The convergence between telecommunications and computing industries enabling the provision of web-enabled software applications facilitates new opportunities for small and medium businesses (SMBs) to embrace application outsourcing projects. Application service providers (ASPs) offering web-enabled software applications on a subscription (pay-as-you-go) basis revisits the traditional service bureau model of outsourcing, and promises additional business benefits of economies of scale, increased scope of business applications, and enterprise application integration (EAI). Yet SMBs rarely adopt formal, project management methods and tools for evaluating the benefits and risks of outsourcing projects. In this paper, the literature on knowledge-based firms provides a useful backdrop for understanding the delineation between explicit knowledge (that can be captured, codified, stored and distributed) and tacit knowledge (that flows through social networks that connect people). Against this background, a knowledge-based risk assessment framework is developed to provide SMBs with a template for evaluating the benefits and risks of application outsourcing. The framework incorporates key performance indicators (KPIs) in five categories: delivery and enablement; integration; management and operations; business transformation; and client/vendor relationships, and attempts to make knowledge explicit, whilst also recognising the tacit aspects of evaluating consortium, project-based outsourcing.
Author Keywords: Application services provisioning; Risk assessment; Outsourcing projects; Knowledge management