As the focus of Information Technology outsourcing (ITO) and business process outsourcing (BPO) evolves from purely-cost-arbitrage and becomes a strategic business decision, the processes of vendor selection and contract negotiation is becoming increasingly complex, time consuming and expensive. Based on theories of contracts and procedural coordination and the growth in the IT-BPO outsourcing industry, we believe that the costs associated with contract negotiation will only increase in future. To offset these costs the practitioners will be well served with a model which helps predict the best suited type of contract – Fixed price or not, given certain deal-parameters.
The project report outlines the design and working of one such model. Our model uses deal parameters as input variables and predicts with 70.47% accuracy and 89.73% sensitivity the best suited type of contract for any given outsourcing deal.