Information technology : the outsourcing advantage

M.Comm.Changes occur rapidly in the Information Technology (IT) environment. It can be very costly to keep up with these rapid changes and at the same time specialist IT skills are hard to come by. Companies have to re-strategize to maintain their competitive advantages. This strategic business concept suggests that management must focus on specialisation, expertise and excellence. In an increasingly competitive and technological advanced world, business focus has shifted from simply minimising costs to maximising revenue. Companies are now focussing on their core competencies and are sourcing their non-core competencies to external providers (vendors). By distancing themselves from these non-core competencies, companies can focus their energy on areas where they have a competitive advantage. Companies enter into outsourcing arrangement's because they believe a vendor is better equipped to perform their IT functions. Outsourcing has become one of the most powerful, organisation-shaping management tools. For the customer outsourcing involves a proper definition of requirements, a detailed analysis and evaluation of potential vendors, developing the pricing structure and managing the outsourcing arrangement. The vendor needs to deliver a service according to specified service levels to which penalties and rewards are tied. An interdependency exists between the customer and the vendor. Change in the one affects the other. One of the key components for a successful outsourcing arrangement is that a company must never outsource the management of their Information Technology processes