In the first part of this thesis, the different approaches which can be used when entering a contract in an outsourcing setting are presented. It is analyzed how the input-, output-and outcome approaches differ with respect to their use, and this is demonstrated based on their respective remuneration models. The results of this part show that, given the different characteristics, the input approach is based on a cost mindset and are applicable when the outsourcing agreement comprises few services. The contract will usually be concerning a short contracting period. When shifting to an output-or outcome setting, a paradigm shift occurs due to the change of mindset towards value as well as the length of the contract. It is argued that only a limited joint interest exists in the collaboration in an output approach as compared to the outcome, based on the gainsharing initiative which is only in force for some part of the contracting period. In an outcome setting the outsourcing parties work together towards a joint business goal, where by the service provider, given the performance-based remunerations models, is incentivized to optimize and innovate processes due to the possibility of over performing for the entire contracting period. In the second part of the thesis, the potential of strategic contracting in relation to the three possible approaches is addressed. The analysis is based on Dyer & Singh’s relational-rent theory, and thereby it is demonstrated how the input approach is characterized as a conventional arm's-length contract, by which the parties engage in the business relation with self-interest. Furthermore, it is argued how relational rent can be generated within the scope of both the output-and outcome approaches. However, from an identification of the strategic parameters it transpires that the greatest potential to perform strategic contracting is realized when an outcome approach is applied. The strategic outsourcing relation is based on a great deal of trust and four characteristics emerge from the relational-rent theory and concern 1) collaboration, 2) commitment, 3) knowledge sharing and 4) private ordering. Further two characteristics are added, and these concerns5)remuneration of the service provider and 6)commercial risk allocation. When ensuring these six characteristics in an outcome relationship ex ante, the potential to generate relational rent is released. In the third part of the thesis it is investigated and analyzed, how the strategic contracting relationship can be secured when facing subsequent circumstances. It is argued, that when including a gain and hardship clause in the contract ex ante, the relationship will be equipped to face the possibility of further risk that may make the agreement more burdensome or the possibility of a sudden economic opportunity, which could generate further relational rent. The provisions afford the collaboration with a mechanism of renegotiation by which the parties together can supplement the binding basis in order to adapt and overcome circumstances that could affect the collaboration and, thereby, the continuation of the relationship. The findings of the analyses show that when intending to engage in a value-oriented and strategic contracting relationship, more engagement and investments are required by both parties in order for the partnership to be successful. However, a over normal profit and a competitive advantage can be generated.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||120|
|Supervisors||Kim Østergaard & Bent Petersen|