A decision model for IS outsourcing

Yang, Chyan; Huang, Jen-Bor

doi:10.1016/s0268-4012(00)00007-4

Cited by 176 publications

(138 citation statements)

References 24 publications

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“…Apart from a variety of empirical works (see [47] for an overview) a series of normative approaches to support make-or-buy decisions have been published in the last two decades (e.g., [85,87]). In the following discussion of make-or-buy literature, we focus on normative make-or-buy approaches for IT services (e.g., components, modules) or especially web services, as the sell option we consider in this paper is only relevant for IT/web services that are tradable on a market.…”

Section: Make-or-buy Decision-makingmentioning

confidence: 99%

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Exposing and selling the use of web services—an option to be considered in make-or-buy decision-making

Zimmermann

Müller

Heinrich

2016

Decision Support Systems

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Abstract:The emergence of the web service market has enabled firms to choose between developing web services internally and purchasing them externally from web service providers. In general, these socalled make-or-buy decisions have been the object of intense debate in the IT outsourcing literature.However, characteristics of web services such as loose coupling and the current trend of digitalizing application interfaces enable new opportunities especially to non-software firms: when a firm decides to develop a web service internally (make-decision) it has the option of exposing and selling the use of this web service after its internal development (sell option). In this paper, we propose a normative approach for the valuation of such a sell option based on real option theory, taking into account the characteristics of web services. This approach enhances traditional make-or-buy approaches by additionally considering this sell option in decision-making. Our results are twofold: (I) the sell option has considerable impact on traditional make-or-buy decisions and makes the internal development of web services more attractive; (II) it is preferable to execute the sell option as soon as possible after completion of the internal development of the web service.

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Section: Make-or-buy Decision-makingmentioning

confidence: 99%

“…Consequently, revenues have no (decision-relevant) effect on the make-or-buy decision, which is why revenues from the internal use remain unconsidered in traditional make-or-buy approaches (cf., [20,87]). …”

Section: Assumption 1 (Option Runtime): a Decision Maker Can Execute mentioning

confidence: 99%

Exposing and selling the use of web services—an option to be considered in make-or-buy decision-making

Zimmermann

Müller

Heinrich

2016

Decision Support Systems

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“…His focus on "four independent sources of value from IS resource" is useful for identifying IS elements that might be considered for outsourcing [6]. Yang and Huang (2000) argued that five factors, including management, strategy, economics, technology and quality, should be considered for outsourcing decision, then they used the analytic hierarchy process (AHP) method to help users in structuring the outsourcing problems [7]. Roy and Aubert (2002) presented an IT outsourcing decision model based on the resource theory [8].…”

Section: Literature Reviewmentioning

confidence: 99%

“…Another consideration of economics is financial flexibility. Because of outsourcing, the facilities and employee would be transferred to the vendor side, which transform fixed costs into variable costs, resulting in increasing financial flexibility [7][9] [20][21].…”

Section: Economicsmentioning

confidence: 99%

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A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method

Wang¹,

Lin²,

Huang³

2008

JSSM

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Introducing Heterogeneity of Managers' Attitude into Behavioral Risk Scoring for Software Offshoring

2011

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In the spirit of Nonaka and Takeuchi's Socialization, Externalization, Combination and Internalization (SECI) model, this paper explores how to integrate the heterogeneity of managers' attitudes, as a behavioral dimension of tacit knowledge, into risk scoring for software offshoring. We propose a linear mixed model approach to make individual heterogeneity explicit within a conjoint analysis experimental framework. The model is then estimated using a data set on Japanese software outsourcing. Based on heterogeneity elicitation, an optimist-pessimist categorizing of managerial attitudes towards risk reveals the drivers of such heterogeneity. We find that experience and the criteria used for selecting vendors are the key drivers. Our behavioral risk scoring, incorporating the attitude heterogeneity, outperforms the ordinary least square (OLS) estimate in risk prediction and yields real benefits in terms of risk reduction, forgone benefits saving and profits improving.

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A decision model for IS outsourcing

Cited by 176 publications

References 24 publications

Exposing and selling the use of web services—an option to be considered in make-or-buy decision-making

Exposing and selling the use of web services—an option to be considered in make-or-buy decision-making

A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method

Introducing Heterogeneity of Managers' Attitude into Behavioral Risk Scoring for Software Offshoring

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