An Approach for Portfolio Selection in Multi-Vendor IT Outsourcing

2011 | International Conference on Information Systems | Citations: 0

Authors: Fridgen, Gilbert; Mueller, Hanna-Vera

Abstract: Companies increasingly extend their outsourcing strategies from single-sourcing ... Expand

Abstract: Companies increasingly extend their outsourcing strategies from single-sourcing to multisourcing combining best-of-breed vendors. This paper includes an analytical model to evaluate a company’s multisourcing strategy. The model can be applied for decision support to answer the questions, how many and which outsourcing vendors to integrate in the implementation of an IT project. We identify an optimal vendor portfolio considering monetary benefits and risk diversification as well as transaction costs arising from the integration and coordination of outsourcing vendors. Based upon a simulation, we find that it makes good economic sense to include a risk evaluation into the multisourcing decision process even if it is subject to misestimation. Therewith, companies are able to avoid unnecessary high risk and consequently a possible high damage. Furthermore, we find that it is better to be too cautious in risk assessment than to be too negligent. Collapse

Topics: outsourcing project management IT project decision support accounting

Methods: Monte Carlo simulation simulation sensitivity analysis descriptive statistic mathematical model

Theories: transaction cost economics portfolio theory

Information Aggregation in Double Auctions: Rational Expectations and the Winner's Curse

2003 | Information Systems Frontiers | Citations: 0

Authors: Guarnaschelli, Serena; Kwasnica, Anthony M.; Plott, Charles R.

Abstract: This paper inquires about the ability of double auction institutions to aggregat ... Expand

Abstract: This paper inquires about the ability of double auction institutions to aggregate information in the context of a “common value” information structure that is known to produce the winner's curse in sealed bid environments. While many fundamental features of the economic trading mechanism are different from those studied in the context of sealed bids, the pattern of information distributed to the population of traders is the same. This gives us an opportunity to determine if the behaviors reported in sealed bid environments can be detected in the more active market environment. As such, the experiments are also a test of the robustness of earlier experiments that demonstrate that in economies with homogeneous preferences single compound securities organized by double auctions are able to aggregate information. The basic result is that a severe winner's curse is not observed. The irrationality observed in sealed bids does not extend itself to the double auction environment. Information aggregation is observed and the rational expectations model receives support. Collapse

Methods: experiment nonparametric test Wilcoxon signed-rank test ordinary least square longitudinal research