WHY OUTSOURCE

The recent trends shows that outsourcing of Information systems, that is subcontracting IT activities, such as data centre operations or systems development, to third parties is becoming an acceptable, if not preferred, policy for large organizations(Earl, 1991). An enterprise might outsource its IT management because it is cheaper to contract a third-party to do so than it would be to build its own in-house IT management team. Or, a business might outsource its human resources tasks to a third-party instead of having its own dedicated human resources staff. Although the mix of factors raising the possibility of outsourcing varies widely from one company to another, there are a series of themes that explain most of the pressures to outsource.

First of all, organization concerns about cost and quality drive outsourcing. The same issues such as getting existing services for a reduced price at acceptable quality standard came up repeatedly. Second, failure to meet service standards can force organization to find other ways of achieving reliability. Third, organization under intense cost or competitive pressures, which does not see IT as its core competence, may find outsourcing a way to delegate time-consuming, messy problems so it can focus scarce management time and energy on other differentiators. Next, several financial issues can make outsourcing appealing. One is the opportunity to liquidate the firm’s intangible IT asset, thus strengthening the balance sheet and avoiding a stream of sporadic capital investments in the future. Also, outsourcing can turn a largely fixed-cost business into one with variable costs. This is particularly important for firms whose activities vary widely in volume from one year to another or which face significant