Investigating vendor selection criteria in information technology outsourcing using multiple criteria decision making

Abstract

The selection of an appropriate vendor from a set of competing vendors in information technology outsourcing is an essential decision for the effective and efficient management of supply chain management in a fiercely competitive environment. Given the growing and intensive applications of information technology resources to improve process efficiency, achieve growth, foster innovation and transform service delivery, the need arises to outsource the major information technology operations of an organisation, as a strategy for organisations to concentrate on their core businesses. Information technology outsourcing is an important constituent in supply chain management, because it demands effective selection of an appropriate vendor, based on multiple conflicting criteria. Supply chain management places strong emphasis on effective evaluation and selection of vendors against usually conflicting multiple criteria, rather than on cost as a single criterion upon which to base a decision. Multiple criteria generally include both qualitative and quantitative attributes, some of which can be fuzzy in nature. The overarching purpose of this research is to screen the most important criteria of information technology outsourcing for vendor selection based on expert opinions. The experts are from institutions of higher education, health, inspection and testing, property, shipping, state own enterprise, local government and transportation, who share their views regarding criteria that influence their vendor selection decision. Since the vendor selection decision is characterised by a high degree of subjectivity, interdependency and conflicting criteria, the analytic hierarchy process is applied to determine the weights of the identified criteria, evaluate and rank the potential vendors that provide information technology outsourcing services to the sampled institutions. The sample size for this research comprises 16 respondents and the 11 criteria which are cost, quality, commitment, additional resources, additional expertise, prior work, contract terms, confidentiality, location, on supplier database and black economic empowerment. Results show that quality of product is the most important attribute for vendor selection in information technology outsourcing. In addition, the study found that the sampled institutions can categorise their information technology outsourcing vendors more effectively and select a more effective supply chain partner. Moreover, the sampled institutions can provide unsatisfactory vendors with valuable feedback that will help them improve and become good partners in the future.