MIT Sloan Management Review

Three objectives — improving IS, enhancing business performance, and generating new revenue — that can help a company assess outsourcing.

As managers experience more volatile marketplaces, global competition, shortened product life cycles, customer pressures for tailored offerings and tighter performance standards, they increasingly depend on new information systems.

Expertise alone does not inspire trust and credibility. Successful IT specialists work on their trustworthiness and build good relationships with clients at the same time.

Creating a business-driven IT infrastructure requires that executives thoroughly understand their firm’s strategic context. By formulating a series of business and IT maxims — short simple statements of the business’s positions — managers can identify the IT infrastructure service suited to their company. Organizational, political, cultural, and reward system issues, as well as a lack of IT leadership, may form implementation barriers.

While outsourcing IT has been a trend in the 1990s, it is not a new phenomenon. For example, systems development has been sourced from outside through application packages or software houses for many years.

When Eastman Kodak turned over the bulk of its IT operations to three outsourcing partners in 1989, outsourcing was a $4 billion a year business.1 Today, that number has grown to nearly $40 billion a year, according to the estimates of industry watchers Frost & Sullivan.

Long-term sustained management of a strategic alliance is turning out to be the dominant challenge of effective IT outsourcing. From a relatively unusual entrepreneurial activity, IT outsourcing has recently exploded across the global corporate landscape.1