During the 1980s, executives learned of the strategic role that information systems (IS) could provide to organizations. Through IS, companies could squelch competition, secure suppliers, obtain customer loyalty, and reduce the threat of new entrants. Executives read about the IS victory stories of American Airlines, American Hospital Supply, and Merrill Lynch as evidence of the success to be found in exploiting information systems. Many executives applied strategic IS models to their own organizations.
As we enter the 1990s, one would assume that the role of IS would escalate as the United States grows from a domestic, industrial society to a global information society. However, many practitioners, academics, and consultants now advise executives to outsource their IS services along with their cafeteria, mail delivery, and custodial services. By farming out many or all of their information services, executives are promised savings of 10 percent to 50 percent off their IS expenditures.1 Many companies are likely to heed this advice, as evidenced by a Yankee Group report that estimates that every Fortune “500” company will evaluate IS outsourcing and 20 percent will sign outsourcing deals by 1994.2 The outsourcing trend is not limited to American companies; Frost and Sullivan estimate that the European outsourcing market will grow from $1.5 billion in 1990 to $10 billion in 1996.3
So what has happened to the IS function in the past few years? Has IS suddenly become a commodity service that is best managed by a large supplier? Several practitioners believe so. Henry Pfendt, director of information technology at Eastman Kodak, claims outsourcing comes down to one question: “Do you want to manage commodities?”4 Elliot McNeil, Southland’s management of information systems (MIS) manager: “It’s like the electric company; you use less, you pay less.”5 Elizabeth Gardner, in a commentary on IS outsourcing in the health care industry: “Outsourcing takes over all information systems functions, much the way an outside company would manage food service or laundry.”6 Bernie Ward, editor of Sky magazine, described IS out-sourcing: “Like shoppers at a fruit stand, companies are picking an apple here or an orange there until they have selected a menu of outsourcing services.&