Omega 29 (2001) 171–182

www.elsevier.com/locate/dsw

An application of the AHP in vendor selection of a

telecommunications system
Maggie C.Y. Tama , V.M. Rao Tummalab; ∗
a Alliances & Partners, Hong Kong Telecom, Quarry Bay, Hong Kong
b College of Business, Production=Operations Management, Eastern Michigan University, 412 Owen Building, Ypsilanti, MI 48197, USA

Received 1 June 1998; accepted 21 July 2000

Abstract
Vendor selection of a telecommunications system is an important problem to a telecommunications company as the telecom-
munications system is a long-term investment for the company and the success of telecommunications services is directly
aected by the vendor selection decision. Furthermore, the vendor selection of a telecommunications system is a complex
multi-person, multi-criteria decision problem. The group decision-making process can be improved by a systematic and logi-
cal approach to assess priorities based on the inputs of several people from dierent functional areas within the company. The
analytic hierarchy process (AHP) can be very useful in involving several decision-makers with dierent con icting objectives
to arrive at a consensus decision. In this paper, an AHP-based model is formulated and applied to a real case study to examine
its feasibility in selecting a vendor for a telecommunications system. The use of the proposed model indicates that it can be
applied to improve the group decision making in selecting a vendor that satises customer specications. Also, it is found that
the decision process is systematic and that using the proposed AHP model can reduce the time taken to select a vendor. ?
2001 Elsevier Science Ltd. All rights reserved.

Keywords: Telecommunications; Systems; Vendors; Selection; AHP

1. Introduction demanding lower price and higher quality, both at the same
time. Along with the deregulation of the telecommunica-
In recent years, the telecommunications (telecom) indus-
try has undergone revolutionary changes. The driving forces
for these changes include increasing customer demand, tech-
nological advances, and a worldwide trend of deregulation.
This is particularly true for the Hong Kong Telecommuni-
cations industry as it was deregulated in June 1995. Con-
sequently, three new companies, in addition to Hong Kong
Telecom, were licensed to operate in Hong Kong beginning
June 1995.
Telecom services generally range from providing basic
telephone line services to advanced services such as data,
videoconferencing and even interactive multi-media ser-
vices. Business users are growing in sophisticated needs,
tions industry, market competition has become erce in
many countries. In order to survive in this competitive en-
vironment, telecom companies need to oer new products
and services to satisfy the growing needs of telecom cus-
tomers, which may require the application of appropriate
technologies. Quite often these products and services con-
sist of network equipment and systems, and are procured
from suppliers of the telecommunications industry. Usu-
ally, these systems could last for 5 –10 years or even more
and could eect the strategic positioning of the company.
Thus, the selection of vendors is an important problem to a
telecom company in meeting the customer needs.
In addition, the selection of a telecom system is equally
an important problem and could involve many criteria, in-
∗ Corresponding author. Tel.: +1-734-487-2454; fax: +1-734- cluding the technical requirements of service specications
487-7099. and cost, etc. Not only the equipment cost, but also the cost
E-mail address: rao.tummala@emich.edu (V.M.R. Tummala). of operating the equipment, and maintenance, upgrade and

0305-0483/01/$ - see front matter ? 2001 Elsevier Science Ltd. All rights reserved.
PII: S 0 3 0 5 - 0 4 8 3 ( 0 0 ) 0 0 0 3 9 - 6
172 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182

support costs, need to be considered in selecting a particular
system. It is important to consider these cost factors care-
fully to ensure the low cost delivery of service. Similarly,
performance-related criteria such as reliability, availability
and serviceability must also be assessed to meet the service
subcriteria for vendor selection. These factors will then be
used to formulate an AHP model to represent the vendor se-
lection problem as explained in Section 3. The AHP model
will then be applied in Section 4 to a case study to demon-
strate its application and examine its eectiveness. The ad-
levels as set in service specications and to increase cus-
tomer satisfaction. Furthermore, technical criteria including
system features, upgradability, future development, compli-
ance with technology standards, interfacing with existing
systems, and network management capabilities, etc., must
be examined carefully. Judging vendor quality is also impor-
tant and here the criteria might include delivery lead-time,
vantages of using the proposed model are also discussed in
Section 4. Finally, we conclude the paper with conclusions
as described in Section 5.
In order to identify the criteria and subcriteria for vendor
selection of a telecommunications system, we conducted a
survey as explained in Section 2. The purpose of this survey
is only to enumerate the critical success factors that will
security, accessibility, vendor reputation, and quality of sup-
port services, etc. It is important that we examine all these
relevant factors in selecting a telecommunications system
and a vendor who designs and delivers the system.
Even though telecom companies are eager to spend
considerable amount of time and money to select ap-
propriate systems and vendors, they may not include all
relevant criteria in evaluating telecom systems and vendors.
form the basis to identify the specic criteria and subcriteria
to formulate the AHP model. It is not used to determine the
priority weights of the criteria and subcriteria, which is the
major purpose of AHP.
2. Identifying the criteria and subcriteria
The decision-making process may not be systematic. These Dickson [7] identied 23 dierent criteria for vendor
factors may result in many changes in selection criteria and selection including quality, delivery, performance history,
costly engineering design changes, which ultimately delay warranties, price, technical capability and nancial posi-
product launches. They may also result in not meeting tion. The studies of Arbel and Seidmmann [8–10], Beck
the nancial objectives with respect to their investment in and Lin [11], Zviran [12], Bard [13] and Liberatore [14]
equipment and systems.
Thus, there is a need for developing a systematic vendor
selection process of identifying and prioritizing relevant cri-
teria and evaluating the trade-os between technical, eco-
nomic and performance criteria. The approach should also
reduce time in vendor selection and develop consensus de-
cision making. Narasimhan [1], Nydick and Hill [2], and
Partovi et al. [3] suggested the use of the analytic hierar-
chy process (AHP) approach for vendor selection problems.
They suggested AHP mainly because of its inherent capa-
bility to handle qualitative and quantitative criteria used in
vendor selection problems. Furthermore, it can be easily un-
derstood and applied by operating managers [4 – 6]. Also, the
AHP can help to improve the decision-making process. The
identied a number of criteria with respect to nancial,
technical and operational aspects that are applicable to se-
lecting a telecommunications system. These factors can be
grouped into three major categories of cost, technical and
operational success factors. The cost factors include capital
investment, unit cost, cost of the billing system, cost of the
network management system, operating cost and mainte-
nance cost. The technical factors, on the other hand, consist
of technical features=characteristics, system capacity, sys-
tem performance, system reliability=availability, system
redundancy, compliance with international standards, inter-
operability with other systems, upgradability on hardware
and software, and future technology development. Simi-
larly, the operational factors include ease of operations,
hierarchical structure used in formulating the AHP model
can enable all members of the evaluation team to visual-
ize the problem systematically in terms of relevant criteria
and subcriteria. The team can also provide input to revise
the hierarchical structure, if necessary, with additional cri-
exibility, etc.
teria. Furthermore, using the AHP, the evaluation team can
systematically compare and determine the priorities of the
criteria and subcriteria. Based on this information the team
can compare several vendor systems eectively and select
the best vendor.
This paper investigates the feasibility of applying the AHP
in vendor selection of a telecommunications system for a
telecom company to improve the group decision making by
a more systematic and logical approach. First, in Section 2,
we identify the critical success factors for vendor selection
of a telecommunications system. The critical success fac-
ease of conguration, performance monitoring capabili-
ties, statistical data reporting capabilities, fault diagnosis
capabilities, detailed accounting information, system se-
curity features, customer network management features,
customized reports generation, and billing
We conducted a survey involving 20 sta members
selected randomly from dierent functional areas of the
telecom company who are directly involved in the ven-
dor selection process [15]. As explained in Section 1,
the purpose of this survey is to assess and identify the
above-mentioned cost, technical and operational factors as
relevant criteria and subcriteria in formulating the AHP
model. A questionnaire consisting of these factors was de-
signed for the survey. Before conducting the survey, a pilot
test was conducted with two professional sta members in
the Engineering Department of the telecom company. The
tors will form the basis for identifying important criteria and questionnaire was modied, based on the input received
 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182 173

Fig. 1. Factors aecting the selection of a telecommunications system.

and some additional criteria were added. The resulting
questionnaire was mailed to the selected respondents.
In order to identify relevant criteria, the respondents were
asked to rate each factor using the three-point scale of “not
important”, “somewhat important” and “very important” in
selecting a telecommunications system [15]. The results of
appears to be the natural cuto point as it is found to be the
average of the highest (2.9, see Fig. 1) and the lowest (1.7,
see Fig. 2) mean rating values of all factors included in the
survey. Also, some of the factors whose mean values are less
than 2.3 could be meaningfully grouped into the other fac-
tors whose mean values are greater than 2.3. For example,
the survey are summarized in Fig. 1, where the mean value
of each factor is determined by multiplying the percentages
of respondents with the values of 1, 2 and 3 which are associ-
ated with “not important”, “somewhat important” and “very
exibility” (see Fig. 1). In addition, the pres-
important”, respectively, and adding the resulting products.
The criteria are arranged in descending order of their mean
values.
“ease of conguration” factor can be grouped into “ease of
operations” criterion. Similarly, “customized report genera-
tion” and “detailed accounting information” can be grouped
into “billing
ence of too many criteria makes the pairwise comparisons
in evaluating vendors, as explained in Sections 3.1 and 5,
a dicult and time consuming process. It may also lead to
The cuto value of 2.3 is used and identied those factors evaluators’ assessment bias. To overcome these problems,
as relevant criteria for which the mean values are greater the cut-o value or some similar method to reduce the num-
than or equal to 2.3. From Fig. 1, we see that the value of 2.3 ber of criteria to a few is desirable.
174 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182

Fig. 2. Factors aecting the selection of a vendor for a telecommunications system.

Thus, we identied the criteria with respect to cost, tech- • Compliance with international standards
nical and operational factors as shown below. • Interoperability with other systems
Operational factors
Cost factors
• Fault diagnosis capabilities
• Capital investment
• System security features
• Unit cost
• Ease of operations
• Operating cost
• Performance monitoring capabilities
• Maintenance cost
• Billing exibility
• Cost of network management system
Technical factors Similarly, the respondents were asked to rate the factors
• Technical features=characteristics considered in selecting a vendor for a telecommunications
• System reliability=availability system as one of “not important”, “somewhat important”
• System performance and “very important” [15]. The vendor-specic factors in-
• System capacity clude the cost and quality of support services, delivery lead
• Upgradability on H=W and S=W time, repair turnaround time, current customers of vendors,
• System redundancy vendor’s nancial position and stability, vendor’s reputa-
• Future technology development tion, experience in related products, existing supplier of the
 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182 175

company, quality and technological systems used, capability company. Quality is equally important as it focuses more
in design assurance, technical expertise and problem solv- on meeting customers’ requirements and becoming compet-
ing capability. The results from the respondents are sum- itive in order to stay ahead in the marketplace.
marized as shown in Fig. 2, in descending order of mean
values. Again, as in the earlier situation, the cuto value of
2.3 for mean ratings is used to identify criteria as shown
below.
Vendor speciÿc criteria
The third level of the hierarchy occupies the criteria den-
ing the two strategic factors of cost and quality of the second
level. There are two criteria related to cost, namely capi-
tal and operating expenditures. On the other hand, the cri-
teria associated with quality are technical, operational and
vendor-specic. The fourth level consists of the 26 subcrite-
• Quality of support services
ria, which were identied in Section 2 above, and is grouped
• Supplier’s problem solving capability
with respect to the ve criteria occupying the third level, as
• Supplier’s expertise
shown in Fig. 3.
• Cost of support services
The strategic factors, criteria and subcriteria used in these
• Delivery lead time
three levels of the AHP hierarchy can be assessed using the
• Vendor’s experience in related products
basic AHP approach of pairwise comparisons of elements
• Vendor’s reputation
in each level with respect to every parent element located
The above identied success factors are now considered one level above. A set of global priority weights can then
as the relevant criteria and subcriteria and are used to for- be determined for each of the subcriteria by multiplying
mulate an appropriate AHP model for selecting the vendor local weights of the subcriteria with weights of all the parent
of a telecommunications system. Theoretically, all the suc- nodes above it.
cess factors shown in Figs. 1 and 2 can be included in the
AHP-based model, as the AHP methodology will enable us
to compare and prioritize them. However, it is not prac-
tical to include all factors as they increase the number of
pairwise comparisons and the related computational eort.
It is also possible that assessment biases may occur in ob-
taining the pairwise comparison judgments from evaluators.
Furthermore, as explained earlier, some of the factors that
are not selected can be grouped into other selected criteria.
Therefore, we used the cuto value of 2.3 and selected 26
criteria to use them in formulating AHP model.
3. The AHP model
The AHP modeling process involves four phases,
namely, structuring the decision problem, measurement and
data collection, determination of normalized weights and
The fth level of the hierarchy contains the rating scale.
This level is dierent from the usual AHP approach in that
a rating scale will be assigned to each subcriterion related
to every alternative, instead of assessing pairwise compar-
isons among the alternatives in the usual fashion. The use of
a rating scale instead of direct pairwise comparisons among
alternatives can be found in Liberatore’s studies [14,17–19].
The major advantage of this method is to overcome the ex-
plosion in the number of required comparisons when the
number of alternatives is large [17]. For example, if we con-
sider 20 alternatives, the number of pairwise comparisons
required for each of the 26 subcriteria would be equal to
n(n − 1)=2 = 190, and it becomes computationally dicult
and sometimes infeasible. However, this is not the reason
for using Liberatore’s rating method in the current case, as
the number of alternatives, namely, the vendor systems, is
usually below 5. The main reason for adopting this method
synthesis-nding solution to the problem [16]. Using this
is that the evaluation of vendors (or vendor proposals) of a
four-phase approach, we rst formulate in this section an
AHP model for vendor selection that could be applied by
the company to any vendor selection of a telecommunica-
tion system.
3.1. Structuring the vendor selection problem
This phase involves formulating an appropriate hierarchy
of the AHP model consisting of the goal, strategic factors,
particular telecommunications system sometimes involves a
large number of technical details consisting of several sub-
criteria. It may be practically too dicult to make pairwise
comparisons among the vendor systems with respect to ev-
ery subcriteria. Also, it is a time-consuming process. The
use of a rating scale can eliminate these diculties as each
evaluator can assign a rating to a vendor’s system without
making direct comparisons.
criteria and subcriteria and the alternatives. The goal of our As suggested by Liberatore, a ve-point rating scale of
problem is to select the vendor of a telecommunications sys- outstanding (O), good (G), average (A), fair (F) and poor
tem that can meet customer requirements, bring prots to (P) is adopted and the priority weights of these ve scales
the rm, and compete strongly in the telecommunications can be determined using pairwise comparisons as explained
market. This goal is placed on the rst level of the hierar- below in Section 3.3 [18]. A potential complication might
chy as shown in Fig. 3. Two strategic factors, namely cost arise when assigning the rating scales by using the ve-point
and quality, are identied to achieve this goal, which form rating system. For example, the relative rating of an “out-
the second level of the hierarchy. The cost factor is impor- standing” vs. a “good” rating may dier for dierent criteria.
tant because the lower the cost of a service, the higher the As stated by Liberatore [18], making such ne discrimina-
productivity and eciency, thus bringing more prot to the tions in judgment would be very dicult. Furthermore, we
176 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182

Fig. 3. AHP model for vendor selection of a telecommunications system.

want to keep the assessment process as simple as possible.
Therefore, we follow Liberatore [18] and obtain one set of
ratings and use them to determine the local and global pri-
ority weights as explained in Sections 3.3 and 3:5 below.
The lowest level of the hierarchy consists of the alter-
natives, namely the dierent vendor systems to be evalu-
ated in order to select the best vendor system. As shown in
Fig. 3, we used three vendor systems to represent arbitrarily
team of evaluators and, as explained above, assigning pair-
wise comparisons to the strategic factors, criteria and sub-
criteria used in the AHP hierarchy. The nine-point scale as
suggested by Saaty [4,5] is used to assign pairwise com-
parisons of all elements in each level of the hierarchy.
Usually, every member assigns his or her pairwise com-
parisons, which will be translated into the corresponding
pairwise comparison judgment matrices (PCJMs). As sug-
three systems that the rm wishes to evaluate. In general, we gested by Saaty [4,5], the geometric mean approach, instead
can include as many vendor systems as the rm wishes to of the arithmetic approach, is used to combine the individual
evaluate before selecting the best vendor. The AHP model PCJMs to obtain the consensus PCJMs for the entire team.
shown in Fig. 3 is generally applicable to any vendor selec- Using this approach, an evaluation team of ve members
tion problem of a telecommunications system that a team who are frequently involved in vendor selection of telecom-
wishes to evaluate, as it covers the critical success factors munications systems within the organization is formed. Of
and the related criteria and subcriteria for vendor selection these ve evaluators, two are senior engineers from the En-
of a telecommunications system. Thus, whenever a team gineering Department. Each one of them has more than ve
needs to select a vendor, then it can assess the vendors by years of experience in vendor selection projects for voice,
the rating scheme as described above and determine the ven- data and transmission networks. Two evaluators are senior
dor priority weights to select the best vendor. As explained product managers from the Marketing Department; one of
earlier in Section 1, the model provides the
exibility to in- them has recently completed the vendor selection of a Frame
clude any specic criteria, and goals and objectives that the
team may wish to consider in any other situation.
3.2. Measurement and data collection
After building the AHP hierarchy, the next phase is the
Relay network and the other is presently involved in vendor
selection of a Digital Data Network. The last evaluator is
a manager from the Operations Department who is respon-
sible for operations of fax and other value-added services.
Thus, the evaluators have sucient experience in vendor
selection of telecommunications systems and, hence, are
measurement and data collection, which involves forming a qualied to assign pairwise comparison judgements for the
 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182 177

proposed AHP model. The opinions expressed by them in

their judgements are considered to be representative of the
company in evaluating the telecommunications criteria and
the vendor selection requirements.
A questionnaire consisting of all strategic factors, criteria
and subcriteria of the three levels of the AHP model is de-
signed and is used to collect the pairwise comparison judg-
ments from all evaluation team members. This approach is
found to be very useful in collecting data. The pairwise com-
parison judgements are made with respect to attributes of
one level of hierarchy given the attribute of the next higher
level of hierarchy, starting from the level of strategic fac-
tors down to the level of subcriteria. The results collected
from the questionnaire are used to form the corresponding
pairwise comparison judgment matrices (PCJMs) for deter-
mining the normalized weights as explained in the section
below.
3.3. Determining normalized weights
As explained earlier, the pairwise comparison judgement
Fig. 4. Pairwise comparison judgement matrix for ve-point rating
scale.
and subcriteria obtained from the third phase are combined
together with respect to all successive hierarchical levels to
obtain the global composite priority weights of all subcrite-
ria used in the fourth level of the AHP model. As explained
earlier, the Expert Choice software system is used to deter-
mine these global priority weights as shown in Table 2.
After calculating the global weights of each subcriterion
of level 4, they are rearranged in descending order of prior-
ity, as shown in Table 3. It can be seen that the cost factors
occupy the top-most rankings in the list, the top rank being
matrices obtained from ve evaluators in the measurement
and data collection phase are combined using the geo-
metric mean approach at each hierarchy level to obtain the
corresponding consensus pairwise comparison judgement
matrices [4,5]. Each of these matrices is then translated into
the corresponding largest eigenvalue problem and is solved
the unit cost, followed by operating cost, capital investment,
cost of support services, cost of network management sys-
tem, and maintenance cost. The technical factors that are in
the top ten rankings include system reliability=availability
and system performance. There are also two operational fac-
tors in the top ten rankings, namely the system security fea-
to nd the normalized and unique priority weights for each tures and fault diagnosis features.
criterion as shown in Table 1. The software system called As explained earlier, the AHP model with all the strategic
Expert Choice is used to determine the normalized priority factors and the dening criteria and subcriteria, along with
weights [20]. The consistency ratio (CR) of each PCJM
is also shown below each matrix. It can be seen that the
consistency ratio of each of the PCJM is equal to or less
than 0.03, which is well below the rule-of-thumb value of
CR equal to 0.1. This clearly implies that the evaluators
are consistent in assigning pairwise comparison judgments
[4,5].
As explained in Section 3.1, we used Liberatore’s [18]
their global priority weights can be used in any specic
vendor selection problem. In Section 4 below, we consider
two vendor selection problems and show how the model can
be applied to select the best vendor.
4. Application of the AHP model to a speciÿc vendor
selection problem
ve-point rating scale of outstanding (O), good (G), aver-
age (A), fair (F) and poor (P) and determined the pairwise
comparison judgment matrix as shown in Fig. 4. Following
Liberatore, we assume the dierence in relative importance
between two adjacent scales with respect to a particular
First we consider a problem of selecting a vendor for a
data switching network system for a telecom company and
demonstrate how the model can be applied. The data switch-
ing network system will be used to oer data services to
scale is constant at 2 times, and obtain the corresponding
PCJM for the rating scales (see Fig. 4). This matrix is then
translated into the largest eigenvalue problem and, by using
Expert Choice, the resulting priority weights of outstand-
ing, good, average, fair and poor are found as 0.513, 0.261,
the public. We consider the strategic factors, and the den-
ing criteria and subcriteria shown in Fig. 3 as appropriate in
evaluating dierent vendor systems and in selecting the best
vendor. The company in question is not involved in research
or design activities. Any new or improved network equip-
0.129, 0.063 and 0.034, respectively.
3.4. Synthesis — ÿnding solution to the problem
After computing the normalized priority weights for each
PCJM of the AHP hierarchy, the next phase is to synthe-
size the solution for the vendor selection problem. The nor-
malized local priority weights of strategic factors, criteria
ment and systems must be procured from qualied vendors
in the telecommunications industry. Therefore, three poten-
tial vendors were shortlisted for evaluation and one of them
should be selected to supply the data switching network sys-
tem. Although the vendor selection of this case study was
already completed using the current vendor selection pro-
cess, we apply the proposed AHP model in order to demon-
strate how it can be used and how the results obtained can
178 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182

Table 1
Pairwise comparison judgment matrices of vendor selection problem
Goal Cost Quality Priority
Cost 1 1.3 0.565
Quality 0.8 1 0.435
CR = 0:0
Cost CAPEX OPEX Priority

Capital expenditure 1 1.1 0.524

Operating expenditure 0.9 1 0.476
CR = 0:0
Quality Technical Operational Vendor Priority

Technical 1 1.7 3.0 0.519

Operational 0.6 1 1.9 0.313
Vendor 0.3 0.5 1 0.168
CR = 0:0
Capital expenditure Cl UC CNMS Priority
Capital investment 1 0.4 1.5 0.268
Unit cost 2.3 1 2.1 0.521
Cost of NMS 0.7 0.5 1 0.211
CR = 0:03
Operating expenditure OC MC CSS Priority
Operating cost 1 3.0 1.6 0.518
Maintenance cost 0.3 1 0.8 0.195
Cost of support services 0.6 1.3 1 0.287
CR = 0:01
Technical TF=C SC SR=A SP CTS IWOS FTD SR UHS Priority

Technical features=characteristics 1 2.3 0.6 1.0 0.7 0.7 0.7 1.5 0.5 0.096
System capacity 0.4 1 0.3 0.4 0.7 0.6 0.5 0.6 0.7 0.054
System reliability=availability 1.6 3.8 1 2.1 2.4 2.1 2.7 2.1 1.6 0.210
System performance 1.0 2.7 0.5 1 1.9 1.7 1.9 1.6 1.9 0.148
Comply to standards 1.4 1.5 0.4 0.5 1 0.8 0.4 0.7 0.6 0.077
Interoperability with other systems 1.4 1.7 0.5 0.6 1.3 1 0.9 0.8 0.7 0.093
Future technology development 1.4 1.9 0.4 0.5 2.4 1.1 1 1.0 1.4 0.113
System redundancy 0.7 1.6 0.5 0.6 1.5 1.3 1.0 1 0.8 0.094
Upgradability on H=W & S=W 2.1 1.5 0.6 0.5 1.7 1.4 0.7 1.3 1 0.115
CR = 0:03
Operational EOS PMC FDC BF SSF Priority

Ease of operations 1 0.5 0.3 0.6 0.4 0.098

Performance monitoring capability 1.9 1 0.8 0.6 0.7 0.214
Fault diagnosis capabilities 2.9 1.3 1 1.0 1.0 0.249
Billing exibility 1.8 1.7 1.0 1 0.7 0.181
System security features 2.6 1.4 1.0 1.4 1 0.258
CR = 0:01
Vendor DLT QSS ERP PSC TE VR Priority

Delivery lead time 1 0.4 0.6 0.3 0.6 0.8 0.084

Quality of support services 2.3 1 4.4 1.3 1.3 2.6 0.275
Experience in related products 1.6 0.2 1 0.3 0.4 1.4 0.092
Problem solving capabilities 3.6 0.8 3.3 1 2.4 3.2 0.29
Technical expertise 1.8 0.8 2.4 0.4 1 2.4 0.175
Vendor’s reputation 1.2 0.4 0.7 0.3 0.4 1 0.084
CR = 0:03
 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182 179

Table 2
Composite priority weights for critical success factors
Strategic Local Criteria Local Success factors (subcriteria) Local Global
issues weights weights weights weights

Cost 0.565 Capital expenditure 0.524 Capital investment 0.268 0.079

Unit cost 0.521 0.154
Cost of NMS 0.211 0.062

Operating expenditure 0.476 Operating cost 0.518 0.139

Maintenance cost 0.195 0.052
Cost of support services 0.287 0.077

Quality 0.435 Technical 0.519 Technical features=characteristics 0.096 0.022

System capacity 0.054 0.012
System reliability=availability 0.210 0.047
System performance 0.148 0.033
Comply to standards 0.077 0.017
Interoperability with other systems 0.093 0.021
Future technology development 0.113 0.026
System redundancy 0.094 0.021
Upgradability on H=W & S=W 0.115 0.026
Operational 0.313 Ease of operations 0.098 0.013
Performance monitoring capability 0.214 0.029
Fault diagnosis capabilities 0.249 0.034
Billing exibility 0.181 0.025
System security features 0.258 0.035
Vendor specic 0.169 Delivery lead time 0.084 0.006
Quality of support services 0.275 0.020
Experience in related products 0.092 0.007
Problem solving capabilities 0.29 0.021
Technical expertise 0.175 0.013
Vendor’s reputation 0.084 0.006
Total: 1.000

be compared with the decision reached by the pre-existing
selection process.
The global priority weights are determined for all 26 sub-
criteria factors as shown in the last column of Table 2. Sim-
ilarly, as explained earlier, the priority weights for O, G, A,
F, and P of Level 5 are determined as 0.513, 0.261, 0.129,
0.063 and 0.034, respectively (see Fig. 4). If only one eval-
uator is involved in assigning the rating scales of outstand-
ing, good, average, fair, or poor for each vendor system
with respect to each subcriterion, we record his or her rat-
ing and transfer them to a spreadsheet as shown in Table
4. On the other hand, if several evaluators are involved in
we can nd the mean and the median of the global priority
weights of vendor systems of team members and use them
to select the best vendor.
In our case study, one of the authors acted as the eval-
uator and assigned the ratings to each vendor system with
respect to each subcriterion as shown in Table 4. Since the
priority weights of each rating is already determined, we
use them against each subcriterion on a spreadsheet format
and determine the global priority weights of the three ven-
dor systems as shown in Table 4. Notice that these global
priority weights need to be normalized as shown in Table 4.
Based on the global priority weights of the three vendor
selecting a vendor system, then we can use the Delphi tech- systems shown in Table 4, we nd that vendor system C
nique to obtain the consensus ratings for all evaluators and had the highest weight. Therefore, it must be selected as the
transfer them to a spreadsheet as explained above. Once we best system to satisfy the goals and objectives of the telecom
transfer the global priority weights of all subcriteria and rat- company. Interestingly, the evaluation team had selected the
ings of vendor systems on a spreadsheet, we can nd the same vendor system using the pre-existing vendor selection
global priority weight of each vendor system by multiply- process. The data services delivered by the data switching
ing the global priority weight of each subcriterion with the network using system C has been in use for six months
global priority weight of vendor system rating, and adding and customers appear to be satised with the services pro-
the resulting values. Or, as suggested by Liberatore [17,18], vided by the system. Thus, the actual decision made by the
180 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182

Table 3 lected the best vendor. Thus, we can conclude that the use
Ranking of critical success factors of the proposed AHP model can help facilitating the de-
Rank Critical success factors (subcriteria) Global weights
cision making and signicantly reducing the time taken to
select the vendor. Also, we hope that the success of these
1 Unit cost 0.154 two applications would encourage the company in using the
2 Operating cost 0.139
proposed model in their future vendor selection problems.
3 Capital investment 0.079
4 Cost of support services 0.077
All ve evaluators who assigned pairwise comparison
5 Cost of NMS
6 Maintenance cost
7 System reliability=availability
8 System security features
9 Fault diagnosis capabilities
0.062 judgements appear to be satised with the nal selection
0.052 of the vendor system. Also, the managers of the concerned
0.047 departments were happy with the application of the pro-
0.035 posed AHP model. To overcome the problems of assess-
0.034 ing pairwise comparison judgements, the evaluators were
10 System performance 0.033 rst trained on AHP principles and assessment techniques.
11 Performance monitoring capability 0.029 The questionnaires were then mailed to obtain the pair-
12 Upgradability on H=W & S=W 0.026 wise comparisons from evaluators. Gaining the support and
13 Future technology development 0.026
commitment to evaluation team from senior and middle
14 Billing
exibility 0.025
15 Technical features=characteristics 0.022
management would also encourage the continued applica-
16 Problem solving capabilities 0.021 tion of the proposed model.
17 System redundancy 0.021
18 Interoperability with other systems 0.021
19 Quality of support services 0.020 5. Conclusions
20 Comply to standards 0.017
21 Ease of operations 0.013 As explained in Section 1, vendor selection of a telecom-
22 Technical expertise 0.013 munications system is an important problem to a telecom
23 System capacity 0.012 company. We rst identied two strategic factors and the
24 Experience in related products 0.007
dening criteria and subcriteria, and then formulated an
25 Delivery lead time 0.006
26 Vendor’s reputation 0.006
AHP-based model, to select the vendor of a telecommunica-
Total 1.000 tions system as shown in Fig. 3. The proposed AHP model
is generally applicable to any vendor selection problem of a
telecommunications system. After nding the global prior-
ity weights, they can be transferred easily to a spreadsheet
evaluation team agreed with the best solution determined
by using the proposed AHP model. And the vendor selec-
tion decision was considered to be successful as the rate of
customer gain was highly satisfactory and the company was
able to win the bid under intense competition with other
network operators.
This result also shows that both the pre-existing vendor
as shown in Table 4 to determine the nal composite pri-
ority weights of vendor systems occupying the last level of
the hierarchy.
The proposed model is applied to two vendor selection
problems. In both cases, the decisions reached by using the
model agreed with those obtained by using the pre-existing
vendor selection process. However, using the AHP model,
selection process and the AHP approach can come up with the criteria for vendor selection are clearly identied and
the same successful vendor selection decision. However, by the problem is structured systematically. This enables
using the pre-existing vendor selection process, the decision decision-makers to examine the strengths and weaknesses
took ve months to complete; and this can be signicantly of vendor systems by comparing them with respect to ap-
reduced using the proposed AHP model. Using the AHP ap- propriate criteria and subcriteria. Moreover, the use of the
proach, the criteria for vendor selection are clearly dened
and the problem is structured systematically. This enables
decision-makers to examine the strengths and weaknesses
of vendor systems by comparing them with respect to ap-
propriate criteria, and, hence, it is easier for the evaluation
team to arrive at a consensus decision. We used the proposed
model in another vendor selection problem and arrived at a
vendor decision that was considered to be successful [15].
This problem involved selecting a new platform to replace
the existing data multiplexing system. Again, we used the
proposed AHP model can signicantly reduce the time and
eort in decision making. In addition, the results can be
transferred to a spreadsheet for easy computations. It is eas-
ier for the evaluation team to arrive at a consensus decision.
From the results of the case studies, it can be con-
cluded that application of the AHP in vendor selection of
a telecommunications system to improve the team decision
making process is desirable. The AHP model developed in
this paper can be used as a basis for implementing vendor
selections of telecommunications systems. The suggested
general model and rated the vendor systems given each of ve-point rating system of assessing the vendor systems
the 26 subcriteria and determined the corresponding global helps decision-makers in avoiding time consuming pair-
priority weights. Based on these priority weights, we se- wise comparison judgments. If new critical success factors,
 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182 181

Table 4
Application of the AHP model to vendor selection of a data switching network

Strategic criteria issues Global System A System B System C

Critical success factors (subcriteria) weights Rating Score × GW Rating Score × GW Rating Score × GW
Cost
Capital expenditure
Capital investment 0.079 F 0.063 0.0050 A 0.129 0.0102 G 0.261 0.0207
Unit cost 0.154 F 0.063 0.0097 G 0.261 0.0403 O 0.513 0.0791
Cost of NMS 0.062 G 0.261 0.0163 A 0.129 0.0081 O 0.513 0.0320
Operating expenditure
Operating cost 0.139 A 0.129 0.0180 A 0.129 0.0180 F 0.063 0.0088
Maintenance cost 0.052 F 0.063 0.0033 A 0.129 0.0068 F 0.063 0.0033
Cost of support services 0.077 A 0.129 0.0100 A 0.129 0.0100 A 0.129 0.0100
Quality
Technical
Features=characteristics 0.022 O 0.513 0.0111 A 0.129 0.0028 G 0.261 0.0057
System capacity 0.012 G 0.261 0.0032 G 0.261 0.0032 A 0.129 0.0016
System reliability=availability 0.047 G 0.261 0.0124 A 0.129 0.0061 G 0.261 0.0124
System performance 0.033 G 0.261 0.0087 G 0.261 0.0087 G 0.261 0.0087
Comply to standards 0.017 G 0.261 0.0045 G 0.261 0.0045 G 0.261 0.0045
Interoperability with other systems 0.021 O 0.513 0.0108 G 0.261 0.0055 G 0.261 0.0055
Future technology development 0.026 G 0.261 0.0067 A 0.129 0.0033 G 0.261 0.0067
System redundency 0.021 G 0.261 0.0055 A 0.129 0.0027 G 0.261 0.0055
Upgradability on H=W & S=W 0.026 G 0.261 0.0068 G 0.261 0.0068 A 0.129 0.0033
Operational
Ease of operations 0.013 G 0.261 0.0035 O 0.513 0.0068 A 0.129 0.0017
Performance monitoring capability 0.029 G 0.261 0.0076 A 0.129 0.0038 G 0.261 0.0076
Fault diagnosis capabilities 0.034 G 0.261 0.0088 G 0.261 0.0088 G 0.261 0.0088
Billing exibility 0.025 A 0.129 0.0032 G 0.261 0.0064 F 0.063 0.0016
System security features 0.035 A 0.129 0.0045 A 0.129 0.0045 A 0.129 0.0045
Vendor
Delivery lead time 0.006 A 0.129 0.0008 G 0.261 0.0016 A 0.129 0.0008
Quality of support services 0.020 A 0.129 0.0026 A 0.129 0.0026 G 0.261 0.0053
Experiences in related products 0.007 O 0.513 0.0035 G 0.261 0.0018 G 0.261 0.0018
Problem solving capabilities 0.021 A 0.129 0.0028 A 0.129 0.0028 A 0.129 0.0028
Technical expertise 0.013 A 0.129 0.0017 A 0.129 0.0017 A 0.129 0.0017
Vendor’s reputation 0.006 G 0.261 0.0016 A 0.129 0.0008 G 0.261 0.0016
Total scores 0.1725 0.1785 0.2459
Renormalized scores 0.2890 0.2990 0.4120

and, hence, new criteria emerge to satisfy changing busi-
ness needs, then they can be included in the AHP model
to select a vendor. Similarly, any new member can be in-
cluded in the evaluation team to consider his or her input.
Also, the vendor selection could be made in a more routine
fashion.
It should be noted, however, that the data collection and
computational problems would increase with the increase in
the number of criteria and subcriteria, as well as the number
of vendors considered in the selection. This is one of the
reasons that we suggested shortlisting the number of ven-
the number of evaluators and collect data and determine the
priority weights to examine whether they are changed. In
this fashion, we can conduct sensitivity analysis and deter-
mine the optimum number of evaluators to be used to collect
data. However, several case studies in the literature using
the AHP indicate the use of three to seven evaluators [5].
In this way, the biases of evaluators in assessing pairwise
comparisons can be reduced.
Acknowledgements
dors rst and then applying the AHP model. Also, as it is
shown here, the number of success factors can be grouped
to minimize the number of criteria and subcriteria used in
formulating the AHP model. The number of evaluators can
be increased to collect more data. In fact, we can increase
The material for this paper was extracted from a M.Sc.
dissertation in Engineering Management on “An Applica-
tion of the Analytic Hierarchy Process in Vendor Selec-
tion of a Telecommunication System”, on which Maggie
182 M.C.Y. Tam, V.M.R. Tummala / Omega 29 (2001) 171–182
C.Y. Tam [15] and V.M. Rao Tummala carried out further
analysis. The authors would like to thank the respondents
who completed the survey and the evaluators who provided
pairwise comparison judgements in a timely manner.
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