An analysis of IT/IS outsourcing provider selection for small- and medium-sized enterprises in Taiwan She-I Chang a , David C. Yen b, *, Celeste See-Pui Ng c , Wei-Ting Chang a a Department of Accounting and Information Technology, Advanced Institute of Manufacturing with High-tech Innovations, National Chung Cheng University, Taiwan, ROC b Department of DSC & MIS, Miami University, United States c Department of Information Management, Yuan Ze University, Taiwan, ROC 1. Introduction Outsourcing is the provision by an outside company of products and/or services that implement functions or activities of the user organization. In general, an outsourcing provider differs from the application service provider (ASP), which merely supplies software applications, hardware, and/or related services. In addition, a service agreement with an outsourcing provider is usually based on a long-term contract, while that with an ASP may be short-term. A review of the IT outsourcing (ITO) literature by Lacity et al. [14] suggested that: (1) research studies of ITO practice in the early 1990s focused on the determinants of IT outsourcing, IT outsourcing strategy, and mitigating IT outsourcing risks; (2) studies from mid-1990s to the late 2000s focused on best practices and client and supplier capabilities; and (3) recent studies have considered offshore outsourcing, business process outsourcing, and the resurgence of application service provision. Taiwan, affected by the global economic downturn and increased competition, has confronted the issue of how SMEs can survive. Over time, SMEs have realized that IT utilities have become one of the most important ways of maintaining global competitiveness. However, there has been no effort to develop a model to aid in selecting an IT/IS outsourcing provider for an SME. While outsourcing has been perceived as viable and economi- cally beneficial for large enterprises, the new business environ- ment has shown that this may be a misconception: often outsourcing has proven to be less effective than internal IT/IS processing. Various factors affect the effectiveness of outsourcing; while some results from the supplier’s capabilities, including their system and service quality [16], partnership, trust, and service level agreements [8], other factors depend on the client-firm’s needs and abilities, including their IT capability, internal organi- zational, participation, and communication [9], as well as their shared/common processes and procedures for testing and ensuring quality and same Capability Maturity Model (CMMI) capabilities [20]. The right choice of an outsourcing provider has a positive impact on the productivity and performance of the client company, and probably on market reaction to increased or decreased market returns [1]. Studies point out those enterprises should carefully manage their pre-planning activity, recognizing that choosing outsourcing companies with excellent service quality is a crucial factor in making a successful selection. Similarly, the choice of outsourcing providers is one of the most important factors Information & Management 49 (2012) 199–209 A R T I C L E I N F O Article history: Received 29 June 2010 Received in revised form 2 February 2012 Accepted 7 March 2012 Available online 12 April 2012 Keywords: IT/IS outsourcing Small- and medium-sized enterprises (SMEs) Delphi method Analytic Hierarchy Process Outsourcing provider selection model A B S T R A C T Outsourcing is important in highly diversified business environments, but while there have been many studies on outsourcing, none have explicitly tackled the problem of how SMEs should assess and select their outsourcer. Numerous benefits might be gained if SMEs could utilize evaluation models to help select their IT/IS outsourcer effectively. Prejudices arising from selection through impartial analysis could be avoided and a more accurate and an objective decision could be made. We investigated the selection process of an enterprise needing an IT/IS outsourcing provider in Taiwan. Our recommended process quantitatively sorts the criteria using the AHP. An evaluation model was developed based on the needs of the SME who should use it to obtain a better outsourcing provider resulting from improved information vital to maintain outsourcing efficiency. Use of our model should reduce costs and potential risks in adopting new IT/IS applications and promote an objective standard with which to evaluate IT/IS outsourcing providers. ß 2012 Published by Elsevier B.V. * Corresponding author at: Department of DSC & MIS, Miami University, Oxford, OH 45056, United States. Tel.: +1 513 529 4826; fax: +1 513 529 9689. E-mail addresses: actsic@ccu.edu.tw (S.-I. Chang), yendc@muoho.edu (D.C. Yen), celeste@saturn.yzu.edu.tw (C.-P. Ng), quillercy@yahoo.com (W.-T. Chang). Contents lists available at SciVerse ScienceDirect Information & Management jo u rn al h om ep ag e: ww w.els evier.c o m/lo c ate/im 0378-7206/$ – see front matter ß 2012 Published by Elsevier B.V. http://dx.doi.org/10.1016/j.im.2012.03.001