Overview of the Sourcing Background

Abstract

The provisioning of IT outsourcing services has shown a particularly rapid increase over the past two decades. A historic perspective on outsourcing shows that from the 1980s large companies started to contract out parts of IT-related tasks to third parties. During this period third parties could offer just a few elementary services, including technical consultancy and training. Applying recent taxonomy, this period can be defined as a preliminary phase of outsourcing, as third parties focused more of their efforts on outtasking. The first real phase of outsourcing, which approximately comprises the decade of the 1990s, was the result of a technology push. During this period companies aimed to contract out parts (or even their entire IT function) to third parties. Third parties, also called suppliers, focused on providing technologically driven solutions. Since companies in these days were aimed primarily at buying a technical solution, adding value related to their business was not in the scope of their considerations. Agreements between companies and suppliers were therefore considered to be more transaction-oriented. As a consequence, companies paid more attention to the specific task of managing the supply side. Kodak’s decision in 1989 to outsource their data center to IBM and DEC can be considered to be a landmark in the field of IT outsourcing (Loh and Venkatraman, 1992). Ever since the ‘Kodak effect’ IT outsourcing has been seen from an industry perspective as the supplier market at the early 1990s developed significantly.

Outsourcing arrangements are dynamic in nature and so are the structures, capabilities and value developed and extracted from them over time.

(Ilan Oshri)