Understanding Risk in IT Outsourcing: A Fuzzy Framework

Abstract

Understanding and addressing risks are fundamental to partnership success in offshore IT outsourcing. This paper develops and demonstrates a fuzzy risk assessment framework to effectively assess risk for a client as well as a service provider prior to entering into a formal contract. The sources of risk in IT outsourcing were extracted based on industry survey and prior research. A fuzzy inference engine which embeds human expert knowledge expressed through natural language gives a superior capability to this approach. The case of offshore software development simulated using the fuzzy framework showed that this method could capture imprecise perceptions about risk factors and quantify them effectively. It also showed that human knowledge embedded as intelligence could effectively map and quantify sources of risk into different categories. This assessment could enable objective comparison of different projects and informed design of contracts and thus lead to partnership success in outsourcing.

Keywords:

• outsourcing
• information technology (IT)
• decision process
• risk assessment
• contract
• fuzzy framework
• inference engine
• human expert knowledge

Additional information

Notes on contributors

Saji K. Mathew

Professor Saji K. Mathew graduated in Applied Electronics and Instrumentation from College of Engineering, Trivandrum, (presently Thiruvananthapuram), Kerala. He has ten years of work experience in industrial automation. He successfully defended his PhD thesis at the ABV Indian Institute of Information Technology & Management, Gwalior. His PhD work explored application of Information Technology for performance management of process control. This involved study of multiple disciplines including Systems Engineering, Process Modeling, Simulation, Control Theory etc. His research papers have been published in reputed journals. He is currently a faculty member at the T A Pai Management Institute (TAPMI), Manipal and teaches post graduate students of Management. In addition to regular teaches courses such as Systems Analysis & Design, Management Information Systems etc. He has also developed and offered courses relevant to industry based on research; including Business Modeling & Simulation using Soft Computing and Software Development Outsourcing. His current research interests include risk measurement and management in offshore IT outsourcing, performance issues in outsourcing engagements etc. He can be reached at: [email protected]