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A simulation model for risk management support in IT outsourcing

A simulation model for risk management support in IT outsourcing
A simulation model for risk management support in IT outsourcing
IT Outsourcing (ITO) is the practice to delegate organizational IT functions to a third party. However, this practice introduces important risks for customer organizations. We have developed a system dynamics simulation model to support ITO decision making that considers a dynamic and integrated view of capabilities management and benefits management. Two IT capabilities are modelled: Contract Monitoring (on the customer's side) and Service Delivery (on the supplier's side). In this paper the proposed model is used to assess the risks presented by a deficit in these capabilities. The results of our experiments indicate that the lack of contract monitoring capability in ITO contracting organizations directly impacts on service conclusion time and influences the cost of contract management, which is an important risk factor related to exceeding the ITO budget. It was also found that low levels of service delivery capability in the supplier most significantly impact the cost of rework and the number of penalties. These factors influence the profitability of the supplier and may induce it to abandon the contract prematurely.
IT outsourcing, IT capabilities, risk Management, system dynamics simulation
ISBN 978-989-758-038-3
339-351
SciTePress
Bezerra, Tárcio R.
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Bullock, Seth
2ad576e4-56b8-4f31-84e0-51bd0b7a1cd3
Moura, Antão
b4b32f87-34aa-430d-8d25-9c0a6ab0a1bd
Bezerra, Tárcio R.
b06e93df-1c62-4164-9c5b-06c82087bd23
Bullock, Seth
2ad576e4-56b8-4f31-84e0-51bd0b7a1cd3
Moura, Antão
b4b32f87-34aa-430d-8d25-9c0a6ab0a1bd

Bezerra, Tárcio R., Bullock, Seth and Moura, Antão (2014) A simulation model for risk management support in IT outsourcing. In SIMULTECH 2014: Proceedings of the 4rd International Conference on Simulation and Modeling Methodologies, Technologies and Applications. SciTePress. pp. 339-351 .

Record type: Conference or Workshop Item (Paper)

Abstract

IT Outsourcing (ITO) is the practice to delegate organizational IT functions to a third party. However, this practice introduces important risks for customer organizations. We have developed a system dynamics simulation model to support ITO decision making that considers a dynamic and integrated view of capabilities management and benefits management. Two IT capabilities are modelled: Contract Monitoring (on the customer's side) and Service Delivery (on the supplier's side). In this paper the proposed model is used to assess the risks presented by a deficit in these capabilities. The results of our experiments indicate that the lack of contract monitoring capability in ITO contracting organizations directly impacts on service conclusion time and influences the cost of contract management, which is an important risk factor related to exceeding the ITO budget. It was also found that low levels of service delivery capability in the supplier most significantly impact the cost of rework and the number of penalties. These factors influence the profitability of the supplier and may induce it to abandon the contract prematurely.

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More information

Published date: 2014
Venue - Dates: conference; 2014-01-01, 2014-01-01
Keywords: IT outsourcing, IT capabilities, risk Management, system dynamics simulation
Organisations: Agents, Interactions & Complexity

Identifiers

Local EPrints ID: 365984
URI: http://eprints.soton.ac.uk/id/eprint/365984
ISBN: ISBN 978-989-758-038-3
PURE UUID: 41988373-c3ce-4e0a-a04c-5069b440ca4d

Catalogue record

Date deposited: 19 Jun 2014 10:07
Last modified: 14 Mar 2024 17:03

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Contributors

Author: Tárcio R. Bezerra
Author: Seth Bullock
Author: Antão Moura

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