Managing IT outsourcing: a value‐driven approach to outsourcing using application service providers

Organizations, both large and small, are increasingly outsourcing their applications to application service providers (ASPs) for a variety of reasons such as cost reduction, shortened time‐to‐market, lack of internal expertise, and risk reduction. However, the adoption of the ASP model has not been smooth sailing for many organizations, and only a few organizations have a formal approach to making ASP outsourcing decisions. Partially to fill this void, develops a value‐driven approach to outsourcing using ASP based on outsourcing theories and the industry’s best practices. The value‐driven approach is an adaptation and extension of Simon’s decision‐making process. It is designed to guide IS managers systematically through the complex process of identifying outsourcing opportunities, evaluating the viability of using the ASP model, making outsourcing decisions, managing contractual and implementation issues, and assessing the service quality of ASP vendors. Provides important implications for research and practice. For researchers, identifies ample research opportunities in this new field. For practitioners, the value‐driven approach gives them an invaluable tool to manage today’s complex information technology outsourcing.