A hybrid model using analytic network process and gray relational analysis for bank's IT outsourcing vendor selection

Abstract

Purpose Considering the limitation of the single stage vendor selection model, this paper proposes a two‐stage vendor selection framework for IT outsourcing in microfinance banks. Design/methodology/approach The paper attempts to realize a complete analysis at company level using grey systems theory for shaping the relations among variables. With the social choice function – Dodgson function, the first stage is a trial phase that helps the decision‐maker find the potential vendors, then, the decision‐maker employs those chosen vendors for the final selection with modified grey relational analysis (GRA) integrated analytic network process (ANP), which emphasizes the interrelation among those selection criteria, and avoids the subjective estimation of experts and practitioners. The case of a microfinance bank IT outsourcing vendor selection is used to verify the proposed approach. Findings The results of the empirical study show that the proposed method is practical for ranking competing vendors in terms of their overall performance with respect to multiple interdependence criteria for the bank's IT outsourcing. Practical implications The method exposed in the paper can be used for other supplier selection by modifying some criteria and weight. Originality/value The paper provides a method for ranking competing vendors in terms of their overall performance with respect to multiple interdependence criteria for IT outsourcing.