Deciding the level of information systems outsourcing: Proposing a framework and validation with three Indian banks

The purpose of this paper is to suggest a framework that would guide the practicing manager to decide the degree of information systems (IS) outsourcing.

The proposed framework has been derived from the findings of a previous empirical study and qualitative inputs. Analytical hierarchy process (AHP) is then used to apply the framework. The framework is finally validated in three India‐based banks.

The proposed framework helps in creating a strategic alignment between the business strategy and information system strategy. The application of the framework shows the preference of managers towards high IS outsourcing. Strategic alignment and medium term impact emerge the important factors in IS outsourcing. The validity of the framework is proved in three banks.

The validation exercise has been done on a small sample due to resources constraints and a study involving a larger sample is desired. Further, it is advised to review the framework on regular intervals and make suitable changes in decision factors.

The framework is helpful to managers in identifying the critical factors which can act as useful inputs in taking informed decisions on the degree of IS outsourcing.

The paper fills some of the gaps in IS outsourcing by suggesting a practice‐ oriented framework that guides the decision maker to undertake a systematic and structured approach in arriving at an outsourcing decision. The framework has evolved from the practices of banks in India for which there does not exist any similar research.