A Strategic Perspective on IT Outsourcing

A Strategic Perspective on IT Outsourcing

Bhaskar Prasad (Department of Management, University of Antwerp, Antwerp, Belgium) and Rudy Martens (University of Antwerp, Antwerp, Belgium)
DOI: 10.4018/ijabim.2013100102
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Abstract

In the current business environment IT outsourcing has gained prominence. Many firms in Europe outsource their IT requirements to Asia. This study analyzes the factors which favor this trend in which clients are based in Europe and vendors are based in Asia. From a strategic perspective, this study identifies the characteristics that IT activities must possess for them to be outsourced from Europe to Asia. In addition to contributing to academic literature this study will put forward the implications for organization adopting IT outsourcing.
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2. The Concept Of It Outsourcing

Outsourcing is designating to another party the authority for the provision of services under a business contract (Lacity & Willcocks, 2001). Considering the fact that a firm has to manage diverse business processes it will be difficult for it to manage all of its processes by entirely relying upon its own competence (Rottman, 2006). Even if it is feasible, the firm may lose its focus and efficiency (Sahay et al., 2003). By outsourcing the non-core business processes a firm can concentrate on their main activities, rather than on services that are external to their expertise (Lee et al., 2003). This will help to enhance the effectiveness and flexibility of the function by securing a support network with highly qualified and specialized workforce. In addition it helps firms to control their costs and business risk.

Various functions such as assembly lines operations, proceedings of legal matters and documentation of office services have been outsourced by firms for years (Rottman & Lacity, 2009). Even though the meaning of outsourcing has not changed, its nature has developed over time, expanding both the range and depth of services being outsourced. Organizations today have a preference to outsource their business processes to firms that are highly focused in using IT for business purposes (Lee et al., 2004). IT Outsourcing is the sub-contracting of an organization’s IT services to an external service provider with the intention of accomplishing the goals of the organization (Sahay et al., 2003). In other words, IT outsourcing is advancing the tasks related to IT through a third-party service provider. This third-party service provider is called vendor. The organization which is obtaining the service is called the client.

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