Exploring the relationship between internal IT and customers in professional service companies : the role of formal and informal governance

• Main Author: Halvorsroed, Jan
• Published: University of Strathclyde 2013
• Subjects: 658
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.576453

There is extensive research available covering the governance of intercompany relationships between a company and its external providers. Far less has been done to explore intracompany relations. Most governance models balance formal mechanisms, for example contracts, with informal features, including trust and ongoing personal relationships. The research studies governance models for intracompany relations between Internal Service Providers (ISP) and customers within Professional Service Companies (PSC). Particularly due to knowledge sharing and the relationship with external customers, PSCs tend to favor informal governance like trust and ethical norms. Transaction Cost Economics and Social Exchange Theory have both been used to explain intercompany relations. This research applies the same theories to intracompany exchanges, but supplements the theoretical framework with IT governance and the particular governance features available within PSCs. Research methodology uses a multi case approach with data gathering from three country organizations of KPMG. Interviews were conducted with members of internal IT, representing the ISPs, and theirs exchange partners within the business units. The findings confirm that all case countries use a combination of formal and informal governance to manage their internal relations. What the research also highlights is the lack of a clear strategy within all countries for how to best balance formal with informal governance. The researcher suggests that each company analyses their need for governance to meet regulatory, strategic and operational goals. Formal governance might be required for some goals but can be supplemented or replaced by informal ones in other cases. There is a theoretical implication from successfully applying the theories to intracompany exchanges. Finally, research regarding internal operations within PSCs in general, and governance mechanisms specifically, also benefits from this research.