Effect of Information Technology Outsourcing on the Performance of Banks in Kenya: Application of the Balanced Scorecard

Citation:
Mungai VW, Moturi CA. "Effect of Information Technology Outsourcing on the Performance of Banks in Kenya: Application of the Balanced Scorecard." IOSR Journal of Business and Management . 2015;17(3):83-89.

Abstract:

Purpose: The study sought to look at Information Technology Outsourcing (ITO) practices in the Kenyan
banking sector and the effect it had on performance. Balance Scorecard was used to measure performance as it
considers both financial and non-financial aspects.
Design/methodology/approach: The study took the form of a descriptive survey design with a target
population of 14 commercial banks operating in Kenya. Primary data was collected from structured
questionnaires and secondary data was collected from the banks past financial records.
Findings: Thestudy revealed that Connectivity and Help desk support were the most outsourced IT functions in
the commercial banks. The study also revealed the two main drivers for ITO were strategic focus and cost
reduction. The main challenge the commercial banks faced during the ITO process was lack of a proper cost
benefit analysis and loss of control. The study further revealed that ITO has a positive and significant effect on
financial performance, learning and growth, customer satisfaction and internal processes.
Research limitations/implications: This study uses three financial firm-level performance measures ROA,
ROE, NIM. The study also didn’t t explore if different types of IT outsourcing categories have different influence
on banks’ performance.
Originality/value: The findings of the study will provide insight for managers in banking industries when
confronted with the decision of whether or not to outsource IT services in their banks. The study will also be of
importance to researchers and future scholars as it will act as a source of reference besides suggesting areas
for further studies that future scholars can research further.
Keywords: Commercial Banks,Balanced Scorecard, IT outsourcing

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