EFFECTS OF INFORMATION TECHNOLOGY OUTSOURCING ON ORGANIZATIONAL PERFORMANCE: /THE CASE OF BANK OF ABYSSNIA HEAD OFFICE/

Abstract

he study aimed to examine the impact of IT outsourcing on organizational performance, focusing on financial, operational, and strategic dimensions. Objectives included assessing the relationship between IT outsourcing levels and strategies, understanding Bank of Abyssinia's outsourcing decisions, and evaluating the impact on performance metrics such as service quality, employee motivation, cost effectiveness, and profitability This research utilizes a mixed-methods approach that combines both quantitative and qualitative techniques using a variety of data sources including surveys and interviews with executives. The study found that the major reasons for Outsourcing IT functions was to access global talent, to access new technologies, followed closely by access to specialized expertise and improved service quality. The findings of this research indicate that IT outsourcing at Bank of Abyssinia had a positive effect on the service quality, profitability and employee motivation while it had a negative effect on the cost effectiveness of the Bank as compared to the in-house maintenance. The challenges of IT outsourcing in BoA include hidden costs and the risk of exposing confidential data. High levels of IT outsourcing have a positive effect on the quality of service and productivity of the bank, while low levels of outsourcing positively affect data security and cost effectiveness. Additionally, employees have shown increased motivation when involved in activities after outsourcing, compared to fully outsourced products. Overall, IT outsourcing at BoA indicates that it has been perceived as beneficial in terms of profitability, particularly in improving the return on investment for IT projects and quality observed in outsourced products. Regarding the impact of IT outsourcing on cost effectiveness, the respondents believed it didn’t have positive relationship indicating there is a ahigh cost of implementation when outsourcing. The study will provide valuable insights into how IT outsourcing can be managed to enable BOA and other banks to have a perspective to achieve their strategic objectives and enhance their overall performance.