Abstract

When Kodak outsourced major components of its IT function in 1989, the information systems world viewed it as a watershed event. This event subsequently resulted, however, in a robust and thriving outsourcing services industry. Today, the US market exceeds $10B annually and is growing at an annual rate of 16% per year while the smaller European outsourcing market is growing even faster at an annual rate of more than 20%. Outsourcing arrangements that were once considered large are being dwarfedbyrecentdealssuchasthosesignedbyXerox,HughesAircraftandJPMorgan. Asthemarketmatures,itisapparent that numerous companies are routinely outsourcing large components of their information systems activities. Increasingly, the conventional rationale for outsourcing — vendor economies of scale and specialization — is becoming less convincing as client companies that should be able to accrue the same benefits as a vendor given their size are also engaging in outsourcing deals. Indeed,acloserexaminationrevealsthatmanyrecentoutsourcingarrangementsarestrikinglyinnovative. Thesedealsdisplay astunningdiversityintheirobjectivesandintheirstructure,varyinginscope,size,durationandcontract. Accordingly,while there has been a spate of new deals, there is a dichotomy of deals: many continue to follow the traditional model and a few companies are blazing new trails.

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