Information Systems Outsourcing Vendor Selection Based on Analytic Hierarchy Process

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. One of the most critical steps in outsourcing is vendor selection, which is a strategic decision. We model the vendor selection problem as a multi-objective optimization problem. Given the multi-attribute nature of IS outsourcing decision, this paper argues that five factors, including cost, quality, project, certification and delivery performance, should be considered for outsourcing vendor selection, and proposes the use of analytic hierarchy process (AHP) method in making IS outsourcing vendor selection. The AHP is used to analyze the structure of the outsourcing problem and determine weights of the criteria and make the selection. It shows by means of a case that the method is very well suited as a vendor-selection tool for the IS outsourcing. Finally, potential issues for future research are presented.