A framework for deciding what to outsource in information technology

Abstract

The theory and background of outsourcing are examined from a general perspective. It is concluded that the pressures to outsource activities can best be understood through two main sources: the work of organization theorists on the management of organizational complexity and the transaction economics approach of Williamson which argues the virtues of provision of many organizational services through market mechanisms rather than by internal departments. Within IT, the early motivation for outsourcing was the cost reduction one implied by the Williamson approach. However, a number of authors have argued that the complexity of managing IT outsourcing means that it is often preferable to try to improve the efficiency of internal suppliers. This suggests that there is a need to develop a framework that will enable a decision to be made about what to outsource and what to insource. A model is applied to the IT sourcing decision.