The decision of strategic information system/information technology (IS/IT) outsourcing requires close attention to the evaluation of supplier/vendor selection process because the selection decision involves conflicting multiple criteria and is replete with complex decision-making problems. Selecting the most appropriate suppliers/vendors is considered an important strategic decision that may impact the performance of outsourcing engagements. The purpose of this study is to provide a more efficient delivery approach for evaluating and assessing possible suppliers/vendors. Using the fuzzy VIKOR method, this study provides a rational and systematic process for developing the best alternative and compromise solution under each of the selection criteria. The study's finding offers an important reference for resolving fuzzy multi-criteria decision-making problems.
In recent years, advances in technology have forced firms to develop their core competencies through the outsourcing of strategic information system/information technology (IS/IT). Dhar and Balakrishnan (2006) indicated that IS/IT outsourcing is a way to transfer some or all of IS/IT-related decision-making rights, business processes, internal activities, and services to external providers, which can more effectively manage time and costs as well as improve productivity, quality, and customer satisfaction. Consequently, many organizations seek to improve their competitiveness, reduce costs, focus more of their internal resources on core activities, and sustain their competitive advantage by engaging in IS/IT outsourcing (Parry et al., 2006).
IS/IT outsourcing, and facilities management in particular, is growing dramatically and continues to be a tempting strategy by which organizations can leverage their specialized technologies and core competencies. In conceptual and empirical studies, the concept of transaction cost economics (TCE) and resource-based view (RBV) have emerged as theoretical approaches explaining the choice of a strategy in the IS/IT outsourcing decision-making process (Cao and Wang, 2007; Williamson, 1985). TCE is concerned with discovering the most efficient arrangement for an economic transaction in regard to which a firm must basically choose between carrying out the transaction itself, engaging in an externalized transaction, or collaborating with a third party (Gemser et al., 2004). In general, TCE has provided firms with the greatest efficiency in terms of cost minimization and has identified organizational capabilities for improving competence and sustained performance (Santos and Eisenhardt, 2005). From the RBV standpoint IS/IT outsourcing provides an alternative strategy that gives firms the ability to effectively leverage knowledge transfer capabilities in which knowledge is a potential source of competitive advantage (Bourlakis and Bourlakis, 2005). Thus, firms have the competitive advantage when they possess capabilities, processes, and/or knowledge that help them differentiate the value that they provide their customers from that provided by their competitors (Collins and Hitt, 2006).
Despite increasingly competitive markets and challenging operating conditions, outsourcing has become a strategic business solution. IS/IT outsourcing, as a legitimate management strategy, encompasses a variety of approaches to contracting for IT services (Chen and Huang, 1992). However, TCE explains the existence of alternative forms of organization on the basis of their relative efficiencies in response to the combined effects of environmental uncertainty, opportunism, and bounded rationality (Bellman and Zadeh, 1970; Yoon and Hwang, 1985). In an outsourcing decision context, the concept of TCE provides a useful framework for understanding the IS/IT outsourcing decision and the conditions under which outsourcing is likely to benefit organizations (Chen, 2000). Because the primary motivation of outsourcing is to minimize costs and leverage resources, TCE posits that firms can better reduce the costs involved and avoid opportunism among exchange partners by bringing all transactions under a common cooperative structure. In addition, the advantage of outsourcing is to provide organizations with a way to leverage the supplier/vendor's superior technical know-now, superior management practices, economics of scale, and increasingly, access to strategic and business advice (Gomes et al., 2008; Zeleny, 1974). RBV suggests that firms have a competitive advantage when they possess one or more resources that are “idiosyncratically fit, valuable, leveraged, unique, and costly to copy or substitute” (Kalling, 2003). Thus, the process of supplier/vendor selection is crucial to success of outsourcing activity and achieves a competitive advantage. However, it is necessary to develop the decision criteria for evaluation and selection of potential suppliers/vendors because the supplier/vendor selection decision is complicated and involves decision-making problems. The process of making a selection decision involves distinguishing the best option from all feasible alternatives in order to understand the issues associated with the problem of selecting a supplier/vendor for IS/IT outsourcing. Fuzzy logic provides an appropriate decision-making method which has been employed to explain and predict trends or future phenomena by providing an analysis of various decision-making techniques. Further, this study proposed an integrated VIKOR approach in a fuzzy environment to solve fuzzy multi-criteria decision-making problems and thereby distinguish the best option from all of the feasible alternatives. By illustrating the results of the analysis, the proposed fuzzy VIKOR method was able to achieve substantial advantages through the spatially explicit evaluation of complex and voluminous data sets, which are difficult to state in conventional quantitative expressions.
