Outsourcing has become an acceptable and fashionable way of providing services in both public and private sector organisations. Many companies that have traditionally employed their own cleaning, catering and security staff now sub-contract or outsource these to specialist suppliers. Appropriate employees of the organisation are usually transferred to these suppliers and hence become employees of the specialist contractor. This contractor then provides an agreed service to the host organisation for a specified contract period. At the end of this period the host organisation is able to evaluate competing suppliers before placing the next contract. The specialist supplier assumes profit and loss responsibility for the delivery of the service as well as taking on the employment and employment rights of the employees.

Outsourcing is a significant trend in the delivery of Information Systems (IS) and Services.

In some instances, this is further encouraged by government policy demanding Compulsory Competitive Tendering (CCT) for public sector contracts.

In this article the term outsourcing is used (in Lacity and Hirschheim's terms) to imply “total outsourcing” where the supplier is in charge of a significant proportion of the IS work. In its most extreme form the complete hardware supply and maintenance and software development and support is turned over to an external supplier. This is often termed Facilities Management (FM) in the UK.

This article is primarily concerned with the perceived advantages and disadvantages of IS outsourcing. However, many of the issues apply to outsourcing other services.

Perceived advantages of outsourcing

The perceived advantages of outsourcing include:

– cost reduction,

– emphasis on core business,

– access to new resources and technical expertise,

– variable staffing requirements and

– internal political problems.

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