A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method
Affiliation(s)
School of Management, Dalian University of Technology. School of Computer Science & Technology, Dalian Maritime University. School of economic and management,Beihang University.
School of Management, Dalian University of Technology. School of Computer Science & Technology, Dalian Maritime University. School of economic and management,Beihang University.
ABSTRACT
An ever-increasing trend in today’s firms is to exploit outsourcing for those information systems (IS) functions deemed to be outside the company’s core competence. Given the multi-attribute nature of IS outsourcing decision, this paper argues that five factors, including, strategy, economics, risk, environment and quality, should be considered for IS out-sourcing decisions, and proposes the use of analytic hierarchy process (AHP) and improved ELECTREIII as aids in making IS outsourcing decisions. The AHP is used to analyze the structure of the outsourcing problem and determine weights of the criteria, and the improved ELECTREIII method is used for final ranking. It shows by means of an appli-cation that the hybrid method is very well suited as a decision-making tool for the IS outsourcing decision. Finally, po-tential issues for future research are presented.
An ever-increasing trend in today’s firms is to exploit outsourcing for those information systems (IS) functions deemed to be outside the company’s core competence. Given the multi-attribute nature of IS outsourcing decision, this paper argues that five factors, including, strategy, economics, risk, environment and quality, should be considered for IS out-sourcing decisions, and proposes the use of analytic hierarchy process (AHP) and improved ELECTREIII as aids in making IS outsourcing decisions. The AHP is used to analyze the structure of the outsourcing problem and determine weights of the criteria, and the improved ELECTREIII method is used for final ranking. It shows by means of an appli-cation that the hybrid method is very well suited as a decision-making tool for the IS outsourcing decision. Finally, po-tential issues for future research are presented.
Cite this paper
nullJ. Wang, Z. Lin and H. Huang, "A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method," Journal of Service Science and Management, Vol. 1 No. 1, 2008, pp. 1-10. doi: 10.4236/jssm.2008.11001.
nullJ. Wang, Z. Lin and H. Huang, "A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method," Journal of Service Science and Management, Vol. 1 No. 1, 2008, pp. 1-10. doi: 10.4236/jssm.2008.11001.
References
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[1] Loh, L., & Venkatraman, N, “Determinants of infor-mation technology outsourcing: a cross-sectional analy-sis”, Journal of Management Information Systems, 1992, 9(1), 7-24. [2] King, W.R, “Developing a sourcing strategy for IS: A behavioral decision process and framework”, IEEE Transaction Engineering Management, 2001, 48(1), 15-24 [3] Wu, F., & Li, H.Z, “The effect of knowledge man-agement on the successful outsourcing of IT/IS”, Science Research Management,2004, 25(2), 82-87. [4] Lee, Jae-N, “The impact of knowledge sharing, organ-izational capability and partnership quality on IS out-sourcing success”, Information & Management, 2001, 38, 323-335. [5] Lacity, M.C., Willcocks, L.P., & Feeny, D.F, “The value of IT sourcing”, Sloan Management Review, 1996, 37(3), 13-25. [6] Venkatraman, N, “Beyond outsourcing: Management IT resources as a value center”, Sloan Management Review, 1997, 38(3), 51-64. [7] Yang, C., & Huang, J, “A decision model for IS out-sourcing”, International Journal of Information Man-agement, 2000, 20(3), 225-239. [8] Roy, V., & Aubert, B, “A resources-based analysis of IT sourcing”, ACM SIGMIS Database, 2002, 33(2), 29-40. [9] Hsu, C.I., Chiu. C., & Hsu, P.L, “Predicting information systems outsourcing success using a hierarchical design of case-based reasoning”, Expert Systems with Ap-plication, 2004, 26(3), 435-441. [10] Aubert, B.A., Riverd, S., & Patry, M, “A transaction cost model of IT outsourcing”, Information & Management, 2004, 41, 921-932. [11] Saaty, T. L, The analytic hierarchy process. New York: McGraw Hill, 1980. [12] Schniederjans M J, Garvin T. “Using the analytic hierarchy process and multi-objective programming for the selection of cost drivers in activity-based costing,” European Journal of Operational Research, 1997, 100: 72-80. [13] Macharis C, Springael J, De Brucher K, Verbeke A. “PROMETHEE and AHP: the design of operational syn-ergies in multicriteria analysis. Strengthening PROME-THEE with ideas of AHP,” European Journal of Opera-tional Research, 2004, 153(2): 307-317. [14] K. Miettinen, P. Salminen, “Decision-aid for discrete multiple criteria decision making problems with impre-cise data”, European Journal of Operational Research, 1999, 119: 50-60. [15] M. Rogers, M. Bruen, “Using ELECTRE III to choose route for Dublin fort motorway”, Journal of Transportation Engineering, 2000, 126(4): 313-326. [16] Quinn, J.B., & Hilmer, F.B, 凷trategic outsourcing? Sloan Management Review 1994, 35(4), 43-55. [17] Quinn, J.B, “Strategic outsourcing”, Sloan Management Review, 1999, 40(4), 23-26. [18] Gilley, K.M., & Rasheed, A, “Making more by doing less: Analysis of outsourcing and its effects on firm per-formance”, Journal of Management, 2000, 26, 763-790. [19] Avgerou, C., & Cornford, T, Developing Information Systems: Concepts, Issues and Practice (2nd edn). Bas-ingstoke: Macmillan; 1998. [20] McFarlan, F.W., & Nolan, R.L, “How to manage an IT outsourcing alliance”, Sloan Management Review, 1995, 36(2), 9-23. [21] Collins, J., Millen. R., & Beamish, P, “Information sys-tems outsourcing by large American industrial firms: Choice and impact”, Information Resources Management Journal, 1995, 8(1), 5-13. [22] Khalfan, A.M, “Information security considerations in IS/IT outsourcing projects: a descriptive case study of two sectors” International Journal of Information Man-agement, 2004, 24, 29-42. [23] Bahli, B., Rivard, S, “Validating measures of information technology outsourcing risk factors”, Omega, 2005, 33(2): 175-187. [24] Osei-Bryson, K. Muata., Ngwenyama, O. K, “Managing risks in information systems outsourcing: An approach to analyzing outsourcing risks and structuring incentive contracts”, European Journal of Operational Research, 2006, 174(1): 245-264. [25] Clark, T., Zmud, R., & McCray, G, “The outsourcing of information services: transforming the nature of business in the information industry”, Journal of Information Technology, 1995, 10(4), 221-237. [26] Earl, M.J, “The risks of outsourcing IT”, Sloan Management Review, 1996, 37(3), 26-32. [27] Lacity, M.C., Herschheim,R., & Willcocks, L, “Realizing outsourcing expectations”, Information Systems Management, 1994, 4, 7-18. [28] Smith, M., Mitra, S., & Narasimhan, S, “Information systems outsourcing: a study of pre-event firm character-istics”, Journal of Management Information Systems, 1998, 15, 61-93. [29] Grover, V., Joong, M., Cheon., & Teng, J.T, “The effect of service qualify and partnership on the outsourcing of information systems functions”, Journal of Management Information Systems, 1996, 12(4), 89-116.