Making the Outsourcing Decision

In this chapter, we present our ITO decision framework which guides practitioners to consider business, economic, and technical factors. Originally published as Lacity, Willcocks, and Feeny (1996), this framework is still remarkably relevant. When discussing business factors, we dismiss the traditional "core versus non-core" criterion because we found it was difficult for practitioners to differentiate IT activities on this basis. Instead, we guide practitioners to consider an IT activity's contribution to competitive advantage as well as to its critical support of daily business operations. In the discussion of economic factors, we challenge practitioners to examine the practices that lead to economic efficiency rather than just economies of scale. Surely, suppliers operate on a larger scale than internal IT departments, but economic efficiency depends more on practices such as standardization, centralization, and tight controls than size. In the discussion of technical issues, we discuss a technology's maturity (stability, measurability, and requirements certainty) and technology's integration with other business functions as the most important technical criteria to consider. This framework continues to be used by practitioners and is still widely cited by academics.KeywordsSwitching CostBusiness OperationSenior ExecutiveStrategic PartnershipExternal SupplierThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.