A Decision model for Selecting an Offshore Outsourcing Location: Using a Multicriteria Method

Abstract

As the offshoring becomes more widespread, business practitioners outsource their activities to overseas countries. Although there is a wealth of academic literature examining outsourcing and offshoring, there is little academic literature that addresses the current outsourcing decision most firms facing, which is where to outsource. Given multi-attribute nature of offshore location selection, this paper argues that five factors should be considered for decisions, and proposes the use of analytic hierarchy process (AHP) and PROMETHEE as aids in making offshore location selection decisions. AHP is used to analyze the structure of the location selection problem and determine weights of the criteria, and PROMETHEE method is used for final ranking, together with changing weights for a sensitivity analysis. It shows by means of an application that the hybrid method is very well suited as a decision-making tool for the offshore location selection decision. Finally, potential issues for future research are presented.