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Discrete Dynamics in Nature and Society
Volume 2015 (2015), Article ID 325890, 10 pages
http://dx.doi.org/10.1155/2015/325890
Research Article

A Novel Dynamic Algorithm for IT Outsourcing Risk Assessment Based on Transaction Cost Theory

1School of Tourism and City Administration, Zhejiang Gongshang University, Hangzhou 311018, China
2College of Computer Science & Information Engineering, Zhejiang Gongshang University, Hangzhou 311018, China

Received 23 July 2014; Accepted 12 August 2014

Academic Editor: Zhigang Jiang

Copyright © 2015 Guodong Cong and Tinggui Chen. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

With the great risk exposed in IT outsourcing, how to assess IT outsourcing risk becomes a critical issue. However, most of approaches to date need to further adapt to the particular complexity of IT outsourcing risk for either falling short in subjective bias, inaccuracy, or efficiency. This paper proposes a dynamic algorithm of risk assessment. It initially forwards extended three layers (risk factors, risks, and risk consequences) of transferring mechanism based on transaction cost theory (TCT) as the framework of risk analysis, which bridges the interconnection of components in three layers with preset transferring probability and impact. Then, it establishes an equation group between risk factors and risk consequences, which assures the “attribution” more precisely to track the specific sources that lead to certain loss. Namely, in each phase of the outsourcing lifecycle, both the likelihood and the loss of each risk factor and those of each risk are acquired through solving equation group with real data of risk consequences collected. In this “reverse” way, risk assessment becomes a responsive and interactive process with real data instead of subjective estimation, which improves the accuracy and alleviates bias in risk assessment. The numerical case proves the effectiveness of the algorithm compared with the approach forwarded by other references.