Information Management: The Organizational Dimension

By Michael J. Earl | Go to book overview

20 Sourcing Information Technology Capability: A Framework for Decision-Making

MARY C. LACITY, LESLIE P. WILLCOCKS, AND DAVID F. FEENY


Introduction

In the years since Eastman Kodak in 1989 announced that it was outsourcing its entire IT function, an important change has taken place in the sourcing of IT activity. Most visibly, senior executives of other Fortune 500 companies have followed Kodak's example and signed long-term contracts worth hundreds of millions of dollars with IT outsourcing 'partners'. Examples include Continental Airlines, Continental Bank, Enron, First City, General Dynamics, McDonell Douglas, and Xerox (for details see Ambrosio 1991; Hamilton 1989; Hopper 1990; Huber 1993; Mehler 1992). In the UK, large organizations such as British Aerospace, BP Exploration, the Inland Revenue, and Philips Electronics have followed suit (see Willcocks and Fitzgerald 1994). CIOs and other prominent members of the IT community have responded with warnings of the dangers of surrendering management control of a 'strategic asset' ( Bergstrom 1991; Buck-Lew 1992; Ganz 1990; Krass 1990). In many cases, these predictions have proved valid, with 'strategic partnerships' experiencing severe problems. Some companies have paid out huge sums to extricate themselves from contracts and rebuild their in-house capability (for a discussion see Lacity and Hirschheim 1993a and Willcocks 1995). On the other hand, CIOs who have adamantly refused to deal with outsourcing vendors have met personal misfortune when their own organizations have failed to demonstrate value for money. These high-profile events have tended to obscure the real phenomenon, a significant and irreversible move to what we call the selective sourcing of IT activity. Our findings suggest that the key question for executives is not 'should we outsource IT?', but rather: 'where and how can we take advantage of the developing market for IT services?'

During two three-year research programmes in the USA and Europe, we have created and tracked in-depth case studies of IT sourcing in more than forty medium-sized and large companies and public-sector bodies. Full

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