A system dynamics model to support strategic decision making on IT Outsourcing: A case study at a state revenue agency in Brazil

Abstract

IT capabilities of contracting organizations and outcomes expected by IT outsourcing (ITO) initiatives should be evaluated through every stage of the ITO life cycle for effective ITO management. However, there is a lack of tools and models that consider the dynamic and integrated view of capabilities management, sourcing decision making and benefits management. In this paper we propose and use a model based on the concepts of dynamic capabilities and benefits management for evaluating and managing customers’ IT capabilities that need to be applied to outsourcing relationships over time. Preliminary validation of the proposed model is carried out in a case study at a Brazilian state revenue agency where the model was used to support decisions on the distribution of limited human resources between IT capabilities of Contract Monitoring and Service Delivery in ITO scenarios of varying internal-external sourcing partitioning. Results provide evidence that the proposed model can ease and accelerate identification of (more) adequate ITO options.