Eight years after Kodak energized the marketplace by outsourcing major components of its information systems (IS) function, the information technology (IT) out-sourcing services industry is booming. Industry analysts predict that the global market will grow from $86 billion in 1996 to more than $137 billion by 2001.1 Out-sourcing arrangements with contract revenues in the hundreds of millions of dollars, once considered large, are dwarfed by recent deals such as those signed by J.P. Morgan, Dupont, and Xerox Corporation for billions of dollars. As the market matures, numerous companies routinely outsource large components of their IS activities. A 1996 survey of 450 information systems executives in North America and Europe found that about 50 percent of the respondents were planning to engage in outsourcing during 1996, and another 25 percent were considering it.2
IT is central to business initiatives such as reengineering, knowledge management, the creation of electronic channels of distribution, and the development of digital business strategies.3 Why are companies outsourcing the activities of their IS departments at such an unprecedented rate when IT has never been more critical to business success?
The motivations for outsourcing are evolving from a primary focus on cost reduction to an emerging emphasis on improving business performance. The traditional rationale of vendor economies... To read the complete article, login or sign-up using the form below.
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