Outsourcing is a critical tool for business managers to control costs and maximize return on the IT investment. Service level agreements have long been a standard for managing the performance of outsourcing agreements. However, service level agreements often fail to provide satisfying results due to offsets and burdensome requirements related to penalties. Balanced scorecard provides a more attractive option for managing the outsourcer. A built-in alignment with business strategy and an orientation towards incentivizing desired behaviors make balanced scorecard a more effective and more satisfying methodology for managing outsourcers. A review of scholarly literature on the subjects of outsourcing, service level agreements, and balanced scorecard elucidates the relative benefits of balanced scorecard compared to service level agreements for managing outsourcing. Balanced scorecard is found to be a beneficial method for managing outsourcing suppliers. However, analyzing the literature identifies a research gap and determines that further research is needed in the areas of outsourcing and supplier management.
