Background

Outsourcing occurs when an organization contracts with a supplier or vendor to provide specific services and support for either or both business and IT activities. Outsourcing refers to services rather than purchased products such as software. Outsourcing is considered here as a separate chapter because (1) it is so often employed in e-business and (2) it is a major cause of failure and problems in implementation and ongoing operation. Today, application service providers (ASPs) can provide many more types of services in hardware, networking, hosting, development, operations, and consulting.

Outsourcing is not new. It began in IT (then called electronic data processing or EDP) with facilities management. Companies had acquired computers, but there was a lack of trained personnel to operate them and provide support. Firms such as IBM and Computer Sciences Corporation stepped in to provide these services. Programmers and systems analysts were often provided as well. Smaller firms then could not afford their own computers. There were no microcomputers or minicomputers. This gap gave rise to service bureaus. Service bureaus provided data processing services. You might have a service bureau write programs as well as prepare data and run the programs.

When timesharing emerged in the 1970s, another opportunity for outsourcing emerged external timesharing services. Here you paid an hourly fee and connected up to the service firm's timesharing system. With the 1980s companies expanded their internal systems staffs and brought in work that had been performed outside. The arrival of local area networks and increased complexity...