IDEAS home Printed from https://ideas.repec.org/a/ids/injams/v5y2013i2p101-128.html
   My bibliography  Save this article

Evaluation of flexibilities in outsourcing agreements through the real option approach

Author

Listed:
  • Dogan Mersin
  • Seçkin Polat

Abstract

Since '90s, outsourcing concept became prevalent as a management strategy and business model. Outsourcing agreements are three to five years on average and depending on the market changes the customer has certain options such as: to expand or constrict the service scope, to penalise or award the vendor according to the service level agreements (SLAs), to abandon the service or to switch to another vendor. Having these real options included in an outsourcing contract gives valuable flexibilities to the service receiving company. In this study a method, based on real options has been developed for modelling and evaluation of flexibilities in outsourcing contracts. The effects of such flexibilities on the total project cost and on the selection of the service provider were calculated using the recommended model through a simulation method. The recommended method was found to yield more effective results than traditional methods particularly in markets with high level of uncertainty.

Suggested Citation

  • Dogan Mersin & Seçkin Polat, 2013. "Evaluation of flexibilities in outsourcing agreements through the real option approach," International Journal of Applied Management Science, Inderscience Enterprises Ltd, vol. 5(2), pages 101-128.
    • Handle: RePEc:ids:injams:v:5:y:2013:i:2:p:101-128
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=53704
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:injams:v:5:y:2013:i:2:p:101-128. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=286 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.