Outsourcing Decisions: Using Porter's Model

Abstract

It is no longer questioned that the management of information systems (MIS) is an important variable when studying organizational effectiveness and competitiveness. There have been numerous studies on how information systems (IS) can be used by organizations for strategic purposes, yet actual experiences of an organization’s use of IS have often been less than satisfactory. Problems with cost, quality, and IS performance, as well as unfavorable end-user—IS relations are frequently reported. Partially because of these problems, the outsourcing of IS functions has become increasingly common. Outsourcing IS functions provides advantages to an organization but it may also create a new set of problems if the impact of the outsourcing decision to the organization as a whole is not fully considered. This chapter reviews the strategic use of IS in organizations, discusses the growing popularity of outsourcing IS functions, and uses Porter’s model of five competitive forces to provide a different viewpoint on the decision to outsource.