owner to reach the correct expected value of the knowledge transferred; otherwise, it is incomplete. The completeness or incompleteness of the sender and the receiver’s information sets is called the information structure of knowledge transfer.
Lin et al. (2005) identified four different information structures. Depending on the completeness or incompleteness of the sender and the receiver’s information sets, there are four possible combinations: (1) symmetric complete information; (2) sender-advantage asymmetric information; (3) symmetric incomplete information;
and (4) receiver-advantage asymmetric information.
An outsourcing relationship typically starts with the third structure of symmetric incomplete information. Neither the potential knowledge sender (vendor) nor the knowledge receiver has complete information about the knowledge transfer. One challenge in this structure is for the sender and the receiver to find mechanisms to alleviate information incompleteness for both before knowledge transfer. One surprising aspect of this structure is that, although no party holds information ad- vantage over the other, strategic distortion in communication still happens (Lin et al., 2005).
The higher stage of knowledge management systems can be defined in terms of the stages of growth model for knowledge management technology as described in the next section.
The findings of DiRomualdo and Gurbaxani (1998) establish the importance of understanding the different types of strategic intent for IT:
• IS.improvement:.Companies that want better performance from their core IS resources — the hardware, software, networks, people and processes involved in managing and operating the technology and supporting users — have the strategic intent of IS improvement. Their objectives typically include cost reduction, service quality improvement and acquisition of new technical skills and management competencies. They believe that outside specialists who are better able to keep pace with new technologies and skills, and who use superior processes and management methods, should manage some, if not all, of their IT services.
• Business.impact: Many IS organizations are struggling to develop the right mix of technical and business skills to exploit technology. As a result, many companies are looking to the IT outsourcing market for help, on the premise that outsourcing vendors’ state-of-the-art skills, capabilities and proficiency at recruiting and managing technologists make them better than internal IS organizations at using IT to improve business results. This strategic intent is deploying IT to significantly improve critical aspects of business performance.
Realizing this goal requires an understanding of the business and the link be- tween IT and business processes, and the ability to implement new systems and business change simultaneously. This form of outsourcing brings new skills and capabilities that link IT to business results rather than those related purely to technology.
• Commercial. exploitation: Outsourcing information technology with the strategic intent of commercial exploitation aims to improve the return on IT investment by generating new revenue and profit or by offsetting costs. The means by which IT assets can be leveraged commercially range from licensing systems and technologies developed initially for internal use, through selling IS products and services to other firms, to launching new IT-based businesses.
Companies pursuing commercial exploitation are often those with innovative information systems. Many come from technology-intensive industries, such as air transport and financial services, and have mission-critical systems that are expensive to maintain and enhance.
Based on the different types of strategic intent, DiRomualdo and Gurbaxani (1998), conclude that there is no “one size fits all” approach to IT outsourcing. Each type
of strategic intent for IT outsourcing requires different approaches and tactics to be realized successfully. And last, but not least, each type requires different approaches to knowledge management to be successful.
Stages.of.Knowledge.Management.Technology
The ambition level using knowledge management systems can be defined in terms of stages of knowledge management technology as was illustrated in Chapter IV.
Stage I was labeled end-user-tool systems, or person-to-technology, as information technology provides people with tools that improve personal efficiency. Examples are word processing, spreadsheets and presentation software. Stage II was labeled who-knows-what systems, or person-to-person, as people use information technol- ogy to find other knowledge workers. Examples are yellow-page systems, CVs and intranets. Stage III was labeled what-they-know systems or person-to-information, as information technology provides people with access to information that is typi- cally stored in documents. Examples of documents are contracts, articles, drawings, blueprints, photographs, e-mails, presentations and reports (Kankanhalli et al., 2005).
Stage IV was labeled how-they-think systems, or person-to-system, in which the system is intended to help solve a knowledge problem. Examples are expert systems and business intelligence.
The first stage is general support for knowledge workers to improve their individual efficiency. The second stage is to locate knowledge sources. The third stage is in- formation representing knowledge, that is, to store what knowledge workers know in terms of information. The fourth, and final, stage is information processing. The stage model was originally designed to describe to what extent a company has utilized
Strategic Intent/
Stage of KMS IS Improvement Business Impact Commercial
Exploitation Person-to-Tools End user tools to
improve efficiency Person-to-Person Efficient access to
knowledge workers Joint efforts for business
process reengineering Joint exploitation of assets
Person-to-Information Efficient access to
shared databases Joint efforts for
performance monitoring Joint exploitation of resources
Person-to-System
Figure 6.2. Contingent approach to knowledge management systems in IT outsourc- ing relationships
knowledge management technology, while here we use these categories to describe at which level the KMS should be in order to meet the changes in requirements from various IT outsourcing relationships on knowledge management systems. Our third proposition is illustrated in Figure 6.2.
An IS improvement strategy requires KMS to provide each knowledge worker with appropriate and standardized tools such as Word, Excel and e-mail at stage I. At stage II, an address book is needed, so that the client can find the updated informa- tion or the expert with the appropriate knowledge. At Stage III, the client needs access to the vendor’s technical database. In general, KMS in the IS improvement should use all the possible methods to facilitate the timely flow of expertise from the vendor to the client when required.
A business impact strategy is needed to leverage the client’s business processes.
The challenge of the person-to-person systems is two-way communication between client and vendor. Joint contribution in the knowledge exchange is found a neces- sity. The KMS must enable both parties to interact through letting them share both explicit and tacit knowledge. Collaboration tools are a possible way to deal with this challenge, although, as Alavi and Leidner (2001) see it, to make use of tacit knowledge through a KMS is a real challenge.
A commercial exploitation strategy has the purpose of making money on the orga- nizations’ IT assets. In addition to supporting knowledge transfer from vendor to client, the KMS has to effectively facilitate knowledge transfer from client to vendor.
The vendor needs free access to the acquired IT assets to fully exploit it. This is also important to the client, as he or she will get better deals from selling their IT assets.
In addition, the client needs continuous access to the IT assets that have been sold.
This makes client and vendor mutually dependent on each other. A good KMS for this type of outsourcing arrangement has to include information about who knows what as well as what they know from vendor and client as well.
The stages model for knowledge management technology can be applied to de- velop another research proposition concerned with knowledge management in IT outsourcing relationships. As knowledge management systems to be applied in an outsourcing relationship involve two parties, both parties will have to be capable of using such applications.
P4: Vendor and client need to be at the same technology stage of growth to be able to successfully communicate with each other through knowledge management systems.
In a different empirical setting, Ko et al. (2005) studied antecedents of knowledge transfer from consultants to clients in enterprise system implementations. They
found that the greater the shared understanding between a consultant and a client, the greater the knowledge transfers. Furthermore, the greater the absorptive capacity of a client, the more intrinsically motivated the client and the consultant, the more credible the consultant, the greater a client’s communication decoding competence, the greater a consultant’s communication encoding competence and the greater the knowledge transfer.
The stages of growth model can be interpreted as alternative strategies, where the alternative strategies are person-to-tools, person-to-person, person-to-information, and person-to-system. A comparison of these four alternatives can be made to the classification into personalization vs. codification strategy by Hansen et al. (1999).
In this comparison, Stages I and II represent personalization, while stages III and IV represent codification. Therefore, it can be argued that the need for KMS is greater when the outsourcing relationship is supported by a codification strategy rather than a personalization strategy.
P5:. A codification strategy is more dependent on knowledge management systems than a personalization strategy in knowledge transfer between vendor and cli- ent in an IT outsourcing relationship.