Analysing alternatives for information technology outsourcing decision: an analytic network process approach

Abstract

Information Technology (IT) outsourcing has become one of the strategies adopted by businesses to manage the information needs of the organisation. The most important reason for IT outsourcing is the organisations' focus on their core competence while other reasons include controlling investments, attaining technological flexibility, reducing staffing problems, and coping with the fast pace of growth in information and communications technologies. But IT outsourcing is a managerial decision that entails various risks and problems. Organisations opting for IT outsourcing are faced with decisions regarding the choices available such as total outsourcing, multiple-supplier sourcing, joint venture/strategic alliance sourcing and insourcing. In this paper, the Analytic Network Process (ANP), which utilises the concept of dependence and feedback is proposed as a suitable technique for analysing IT outsourcing decision. This approach captures interdependencies among the decision attributes and allows a more systematic analysis. It also allows inclusion of all the relevant criteria (tangible or intangible, objective or subjective, etc.) that have some bearing in arriving at the best decision.