The Assessment of Outsourcing IT Services using DEA Technique: A Study of Application Outsourcing in Research Centers

The Assessment of Outsourcing IT Services using DEA Technique: A Study of Application Outsourcing in Research Centers

Mohammad Amin Zare (Management and Accountancy School, Allame Tabataba'ee University, Tehran, Iran), Mohammad Taghi Taghavi Fard (Management and Accountancy School, Allame Tabataba'ee University, Tehran, Iran) and Payam Hanafizadeh (Management and Accountancy School, Allame Tabataba'ee University, Tehran, Iran)
DOI: 10.4018/IJORIS.2016010104
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Abstract

This article proposes a model to make an assessment of efficiency in Information Technology (IT) outsourcing in research centers through data envelopment analysis (DEA). In this research input and output variables of DEA model for assessment of IT outsourcing efficiency distinguished. The decision-making units (DMUs) include 36 research centers in Iran. Expenses and capabilities of contractors represent the inputs and the satisfaction of users, risks, and quality constitute the outputs. In order to calculate the input and output values, a questionnaire has been conducted to DMUs. Afterwards, BCC model has facilitated the calculation of the efficiency of the DMUs and classifies efficient and inefficient units. In addition, Anderson Peterson's model is used for ranking efficient DMUs. This research has brought us to the conclusion that the variables of risk and quality account for the biggest shares in efficiency improvement of non-efficient DMUs.
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Introduction

IT services offer a variety of advantages like reducing operational costs, increasing flexibility and efficiency for organizations (Vassiliadis, Stefani, Tsaknakis, & Tsakalidis, 2006). An effective implementation of these services requires investment in the necessary infrastructures, technical facilities and specialized human resource. Providing such facilities m ay cost too much in the light of rapid changes in IT and communications technologies. To that effect, small and medium-sized organizations may not afford the costs and that is the main reason for the emergence of IT outsourcing, which means contribution of external contractors for carrying out a part or the whole of IT services in an organization (Khalfan, 2004). Despite the advantages it brings for organizations, IT outsourcing could also lead to restrictions. That is why the decisions made about IT outsourcing are of strategic nature and a precise evaluation and prediction of consequences is a significant issue. Conducting a relevant research can be of great help to managers of organizations before making up their minds. This article, drawn up into six sections, focuses on presenting a model of assessment by IT outsourcing through data envelopment analysis to research organizations.

In view of the rapidity of IT developments and relevant complexities, it is hard work to make decisions about investment on information and communication technologies. IT services are categorized in the support functions of organizations and investment in this field needs to offer justification for efficiency. Allocation of resources and employment of manpower from within the organization to provide IT services is a main option in development of IT structure. Another approach comes up here and that is nothing but outsourcing, that is assigning a section of the organization’s service providing task to a source outside. Within the framework of outsourcing, certain services, which are not directly involved in the organization’s activities and are of support nature, are assigned upon outsiders. The reason is to set limitations to the organization’s activities and concentrate on main process. When such a thing happens, people inside the organization would be free from technical affairs like software, hardware and communications. Specialists from outside the organization take care of technical issues and offer the best services to the people inside the organization. Outsourcing is a relatively new option for providing IT services. Making decision about IT outsourcing resembles somewhat to choosing between making or buying.

IT outsourcing might bring various achievements for organizations, or even introduce new restrictions (Kobelsky and Robinson, 2010). For this reason, it is necessary to make an inclusive and comprehensive assessment before opting for IT outsourcing. Such an assessment might take place through quantitative or qualitative models, allowing the measurement of IT outsourcing performance. Data envelopment analysis (DEA) is such a model we have employed in our research work. Under DEA, indices of evaluation might be used in two groups of input and output variables. Research centers have been selected as DMUs in an attempt to let DEA offer a framework for evaluating the efficiency of application outsourcing of these centers. This research seeks to find answers to the following questions:

  • How is it possible to measure the efficiency of IT outsourcing in research centers?

  • Have research centers in question proven to be efficient in IT outsourcing?

  • Which efficient DMUs are referents for inefficient DMUs in certain research centers?

Research Background

DEA is an appropriate tool for assessment and measurement of the efficiency. Various research works have hitherto been conducted in this field. The bulk of research works is focused on the impact of IT on the performance of organizations and assessment of the efficiency of investments made in Information Technology.

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