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IT Outsourcing

Outsourcing the performance of some value chain activities traditionally performed in-house has become increasingly popular. Outsourcing strategies involve a conscious decision to abandon or forgo attempts to perform certain value chain activities internally and instead to farm them out to outside specialists and business partners.

The two driving themes behind outsourcing are:

1. Outsiders can often perform certain activities better or cheaper.

2. Outsourcing allows a firm to focus its entire energies on its core business.

Advantages Obtaining higher quality and/or cheaper components or services

Improving the company's ability to innovate by allying with "best-in-world" suppliers who have considerable intellectual capital and innovative capabilities of their own.

Seeking out new suppliers with the needed capabilities already in place is frequently quicker, easier, less risky, and cheaper than hurriedly retooling internal operations to disband obsolete capabilities and put new ones in place.

Increasing the firm's ability to assemble diverse kinds of expertise speedily and efficiently.

Allowing the firm to concentrate its resources on performing those activities internally that it can perform better than outsiders and/or that it needs to have under its direct control.

Disadvantages
A company will farm out too many or the wrong types of activities and thereby hollow out its own capabilities.

In such cases, a company loses touch with the very activities and expertise that over the long run determine its success.

Advantages		Obtaining higher quality and/or cheaper components or services
		Improving the company's ability to innovate by allying with "best-in-world" suppliers who have considerable intellectual capital and innovative capabilities of their own.
		Seeking out new suppliers with the needed capabilities already in place is frequently quicker, easier, less risky, and cheaper than hurriedly retooling internal operations to disband obsolete capabilities and put new ones in place.
		Increasing the firm's ability to assemble diverse kinds of expertise speedily and efficiently.
		Allowing the firm to concentrate its resources on performing those activities internally that it can perform better than outsiders and/or that it needs to have under its direct control.
Disadvantages		A company will farm out too many or the wrong types of activities and thereby hollow out its own capabilities.
		In such cases, a company loses touch with the very activities and expertise that over the long run determine its success.