operation in the times where the work load is low and not much work is there to be done either in terms of general resources or technological resources

As Mentioned previously, outsourcing puts the company in a situation of higher flexibility, which allows it to be a much agile company that focuses on marketing and sales rather compared to competitors, rather than focusing on the supporting functions.

Companies advance when they get into a partnership, outsourcing is one form of partnership and is important as it is not just a single transaction, rather a long term "contract’ and both companies must start making sure their organizations have the ability to meet objectives of the outsourcing project, hence they work on developing their companies and human resources to be able to deal with this matter.

Challenges& Risks of outsourcing

Problems

As much as outsourcing can be beneficial to the company, there are risks that can lead to major losses and problems to the company if they were not dealt with in an appropriate manner,

The risks originate from the outsourcer developing a Machiavellian Attitude (Gorla & Lau, 2009)

Risks are demonstrated through the Agency theory (AT) and the Transaction Cost Economic (TCE) Theory.

According to the Agency theory which suggests that people are concerned more about their self-interest than of others interest, which will result in conflict whenever 2 parties are engaging in an activity requiring cooperation (Jensen, 1998); Which can be also applied on firms and companies, an outsourcing firm will always seek its best interest irrespective of the best interest of the client (User Company) which can form a risk factor on the client.

Another risk factor emerges from the theory of TRANSACTION COST ECONOMIC (TCE), which discusses the attitude a firm or party will take once an agreement is reached, hence the other party can be dependent on the first, hence the first can make use of this and from the fact that a change in the relationship and seeking new partnership with another provider will be costly and increase the costs of providing the service. (Gorla & Lau, 2009)

(Gorla & Lau, 2009) Described the problems that can face an outsourcing process and categorized them into several categories which are listed and elaborated below

Vendor attitude problem

This is best described by the outsourcer’s attitude of not committing and becoming irresponsible towards the User. Outsourcer can perceive the situation as an opportunity to increase the costs as advised by the TCE and develop a system that will serve the User but not fully in order to be able to serve several users, this causes dissatisfaction towards the service provided and causes the user to stop outsourcing in future incidents.

Vendor competence problem

This represents the fact that the outsourcer may not be competent enough for the Task, an example of this can be in Information Systems outsourcing where the outsourcer my not be technically knowledgeable enough and can produce an end product that doesn’t technically serve the User in the best form, or even be a dysfunctional product that is of no use to the user.

Vendor coordination problem

Coordination discusses the linkage of the various components and departments of the organization with each other to perform the tasks as a single units rather than islands and compartments. Lack of vendor coordination can mean miscommunication, the User and the outsourcer not cooperating and helping each other, and the User not being able to control/audit the outsourced Tasks/ Processes/ Activities. Both of the User and the outsourcer can have a higher self-interest according to the AT theory and a conflict of interest can occur, in this situation the User is usually dissatisfied.

In-house competence problem

There are two components to this problem, 1) internal deficiency and lack of skills and, 2) absence of outsourcing experience by the user.

According to the above and in line with the AT two problems occur, 1) absence of sufficient effort exerted by the outsourcer, 2) Outsourcer exaggerates its capabilities to win the deal.

The Above Agency problems are likely to occur more when the User (client) lacks the knowhow and competency, and as a result, the overall performance will not be satisfactory, this will also lead to higher costs paid by the User which defies the benefit of cost saving in the first place.

The above mentioned problems can lead to dissatisfaction and disappointment by the user and a decision of contract termination or renewal cancellation can be influenced by such behavior and attitudes by the outsourcer, not to mention the losses of time and resources as well as opportunities, and can be catastrophic.

Consequences &outcomes

After stating the Risks and categorizing them (Gorla & Lau, 2009) have also categorized the consequences and outcomes of those Risks into five categories

Loss of corporate security

This point refers to the state where a certain knowhow within the organization has been transferred to an external party, and according to the AT if the contract is not well written and "Water tight" this knowhow and confidential information is jeopardized to be transferred to competition.

Degradation of services,

As a result of the conflicts that can occur between the Outsourcer and the User, the Service provided will be degraded and not up to the desired level by the User and contracted level between both parties.

A good example to explain this situation, is when a mobile operator outsources its retail operation, the outsourcer can hire employees that are of lower caliber to save costs.

Unqualified Employees will degrade the Service provided to the customers, as well as the costs to retain the dissatisfied customer and save company reputation.

This creates a conflict between the outsourcer and the user, because the user has to bear the consequences of bad service being provided to its customers.

This is a risky situation and causes big problems in outsourcing. It also creates a dilemma for companies, whether to outsourcer and compromise Quality in favor of cost saving, or not to outsource, save the quality and have more costs.

On the other side, service can be degraded in the incident of both parties having some conflicts like payment issues, or communication problems, this can result in both companies being dragged into struggles and losing focus over the outsourced process/Task that needs to be done, hence service is degraded not because the Outsourcer is not capable or has high caliber, rather because of loss of focus.

Loss of control

The loss of control occurs as the operation/task/ process is done outside of the company, in the case where the sufficient knowledge of how to follow up and control an outsourced tasks, the User faces the threat that the Outsources will be in control of the process.

If the process is vital to the business and not a supporting function, this may lead to a huge threat that the outsourcer will favor its own self-interest over the User’s interest and lead the business in the direction that best suits its goals (I.E. a company that used to sell its goods with a direct sales model and moving towards indirect, and hiring distributors can face such problem as the lack of the sufficient knowledge of control can cause them loss of control over their selling strategies, a perfect example on this point can be Dell computers in the EMEA region where Dell is a company that sells directly to its customers in North America, however in the EMEA region, it adopted an indirect sales strategy and is suffering because the distributors are driving the Sales strategies rather than complying to Dell’s Strategy)

High Unexpected Costs

Usually costs in an outsourced project/ process/ task are preset and fixed costs as the Outsourcer will provide the service at a fixed rate, however, when complication occur and a conflict of interest exits between the User and the outsourcer as proposed by both AT and TCE, this may lead to several options like a delay in the execution which costs extra costs AND/OR the user breaching and terminating the contract and take a decision to either back source or to seek another provider to outsource the Task, this leads to higher un expected costs.

Loss of in-house capability.

When a user takes the decision to outsource, this eventually affects the organization from within as no one internally is required to perform the task, this may lead to the loss of know how after a certain period of time, which puts the organization in a vulnerable position and gives the outsourcer an upper hand in negotiating the renewal of the contract as it is a difficult job to switch vendors especially if the current Vendor does understand the needs and culture of the organization and is performing well. However will take advantage and try to increase the cost of the contract on the renewal due to the limited options that the user has.

Out sourcing is a major decision that needs to be thought thoroughly, it is a risky decision if taken quickly and not well prearranged (BONFOUR, 1999), this can lead to failure of outsourcing process, hence "back sourcing" occurs, the problem with back sourcing is it is costly and is even a harder decision than outsourcing.

Leaders in organizations often fall in the mistake of considering the benefits of outsourcing without really considering the risks, which can result in failure and extra costs (NILI, Shekarchizadeh, & SHOJAEY, 2012)

The Above idea is supported by (Lonsdale, 1999) where he mentions that outsourcing is a new tool to managers and they lack the methods of measuring the consequences and usually expect outcomes more than what is actually delivered

On the other Side, (BEAUMONT, 2006) agreed with most of the mentioned above yet he added points of his own and presented the Challenges of outsourcing to be

Loss of competencies within the company,

Risking the confidentiality of information

Challenges of handing over Processes to the Outsourcer,

consideration of appropriate costs,

an absence of a cultural "Match" between the parties and

the absence of flexibility while signing an obligatory contract

For the purpose of this literature review the Consequences and outcomes that will be considered till the end of the research are

Degradation of Services

Loss of control

High un expected costs

Service Quality

Definition

There are many definitions of quality according to the Good/Service Provided,

One definition put by (Ren & Zhou, 2006) in call center Business is the rate that the customer’s need or quest is properly served that customer doesn’t need to re-call.

While (Ramseook-Munhurrun, Naidoo, & Lukea-Bhiwajee, 2010) Adopted the definition of Quality which states "Conceptually, service quality is defined as global judgment or attitude relating to the overall excellence or superiority of the service"

In contrast to that, (Alamgir & Shamsuddoha, 2003) mentioned that Service quality is determined by the variance between clients' anticipations of the service provided and the Clients’ assessment after receiving the service.

Factors and Dimensions of Quality

(NILI, Shekarchizadeh, & SHOJAEY, 2012) Identified numerous factors of quality and are listed as below

Quality planning,

Quality control,

Quality assurances, and

Quality improvement.

While according to (Alamgir & Shamsuddoha, 2003) who identified Dimensions of Service Quality are demonstrated in the below Table

The above mentioned factors are important to be considered by the User company because if the in house Service Quality is highly regarded in the first place, then the idea of outsourcing should be considered ONLY if it will enhance the Service which should be measured according to the above factors, otherwise, a company/firm will be risking a degradation in Quality

Effect of outsourcing on Service Quality

As mentioned previously on the Benefits and challenges of the outsourcing, out sourcing has an effect on the Service quality in both a positive and negative manner.

Below are the positive outcomes of outsourcing on quality according to (Clements, Donellan, & Read, 2004)

Through outsourcing the organization ensures that departments have more time and resources allocated towards more important functions, this opens the door to more efficiency and effectiveness and better performance, as well as enables organization employees to be more creative and focused on the more important functions

Enhance the Quality of the services performed within the company as well as the goods produced due to the increased focus and resource allocation.

While according to (Gorla & Lau, 2009) the negative implications that affect the service Quality are:

Degradation of services As a result of the conflicts that can occur between the Outsourcer and the User. This can be very risky and harmful in the incident where the outsourced Task/Service is a service that is originally provided by the user to its Clients.

Loss of control where the task is performed outside of the company and the User losses control over the process, and the outsourcer is not up to the competency level which also has a negative effect on the service of Quality provided.

Service Level Agreements (SLA)

Service Level Agreements (SLA) are agreements that specify the Services that the Service Receiver (SR) is expecting and the level of the quality of the service Expected.

SLAs are a fundamental part of any outsourcing project, although it doesn’t guarantee 100% that the SR will receive what is expected from the Service Provider nor the out sourcing process will be Successful (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008), but it forms a good guidance throughout the contract lifetime.

Definition

(BEAUMONT, 2006) Defines an SLA as "A service level agreement (SLA) is a contract that defines services that the vendor will provide to the client and specifies ‘meta-data’: information about the agreement itself, such as its term, the parties, and ways in which disagreements or changes are to be negotiated."

Characteristics of SLA

SLAs have several characteristics, according to (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008) those characteristics are:

Foundation Characteristics

Change Characteristics

Governance Characteristics

Each of those characteristics has a role in the SLA, the foundation characteristics as the name may indicate set the foundation that the SLA is based on, while the Change characteristics are meant to make sure that the SLA is not Static and is able to change according to the future needs, while at last the governance Characteristics are meant to help the User make sure that the service level is up to expectations, as well as if some conflict occurred, it helps on the resolution.

Foundation characteristics

According to (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

FC is meant to define the mutual goals and set clear guidelines of performance by specifying responsibilities and roles of each party within the outsourcing agreement.

"service-level objectives" and "service- level content" factors clearly set the requisites and arrangements, and form the grounds of working values of the relationship between both parties of the agreement.

Another element "process ownership plan" will identify the responsibilities and roles of each party and help decision makers and team members carrying out detailed methods to execute the contract obtain a unified view of key process along with the process owners

Foundation

While (Kishore, Rao, Nam, Rajagopalan, & Chaudhury, 2003) agreed to the above and added that FC components are aimed to answer in specifically the Questions of 1) which service has to be delivered and at which level? 2) Who is responsible on delivering which service? When those questions are answered and agreed upon, the relationship between both parties should be at ease and conflict points are reduced.

Also, it is important to set the FCs before the outsourcing process begins, as it plays an important role in defining and preserving the set of rules of engagement, when we mention "preserving" it is because sometimes contracts are on long term, and people who initially started the process can be away and new people are taking over overtime. (Choudhury & Sabherwal, 2003)

Change characteristics

Change Characteristics are aimed to set procedures for modifying the agreement to be more in line with the transforming objectives of the relationship that exists based on the outsourcing process (DiRomualdo & Gurbaxani, 1998)

It has been evident that many contracts of outsourcing were amended after initially being agreed upon and worked according to, that happens due to the alteration in the needs and the acquisition of new information and data either party. (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

This amendment happens through Plans that are components in the change characteristics clauses in the contract which are named "the future demand management plan" & "anticipated change plan" under which both sides of the agreement agree on constant assessment of the contract and amending it when needed to meet the dynamic business essentials of the service receiver. (KLEPPER & Wendell, 1997)

The Change characteristics also allows both parties to agree on methods to respond to abrupt changes in needs of receiver in complicated tasks (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

Governance Characteristics

The Governance Characteristics are the set of characteristics in the SLA that is concerned with the Service receiver being able to make sure that the service level agreed upon is being constantly delivered.

The GC consists of four components and they are:

Communication plan

Measure charter

Conflict arbitration plan, and

Enforcement plan

Those 4 components are concerned with assessment of the service performed, and the tactical methods enabling the receiver to guarantee the objectives of outsourcing relationship are managed. (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

On the other side, if the service is assessed and found not up to the desired and agreed level GCs also help on finding resolutions to such occurring conflict by specifying the processes of conflict resolution in the contract.

Relational governance

Relational governance suggests that rather than having the responsibilities, promises and expectations happening and being delivered through a force of a contract, it can happen by building up a positive relationship between entities that obtained mutual trust. (Goo, Kishore, Rao, & Nam, 2009)

(McEvily, Perrone, & Zaheer, 2003) Mention there is much evidence from previous researches that elaborates that relational governance enhances the overall performance between organizations, especially on outsourcing processes.

A question rises on whether the relational governance is an alternative to the Governance characteristics of the SLA, and it is evident that it doesn’t replace the SLA contract rather it adds to it and both should be working simultaneously.

Relational norms

Relational norms are norms are behaviors that are accepted, expected and appreciated, they are shared by key decision makers aiming to achieve the objectives or the entire group rather than individual goals (Goo, Kishore, Rao, & Nam, 2009)

There are three main types of relational norms and they are

Solidarity

Information exchange

Flexibility

According to (Macneil, 1980) Solidarity is "a two way anticipation that behaviors are aimed towards maintaining the relationship and there is a high value placed on the joint relationship."

While Information exchange is the idea that parties are willing to exchange valuable information openly and voluntarily,

Flexibility on the other hand is the concept that both concerned parties are willing to make adjustments to their needs and requirements if needed. (Goo, Kishore, Rao, & Nam, 2009)

In situations where the 3 components of relational governance exist, relationship between the user and the outsourcer is usually a good relationship and this affects the outsourcing project positively.

Harmonious conflict resolution

In a relationship between organizations especially on outsourcing, conflict is inevitable, this is due to variance in Goals, opportunism, different cultures. (Doz)

it is important to try to minimize the conflicts between the organizations as addressed previously, but also, since we acknowledge the fact that conflict is inevitable (Kale, Singh, & Perlmutter, 2003), it is crucial to manage the conflict; how conflict is managed has a serious effect on the future of the relationship between parties. (Goo, Kishore, Rao, & Nam, 2009)

To be able to manage and resolve conflicts harmoniously, s few clauses may need to be embedded within the SLA.

If the foundation Characteristics are clear enough, this helps both organizations resolve their conflicts in a harmonious way.

Mutual dependence

Mutual dependence refers to the idea that both organizations can achieve much more by cooperating together than each can do on its own, this is basically the concept of integration and what is so called "1+1=3".

When organizations have mutual dependence, this helps them manage the conflict as well as gives a strong reason for he outsourcer to maintain the service level that is agreed upon on the SLA, it also is a good reason for the User to be flexible enough in minor issues that don’t make much of difference in the Quality of service provided.

Trust

Trust refers to the perception by one party that the requirements and obligations will be delivered by the other party on timely basis, (Goo, Kishore, Rao, & Nam, 2009) it is an indispensable requirement for relational governance (McEvily, Perrone, & Zaheer, 2003), trust is built through positive experiences that the User has been through while dealing with the outsource, and found sufficient levels of integrity and fairly good results on the tasks level, as well as experiencing resolving conflicts in a harmonious manner whenever they occurred.

Commitment

All the above mentioned factors (Relational norms, Harmonious Conflict Resolution, Mutual Dependence, and Trust) when exist help Building a sense of commitment at both parties of the outsourcing contract.

Commitment is an important matter, because as mentioned previously, SLA Clauses and obligations do not cover all the aspects of the project being outsourced, and in many cases when the SLA is very detailed it causes an opposite effect to what is desired, and what really happens is it affects the Trust negatively. (Goo, Huang, & Hart, A Path to Successful IT Outsourcing, 2008)

Conclusion

At"last we conclude that outsourcing is a sensitive issue and can lead to huge success or huge failure.

Outsourcing" has an effect on the service Quality, it has been shown by the above topics that outsourcing affects the service quality and one of the risks of outsourcing is the "degradation of service Quality".

However in order to make use of the outsourcing and maximize the benefits while minimizing the risks and problems of outsourcing, several techniques and steps need to be taken, amongst those techniques are to maintain the know-how of the process outsources within the company to be able to manage the outsourcing process.

Another main technique to make the outsourcing project work and not affect the Service Quality is to Use SLA.

One factor that may lead to the failure of SLAs maintaining the service Quality as desired, is the lack of the right to audit on the service in the SLA either by the user or by a third party audit firm.

SLAs are a good tool to try to keep the service quality at the same level that was performed in house, are still not a guarantee that the service that will be provided by the outsourcer will match the expectations, and needs to be backed up with relational governance tools that will build the Commitment of both parties to make benefit from the outsourcing contract in a fair manner that will take into consideration the welfare of both parties, and minimize the opportunistic behavior that either one of the organizations can take to take privilege of a certain situation on the account of other organization’s loss.