Evaluating vendor's performance in outsource software development risks using analytic hierarchy process technique

Outsource software development approach has been recognized as an important practice in government agencies as well as in private sectors. It includes third parties role and involvement in IT implementation and thus this approach has certain level of risks that need to be identified, measured and managed. The benefits and reasons associated with outsourcing implementation are operation and development cost reduction, operational efficiency and improves service quality. Although there are advantages in this approach, but there are also risks that associated with it. In this study, a survey was conducted to recognize key risks involve in outsource software development and to access and classify risk's level and severity in the software project development and implementation. Then, the identified risks were analyzed using AHP technique to evaluate the performance of the vendors in outsourcing data collected in the organization. The evaluation was carried out with officers in The Rubber Industry Smallholders Development Authority or RISDA in Malaysia because this organization has experience in outsourcing for more than 15 years. The results categorize key risks associated with system software development and the method developed helps the organizations to manage risks based on the importance and harshness of the risk towards organisations. The proposed method is developed and established on risk analysis to measure performance of the vendors using multi-criteria selection method.