2.1 Introduction

In the early 1990s, many company boards and government departments worldwide increasingly asked: Why not outsource IT? Much of this was a questioning of escalating IT costs and a reaction to increased competitive and recessionary pressures. Vendors were seen as being able to provide the same or superior service cheaper, offer access to technical expertise in short supply, change fixed to variable costs, and/or through headcount reduction and purchase of IT assets, improve the financial position of a client organization. IT outsourcing has also been portrayed as an opportunity to apply a core peripery model to managing and organizing. On this argument, an organization should focus on its key tasks and capabilities, and outsource the rest to world class providers. On this analysis, all IT is sometimes mistakenly characterized as an undifferentiated, albeit occasionally strategic , commodity that can largely be outsourced. This can be a particularly damaging assumption as we move into outsourcing e-business components and infrastructure, which by definition should be closely connected to the business.

A further reason for outsourcing IT is all too familiar. Faced with rising IT costs and little demonstrable business value, senior managers have often given up on the internal IT function, and contracted out to third party management some or most IT assets and activities. Finally, we are finding in most recent work into the IT needs for e-business that speed and access to scarce IT skills are becoming much more important...