Information and communication technology outsourcing is a major part of outsourcing decisions by commercial banks operating in Kenya and has registered a rapid growth recently. The study sought to find out the information systems (IS) functions which were outsourced by the banks and rank the factors influencing IS outsourcing decision according to importance. To achieve this, the study adopted an exploratory study in which all the 45 banks in Kenya were studied. The study used self administered questionnaires to collect data, which was analysed using various analytical tools.
The study established that commercial banks mainly outsource functions such as systems implementation, network services, software and hardware maintenance, and Automated Teller Machine (ATM) services. The study further established that factors such as cost, desire for quality, size of organization, and business strategy, among others, influenced the banks’ decisions to outsource IS functions to a large extent. The study established that the small banks had a higher level of IS outsourcing as compared to large and medium banks. This is attributed to lack of technical capacity and need to deliver quality service at a minimal cost. The study revealed that operational costs was ranked as number one driver of outsourcing decision by commercial banks operating in Kenya followed by the desire for quality and organizational size respectively. The study concluded that though cost was the main driver of outsourcing decision, there existed other factors which were equally important such as desire for quality and business strategy among others.